Examining structural stability and time-varying causality between exports and economic growth in China amidst shock

Can the Chinese economy still be driven by exports in the face of global shocks? This research question is explored in this brief study. Economists and public policy analysts widely asserted that China’s economic growth and development were built on a strong foundation of the export-oriented manufacturing sector (Johnston, 2024). Precisely, China embarked on the mission of export-led growth in the 1980s, marked by a series of economic reforms such as trade liberalisation (particularly joining the World Trade Organization [WTO] in 2001), the reindustrialisation process around 2004 and the processing of export goods (Yao, 2014). However, concerns have emerged about whether the Chinese economy can continue to rely on exports as its primary driver in the years ahead. Roubini (2024) argues that China’s export-led growth model has broken down. He provides a reason for this development. He notes that after three decades of robust economic expansion, during which the economy grew at an average annual rate of 10%, China’s growth has slowed significantly. Currently, the growth rate hovers around 5% and the International Monetary Fund projects that it could decline further to approximately 3.4% by 2028 [1]. Roubini attributes this economic outlook to structural, rather than cyclical problems. These include an ageing population, a collapsed real estate bubble, massive overhangs of private and public debt and a marked shift away from market-oriented reforms back to state capitalism.

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