How Important are Exports and Foreign Direct Investment for Economic Growth in the People’s Republic of China?

Yuqing Xing and Manisha Pradhananga
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Manisha Pradhananga: Asian Development Bank Institute

No 427, ADBI Working Papers from Asian Development Bank Institute

Abstract: The global financial crisis and the recent growth slowdown in the People’s Republic of China (PRC) have led to questions about the sustainability of the PRC’s growth. The commonly used argument is that the PRC is too dependent on external demand and that it needs to rebalance its economy toward domestic consumption. However, conventional measures of external demand—share of net exports and exports as a share of gross domestic product (GDP)—are biased and do not accurately measure the contribution of external demand to GDP growth. In this paper, the authors propose two measures that provide a more accurate estimate of the vulnerability of the PRC economy to external shocks, in the form of sudden drops in exports and foreign direct investment (FDI). Based on their findings, the authors conclude that the PRC economy remains highly dependent on external demand in the form of exports and FDI, and rebalancing the economy toward domestic demand has not yet been achieved.

Keywords: prc economy; growth; external demand; gdp accounting (search for similar items in EconPapers)
JEL-codes: E01 F43 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013-07-01
New Economics Papers: this item is included in nep-cwa, nep-dev, nep-int, nep-mac and nep-tra
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Citations: View citations in EconPapers (1)

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