China’s Dependence on Exports

“The Dependence of China’s Economic Growth on Exports and Investment,” by Andong Zhu and David M. Kotz, was recently published in the Review of Radical Political Economics OnlineFirst.

Here’s some background about the article provided by David Kotz:

Who is the target audience for this article?

The target audiences are the following: a) Those interested in China’s economy and its relation to the global economy; b) Those interested in the relation between export dependence and economic growth.

What Inspired You To Be Interested In This Topic?

I have often visiting China since 2000 and saw first hand the remarkably rapid economic growth. Although I am not a China specialist, I became interested in why China has grown so rapidly over a long period of time since the late 1970s. This was especially an interesting question because China was shifting from a centrally planned economy in the direction of a market economy over that period, and almost all the other countries that made such a transition suffered huge depressions rather than super-rapid growth.

Secondly, generally, large countries that have grown rapidly for a long period of time have in past history relied mainly on their domestic market. Examples are the USA, the USSR, and Japan (the latter’s dependence mainly on its domestic market is contrary to the popular impression but nevertheless true). I was interested in the possible problems stemming from China’s rapid growth based increasingly on exports, since no large country had done that before.

I teamed up with Andong Zhu, who is based at Tsinghua University in Beijing and knows a lot about China’s economy and state policies.

Were There Findings That Were Surprising To You?

I was surprised at how recent China’s export dependence was — we found it was only since 2001 that China’s rapid growth became heavily dependent on exports.

How Do You See This Study Influencing Future Research And/Or Practice?

First, I hope the article will illuminate the difficulties in the way of China shifting to growth based on its domestic market — everyone including China’s leaders are calling for such a shift, but we argue that it will not be easy.

Second, I hope the article will persuade those interested in export dependence that the best measure is not a country’s export surplus as a share of GDP but rather the domestic content of exports (the value added by domestic factors of production) as a share of GDP.

How Does This Study Fit Into Your Body Of Work/Line Of Research?

I have not previously written an article just about China although I have compared China’s transition economic policies to that of Russia previously. However, I have written several articles about the role of aggregate demand in economic growth for the US, and this article uses some of the techniques that I had used in the latter studies.

How Did Your Paper Change During The Review Process?

It got shorter! The original version was too long, and following the reviewers’ advice, we cut it down and made it more focused on the central issues: how/why did China’s growth become so dependent on exports, why that is a problem, and what is the solution.

What, If Anything, Would You Do Differently If You Could Go Back And Do This Study Again?

I would do it more quickly! We started working on this paper in the summer of 2007, and it was not accepted until 2010.

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[…] research by Andong Zhu and David Kotz has shown that since the 1978 launch of market reform, shifting levels of domestic consumption, […]