 China's demand shock in world commodity markets: do resource windfalls lead to economic growth?Yanbai Li and Fenglan Wu Economic Modelling, 2025, vol. 151, issue C Abstract: This study investigates how China's resource demand shock influenced economic growth in developing countries, addressing a gap in the literature on the growth effects of the 2000s commodity boom. While existing studies document China's global trade impact, the consequences of its resource-driven demand surge remain underexplored. Using data from 100 developing countries between 2001 and 2013, we apply a shift-share instrumental variable approach that leverages China's exogenous demand as a source of variation in multilateral resource exports. We find that resource windfalls during this period reduced economic growth by an average of 40 %. Two key transmission mechanisms are identified: exchange rate appreciation and a decline in foreign direct investment. These findings offer new insights into the costs of resource dependence amid global commodity cycles, expand the literature on China's economic rise, and highlight the structural vulnerabilities faced by resource-exporting developing economies. Keywords: Natural resources; Economic growth; China; Trade shocks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:151:y:2025:i:c:s026499932500224x DOI: 10.1016/j.econmod.2025.107229 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.