The Global Financial Crisis and China's Exports: Causal Empirics and Political Economy

Regional and global financial crises deeply affect all economies worldwide but especially developing Asia where trade (especially exports) and FDI have been crucial ingredients of growth and poverty reduction (World Bank, 2009). The paper studies the impact of these crises on China's exports to provide credible policy responses and choices, and to build resilience capacity for better future crisis mitigation and management. First, it introduces a new endogenous trade-growth model of nonlinear simultaneous equations embracing crises and trade liberalisation. The model has improved structural and modelling features over existing approaches (such as descriptive analysis. panel regression and CGE/GTAP, see Tran Van Hoa, 2004). Second, using historical harmonised trade and economic data and GMM system estimation, the paper provides efficient estimates and more credible outcomes in the sense of Friedman (1953)-Kydland (2006) data-model realism or consistency. Based on these findings, appropriate policy responses and choices are then formulated and recommended for informed debate by researchers and analysts, and also as important inputs to economic and trade policy-makers.

Keywords: Global financial crisis, China’s exports and growth, econometric modelling and forecasts, endogenous trade-growth theory, economic and trade policy.

JEL: C51, F13, F17