China's Trade Flows: Changing Price Sensitivies and the Reform Process

IMF Working Papers, January 1, 1999

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China's Trade Flows: Changing Price Sensitivies and the Reform Process

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Bibliographic details

• Authors: Anuradha Dayal-Gulati, Valerie Cerra
• Published: January 1, 1999
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451841619.001

Summary

• Over the past 20 years, the Chinese authorities have undertaken wide-ranging reforms of their exchange and trade systems that have steadily reduced the role of planning and increased the importance of market forces.
• As these reforms have taken root, relative prices and domestic and foreign demand would be expected to have played a bigger role in determining trade flows.
• Econometric estimates of export and import equations provide evidence that trade flows have indeed become increasingly price sensitive, owing to the gradual liberalization of the trade regime over time, and to the growing shares of foreign-funded enterprises and manufactures in total trade.

Empirical findings and price sensitivity

• Trade flows have become increasingly price sensitive over the reform period.
• The increasing price sensitivity is attributed to:
  • Gradual liberalization of the trade regime over time.
  • Growing shares of foreign-funded enterprises in total trade.
  • Growing shares of manufactures in total trade.
• Econometric estimates of export and import equations are the primary evidence base for these conclusions.

Methods and scope

• The working paper uses econometric estimates of export and import equations to assess determinants of trade flows.
• Subject coverage includes: Balance of payments, Exports, Foreign direct investment, Foreign exchange, Imports, International trade, Real effective exchange rates.
• Keywords signaling methodological and topical focus: Econometric models, export transaction, export volume growth, Price elasticity, Trade reform, import demand and supply equation, import behavior.

Policy context and reform process

• Wide-ranging reforms of exchange and trade systems reduced planning and increased market forces.
• The reform process changed the determinants of trade flows, increasing the roles of relative prices and domestic and foreign demand.

Content in this bundle

• China's Trade Flows: Changing Price Sensitivities and the Reform Process - WP/99/01
  • China's Trade Flows: Changing Price Sensitivities and the Reform Process - WP/99/01 (Markdown version)
  • China's Trade Flows: Changing Price Sensitivities and the Reform Process - WP/99/01 (PDF)