BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 14/2012:
Are Chinese Trade Flows Different?
Yin-Wong Cheung ()
, Menzie D. Chinn and Xing Wang Qian
Abstract: We find that Chinese trade flows respond to economic
activity and relative prices -- as represented by a trade weighted exchange
rate -- but the relationships are not always precisely or robustly
estimated. Chinese exports are generally well-behaved, rising with foreign
GDP and decreasing as the Chinese renminbi (RMB) appreciates. However, the
estimated income elasticity is sensitive to the treatment of time trends.
Estimates of aggregate imports are more problematic. In many cases, Chinese
aggregate imports actually rise in response to a RMB depreciation and
decline with Chinese GDP. This is true even after accounting for the fact a
substantial share of imports are subsequently incorporated into Chinese
exports. We find that some of these counter-intuitive results are mitigated
when we disaggregate the trade flows by customs type, commodity type, and
the type of firm undertaking the transactions. However, for imports, we
only obtain more reasonable estimates of elasticities when we allow for
different import intensities for different components of aggregate demand
(specifically, consumption versus investment), or when we include a
relative productivity variable.
Keywords: China; imports; exports; real exchange rate; (follow links to similar papers)
JEL-Codes: F14; F41; (follow links to similar papers)
39 pages, June 18, 2012
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