China in 2005: Implications for the Rest of the Wo r l d

Arndt, Channing; Hertel, Thomas; Dimaranan, Betina; Huff, Karen; McDougall, Robert

doi:1997.12.4.505

Journal of Economic Integration 1997 December;12(4) :505-547.
DOI: https://doi.org/10.11130/jei.1997.12.4.505

China in 2005: Implications for the Rest of the Wo r l d

Channing Arndt, Thomas Hertel, Betina Dimaranan, Karen Huff, Robert McDougall

Purdue University

ABSTRACT

This paper analyzes the impact of continued rapid growth in China on her trading partners using a multiregion, applied general equilibrium model. Contrary to conventional wisdom, we find that most developing countries benefit from China's growth. Product differentiation plays a key role in this finding. Systematic analysis of these welfare gains shows that, as expected, simple terms of trade calculations based on net trade positions and average world price changes predict a loss for the developing countries. However, with the exceptions of South Asia and Thailand, this loss is overshadowed by a positive movement in region-specific export price indices. Second-best effects also play a significant role in the gains for a number of the developing countries. (JEL Classi fication: F11, F15)