Impact of external and internal factors on China’s economic growth

Boris A. Kheyfets, Veronika Yu. Chernova

Abstract


Relevance. China is the dominant trading partner for many countries of the world. The new plan for the Chinese economic development in 2021–2035, based on the “double circulation” model, has become the subject of vigorous debate.

Research objective. The study aims to identify China’s economic growth drivers before and during the COVID-19 pandemic and evaluate the impact of external and internal factors on China’s economic growth, taking into account future strategic changes.

Data and methods. To identify the growth factors of GDP, we used a factor model based on GDP components by spending and the data provided by the State Bureau of Statistics of the PRC for 2007–2020.

Results. Over the past decade, the contribution of GDP components that shape domestic demand has been steadily reduced. The decline in the share of net exports in GDP growth was replaced by the fluctuations in the external and domestic demand shares in the subsequent periods. The evaluations show that in 2020, 1% of 3.56% of China’s economic growth in GDP (in national currency) was provided by net exports and 2% of 3.56% was provided by an increase in gross capital formation.

Conclusions. The increase in the contribution of net exports to GDP growth was caused not only by the growth of exports with a slowdown in the growth of imports but also by the redistribution of the shares of all factors and primarily by the sharp reduction in the share of the contribution of household expenditures to consumption. To promote domestic circulation through personal consumption, it is necessary for China to lower the savings rate, solve the problem of income inequality, and increase disposable income per capita.


Keywords


Economic growth, Domestic market, Double circulation, GDP components, Domestic consumption, Export, Import, International trade

Full Text:

PDF

References


Breunig, R., & Majeed, O. (2020). Inequality, poverty and economic growth. International Economics, 161, 83–99. https://doi.org/10.1016/j.inteco.2019.11.005

Changhong, P., & Hongkui, L. (2021). Research on the scientific connotation of new development pattern. China Finance and Economic Review, 10(3), 3–24. https://doi.org/10.1515/cfer- 2021-0014

Chen, B., Yang, X., & Zhong, N. (2020). Housing demand and household saving rates in China: evidence from a housing reform. Journal of Housing Economics, 49, 101693. https://doi.org/10.1016/j.jhe.2020.101693

Gabriele, A. (2006). Exports of services, exports of goods, and economic growth in developing countries. Journal of Economic Integration, 21(2), 294–317. http://www.jstor.org/stable/23000614

Garcia-Herrero, A. (2021). What is behind China’s dual circulation strategy. China Leadership Monitor, 69 (Fall). https://doi.org/10.2139/ssrn.3927117

Gribova, N.V. (2021). Chinese household consumption: Main trends and pandemic factor. National Strategy Issues, 64, 33–59. https://doi.org/10.52311/2079-3359_2021_1_33

Grieger, G. (2020). China’s Economic Recovery and Dual Circulation Model. EPRS (European Parliamentary Research Service). PE 659.407.

Han, H., & Si, F. (2020). How does the composition of asset portfolios affect household consumption: evidence from China based on micro data. Sustainability, 12(7), 2946. https://doi.org/10.3390/su12072946

Hong, Y., Yang, J., & Xu, Z. (2020). The strategy of the mutual promotion of domestic and international circulation of China: Analysis of SWOT and countermeasures and suggestions. 2020 Management Science Informatization and Economic Innovation Development Conference (MSIEID), pp. 418–424. https://doi.org/10.1109/MSIEID52046.2020.00089

Huang, K.X. D., Li, S., & Tian, G. (2021). Chinese economy under the new “dual circulation” strategy: Challenges and opportunities – A summary of the Annual SUFE Macroeconomic Report (2020–2021). Frontiers of Economics in China, 16(1), 1‒29. https://doi.org/10.3868/s060-013-021-0001-0

Huang, X., Yu, P., Song, X., & Chen, H. (2021). Strategic focus study on the new development pattern of ‘dual circulation’ in China under the impact of COVID-19. Transnational Corporations Review, 14(2), 169–177. https://doi.org/10.1080/19186444.2021.1959822

Humnath, Р., Devkota, M.L., & Banjade, D. (2022). Exports and imports-led growth: Evidence from a small developing economy. Journal of Risk and Financial Management, 15(1), 11. https://doi.org/10.3390/jrfm15010011

Jia, K. (2021). Accelerating the construction of a new development pattern with the domestic circulation as the mainstay and mutual promotion of dual circulation. Journal of Chinese Economic and Business Studies. https://doi.org/10.1080/14765284.2021.1929785

