Are Chinese Trade Flows Different?

53 Pages Posted: 2 Mar 2012 Last revised: 6 May 2023

See all articles by Yin-Wong Cheung

Yin-Wong Cheung

University of California, Santa Cruz - Department of Economics

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER)

Xingwang Qian

State University of New York, Buffalo State

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Date Written: March 2012

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.

Suggested Citation

Cheung, Yin-Wong and Chinn, Menzie David and Qian, Xingwang, Are Chinese Trade Flows Different? (March 2012). NBER Working Paper No. w17875, Available at SSRN: https://ssrn.com/abstract=2014571

Yin-Wong Cheung (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

Engineering 2, Department of Economics
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Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics ( email )

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Xingwang Qian

State University of New York, Buffalo State ( email )

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