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An Analysis on the Contribution of China's Economic Growth to Global Economic Growth

Jul 28,2015

By He Jianwu, Department of Development Strategy and Regional Economy of DRC Research Report No 115, 2014 (Total 4614)

In 2010, the scale of China's economy exceeded that of Japan, becoming the second largest economy in the world and the largest in Asia, and one of the medium- and high-level income countries from a lower- and medium-level income country. As China continually gets integrated with the global economy, its development is reflected not only in the improvement of its own level, but also in the fact that it has also become an important driving force for the economic development of other countries and regions. Against the background of China's increasing role and influence in global economy, the correct understanding and publicizing of the positive role of China's development in the global economy is not only conducive to improving the positive image of China in the international community, but also has great significance in guiding China to formulate future development strategy. This paper tries to reveal in an all-round way from different angles the positive influence of China's economic growth on the global economy.

I. China's Economic Growth Speeds up the Change of the "South-North" Development Pattern in the Global Economy and the Shift of the Economic Center to the East.

Reviewing the history of the global economic development, it is found that the global economic situation of this century is undergoing unprecedented changes. From the 1960s to the early 1980s, the proportion of GDP of developed countries to that of developing countries in the global economy remained basically stable, with the GDP of developed countries three or four times that of the developing countries. During the last 15 years of last century, the proportion of GDP of developed countries in the global economy rose remarkably from less than 80% to nearly 85%. In this century, boosted by developing countries, especially China's rapid growth, the situation has been reversed, with the proportion of developing countries beginning to soar from about 18% at the beginning of this century to 31.8% in 2012, and half of the increase is contributed by China. China's proportion in the global economy rose from 3.7% in 2000 to 11.6% in 2012.

The influence of China's economy on the global economy is reflected not only in the change of the South-North development pattern, but also in the accelerated eastward shift of the global economic center. According to the study of Danny Quah (2011), with the continued rise of China's economy and the development of other regions in East Asia, the global economic center of gravity is shifting to the east at an accelerated speed, moving from the middle of the Atlantic coastal areas in 1980 to the east of Helsinki and Bucharest in 2007.

II. China's Economic Growth Not Only Provides A Huge Market to the Global Economy, But Also Speeds Up The Global Technological Progress and Promotes Global Economic Stability.

As China gets continually integrated with global economy, China's economy and the global economy are becoming increasingly close to each other. China's economic development has provided huge development opportunities for other countries and regions in the world. Specifically, it's reflected in the following aspects:

1. China's rapid economic growth has provided a vast market for global development.

Over the past 30 years and more, fast industrialization has successfully boosted China's rapid economic growth, creating huge market demands. On one hand, the demands for energy, raw materials and electromechanical equipment grow rapidly, greatly stimulating the export growth of energy, raw materials and machinery equipment, and boosting the economic growth of these exporting countries. Since the beginning of this century, China's iron ore import demand has grown by 12.5 times, and the import demands for high-tech products and mechanical and electrical products have respectively increased by 8.7 and 6.6 times. On the other hand, with China's economic growth, the middle-level income population has been growing and quickly become a major consumption force in the global market. China has overtaken the United States and become the largest consumption market of iPhone in the world, with 38% iPhones sold in China. In 2010, China replaced U.K. boasting the biggest source of tourists to Maldives.

2. China's development has promoted the deepening of the global labor division and technological progress.

China's opening to the outside world has not only improved its own specialization level, but also promoted the improvement of its trade partners' specialization level, and propelled the deepening of the global labor division system and the improvement of resource utilization efficiency at the same time. Studies show that, over the past 20 years and more, the vertical specialization indexes of major Asian economies have all gone up, indicating that their specialization level is improving and their labor divisions being deepened (WTO, 2011). Among them, China witnessed the biggest increase, with its vertical specialization index rising from about 8% in 1985 to 37% in 20081, basically reaching the level of the Republic of Korea. Additionally, China's development has also provided a huge amount of capital support for global research and development. The proportion of the R&D investment in China to GDP in 2013 reached 2.09%, more than twice that in 2000. What's more, China is also a major buyer of global patents. By 2011, China had become the fifth largest buyer of patents & licenses and the third largest net importer of patents in the world.

3. China's stable development is conducive to the world in controlling inflation and stabilizing economic growth.

For long, China's cheap export has played an important role in stabilizing global prices. Data show that, over the past 30 years and more, the annual average price hike of China's exports is only 0.5% while that of global exports in the same period reaches 2.3%. Besides, over the past 30 years and more, China's economy has maintained a stable and rapid growth, playing the role of "stabilizer", to a certain extent, in suppressing the global economic fluctuation and stabilizing the growth of global economy. Estimation shows that, over the past 30 years and more, the fluctuation degree of China's economy is greatly lower than that of major developed countries , and is only higher than Vietnam in all the countries and regions included in the economic database of the World Bank. In addition, after the outbreak of the financial crisis, the course of recovery of global economy has justified the important role of China in stabilizing global economy.

III. The Quantitative Estimation on the Contribution of China's Economic Growth to Global Economic Growth

In order to work out the contribution of China's economic growth to global economic growth in an all-round way, it is analyzed from two perspectives. On one hand, from the historical and global perspective, historical data is used to estimate the historical contribution of China's economic growth to global GDP increment; on the other hand, based on the current facts, transnational data and the international input-output model are used to analyze the boosting effect of Chinese economy on the economy of different countries.

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1If China’s trade is not divided into processing trade and general trade, China’s specialization degree will be greatly underestimated and China’s vertical specialization index is only 20%.