China rebound hinges on role of exports

[FT_news]

With China showing tentative signs of an economic rebound, the theory that the world's recently crowned third-largest economy could detach itself from the US economy – an idea that looked foolish during the autumn global slump – is being dusted off again

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[forum_admin]

But for China to really “decouple” from the global slowdown, it will need to demonstrate that its growth is not dependent on exports.

Economists have long argued about the role of exports, which represent about 40 per cent of China’s gross domestic product, in the country’s spectacular expansion.

The performance of the economy this year, including Thursday’s release of first-quarter GDP figures, will help answer that question.

The issue is a crucial one. China’s economy is expected to rebound later this year, boosted by aggressive government policies. But whether China can go back to its long-term trend of 8-9 per cent annual growth or whether it is facing a period of relatively sluggish expansion will depend to a large extent on just how important exports really are.

One school of thought has it that the bulk of growth in recent years has been driven by domestic demand rather than exports.

Although China’s headline export figures are huge, some researchers believe this greatly exaggerates the importance of the sector. The reason is that many of China’s export factories only assemble parts that were manufactured elsewhere.

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