## China’s Imports Slowdown: Spillovers, Spillins, and Spillbacks

_IMF Working Papers, March 7, 2016_

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## Bibliographic details
- Authors: Alexei P Kireyev, Andrei Leonidov
- Published: March 7, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513555850.001

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### Summary of purpose and approach
- Models international spillovers from a hypothetical drop of China’s imports as a result of China’s rebalancing of its growth model.
- Uses a network-based model to capture higher round network effects of the shock that are largely unaccounted for in existing literature.
- Network effects considered: direct spillovers from China on its trading partners, subsequent spillins among those partners, and spillbacks on China itself.

### Key findings
- The network effects most likely will be substantial, may amplify the initial shock, and can change the direction of its propagation.
- Regional impact ranking (strongest to weakest):
  - Asia and Pacific: strongest impact.
  - Middle East and Central Asia: second strongest.
  - Sub-Saharan Africa: noticeable only for some countries.
  - Europe, including the Euro area: moderate spillovers.
  - Western Hemisphere, including the United States: very marginal spillovers.
- Sectoral impact:
  - Metal and non-fuel commodity exporters may experience the largest negative impact.

### Model characteristics and contributions
- Employs a network-based model to trace higher-order (round) effects across trading partners.
- Captures:
  - Direct spillovers from China to its trading partners.
  - Spillins (propagation among affected partners).
  - Spillbacks (feedback effects on China).

### Policy-relevant implications
- Because network effects can amplify and redirect shocks, policymakers should consider second-round and network-mediated channels when assessing vulnerabilities to China’s import demand changes.
- Regions and countries with concentrated exposure to metal and non-fuel commodity exports should prioritize contingency planning for demand shocks originating from China.
- Regional cooperation and monitoring of trade network linkages can help identify and mitigate spillins that propagate shocks beyond direct bilateral exposures.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/chinas-imports-slowdown-spillovers-spillins-and-spillbacks-43774_