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The role of China in the trade slowdown

Guillaume Gaulier (), Walter Steingress () and Soledad Zignago ()

Rue de la Banque, 2016, issue 30

Abstract: Many analysts worry about the recent international trade slowdown.After the 2008 financial crisis, international trade of goods and world industrial production grew nearly at the same pace implying a trade elasticity of one. This stands in sharp contrast to the pre-crisis period when global trade increased more than two times faster than industrial production. This Rue de la Banque argues that (1) the long-run elasticity of world trade to income is one indeed, but (2) structural changes in China go a long way to explaining changes in trade elasticity;the trade acceleration observed before the crisis was largely driven by the supply-side shock of China integration in the world trade while the recent trade deceleration is closely linked to the shift of China’s production towards domestic demand.

Date: 2016
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