The role of the Chinese cycle in the global cycle

- "We seek to ascertain the role played by the Chinese cycle in the global cycle."
- "This poses two types of questions:
• to measure the weight of the Chinese cycle, we can use an accounting approach (China’s weight in global GDP, in global trade); but it overlooks the multiplier effects of the Chinese cycle: growth motor of other Asian economies, effects of the sharing of the production between China and other Asian countries. Effectively, we find an elasticity of output (GDP and manufacturing output) to output in China of 0.4 and not from 0.1 to 0.2 according to the accounting approach;
• we also have to look at the direction of causality between the Chinese cycle and the cycle of the rest of the world; in certain periods (after Lehmans’ bankruptcy), the freezing of the global economy has weakened the Chinese economy; in other periods (late 2009, early 2010 for instance), Chinese growth has driven upwards the global economy. However, overall, statistical tests show that causality definitely heads from China to OECD countries."

Natixis Flash Economics 449 20100910

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