Kakwani, N., Li, S., Wang, X., & Wu, S. (2019). Social tensions in a growing China. The Manchester School, 87(2), 228–258. https://doi.org/10.1111/manc.12250

Kalaitzi, A.S., & Chamberlain, T.W. (2020). Exports and economic growth: Some evidence from the GCC. International Advances in Economic Research, 26, 203–205. https://doi.org/10.1007/s11294-020-09786-0

Koopman, R., Wang, Z., & Wei, S.J. (2008). How Much of Chinese Exports is Really Made in China? Assessing Domestic Value-Added When Processing Trade is Pervasive. National Bureau of Economic Research. 49 p. https://doi.org/10.3386/w14109

Kuzmin, E., & Romanova, O. A. (2021). Coverage of Production Chains in Cooperation Industrial Enterprises. Lecture Notes in Information Systems and Organisation, 44, 87–96. https://doi.org/10.1007/978-3-030-73261-5_9

Liu, X. (2021). Research on the construction of a “dual circulation” development pattern. Journal of Frontiers of Society, Science and Technology, 1(2). https://doi.org/10.23977/jfsst.2021.010211

Lomanov, F.V. (2021). Circulation versus isolation. Russia in Global Affairs, 19(3), 8–20. https://doi.org/10.31278/1810-6439-2021-19-3-8-20

Perskaya, V.V., & Revenko, N.S. (2020). “Made in China 2025”: China’s experience of supporting national development challenges. Asia & Africa Today, 7, 19–25. https://doi.org/10.31857/S032150750010100-2

Saad, J., Yu, B., Liangyan, T., & Dong, W. (2021). The ‘dual circulation’ development model of China: background and insights. Rajagiri Management Journal. https://doi.org/10.1108/RAMJ-03-2021-0016

Su, L., & Liang, J. (2021). Understanding China’s new dual circulation development strategy: A Marxian input-output analysis. Review of Radical Political Economics, 53(4), 590–599. https://doi.org/10.1177/04866134211021971

Subasat, Т. (2002). Does export promotion increase economic growth? Some cross-section evidence. Development Policy Review, 20(3), 333–349. https://doi.org/10.1111/1467-7679.00175

Wang, W., Weaver, N., & Xue, N. (2019). Challenges for the Chinese Economy in the New Era of Development. Journal of Chinese Economic and Business Studies, 17(1), 1–7. https://doi.org/10.1080/14765284.2019.1582225

Wang, X., & Piesse, J. (2013). “The micro foundations of dual economy models”. The Manchester School, 81(1), 80–101. https://doi.org/10.1111/j.1467-9957.2011.02263.x

Xiong, J., Tang, Z., Zhu, Y., Xu, K., Yin, Y., & Xi, Y. (2021). Change of consumption behaviours in the pandemic of COVID-19: Examining residents’ consumption expenditure and driving determinants. International Journal of Environmental Research and Public Health, 18, 9209. https://doi.org/10.3390/ijerph18179209

Yang, J., Kumar, V., Ekren, B., & Kuzmin, E. (2021). Understanding the Role of Digital Technologies in Supply Chain Risks Management. Lecture Notes in Information Systems and Organisation, 44, 133–146. https://doi.org/10.1007/978-3-030-73261-5_13

Yasinskii, V.A., & Kozhevnikov, M.Y. (2022). Double circulation: A growth model for the Chinese economy in the next fifteen years. Studies on Russian Economic Development, 33, 118–125. https://doi.org/10.1134/S1075700722010154

Yuan, R. (2020). Financial Sustainability of the Pension System in China: Impact of Fragmented Administration and Population Ageing. Retrieved from: https://findanexpert.unimelb.edu.au/scholarlywork/1477537-financial-sustainability-of-the-pension-system-in-china--impact-of-fragmented-administration-and-population-ageing

Zhu, A., & Kotz, D. (2010). The dependence of China’s economic growth on exports and investment. Review of Radical Political Economics, 43(1), 9–32. https://doi.org/10.1177/0486613410383951




DOI: https://doi.org/10.15826/recon.2022.8.2.008

Copyright (c) 2022 Boris A. Kheyfets, Veronika Yu. Chernova

Сertificate of registration media Эл № ФС77-80764 от 23.04.2021
Online ISSN 2412-0731