DP13721 Structural change in the Chinese economy and changing trade relations with the world

Author(s): Eddy Bekkers, Robert Koopman, Carolina Lemos Rego
Publication Date: May 2019
Date Revised: May 2019
Keyword(s): China, Dynamic CGE-Modelling, structural change
JEL(s): F14, F43, I25
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13721

This paper examines the impact of structural change in China, in particular a reduction in the savings rate, an increase in the share of skilled workers, and an increase in productivity in technologically advanced manufacturing sectors targeted by Made in China 2025. Baseline projections until 2040 are generated with the WTO Global Trade Model, a dynamic computable general equilibrium model. With the modelled structural changes the Chinese economy is projected to reorient its focus increasingly onto the domestic economy, raising the share of private household and government consumption in GDP, turning China's trade surplus into a trade deficit, reducing China's share in global exports, raising the share of services in both production and exports, shifting the destination markets of Chinese exports from developed to developing countries, and changing its pattern of comparative advantage away from sectors like light and heavy manufacturing to electronic and machinery equipment. The large bilateral trade surplus vis-a-vis the United States is projected to fall to almost zero.