Uncertainty’s Effect on China’s Knowledge-Based Economy: Transformation Beyond Trade

Wenbo Jia (), Hao Jiang (), Yiqing Lyv () and Stavros Sindakis ()
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Wenbo Jia: Sichuan Police College
Hao Jiang: Sichuan Police College
Yiqing Lyv: Sichuan University
Stavros Sindakis: Hellenic Open University

Journal of the Knowledge Economy, 2025, vol. 16, issue 1, No 164, 4684-4725

Abstract: Abstract China’s trade, once a predictable engine of global growth, now moves to a complex beat amid financial crises, trade conflicts, and shifting geopolitical sands. This study reveals the intricate choreography shaping China’s trade trajectory, introducing the “trini graph displays noticeable fluctuations between the “Realized” ty of uncertainty”—exchange rates, trade policy anxieties (domestic and American), and geopolitical shadows. We reveal the nuanced time-varying impact of these forces using a dynamic framework informed by the “growth-at-risk” model and the insightful concept of relative entropy. Like a graceful waltz partner, the real effective exchange rate has a long-term influence. In contrast, trade policy uncertainty in the USA delivers a potent jive, particularly through short-run shocks. Geopolitical risks, a constant tango partner, cast a gloomy shadow over all time horizons. Nonetheless, China’s trade growth is remarkable, weathering shocks with adaptable grace; despite a more favorable future with greater upside potential, downside risks persist, urging caution in this delicate dance. This research provides policymakers and business leaders with the knowledge and tools to navigate the turbulent waters ahead, paving the way for informed decisions, resilient strategies, and a more stable global trade environment.

Keywords: Real effective exchange rate (REER); Economic uncertainty; Time-varying parameter structural vector autoregression (TVP-SV-VAR); Relative entropy; Growth at risk (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-02036-2

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