China’s Trade in Crisis

This paper demystifies the concern that China’s high export dependence on Western markets has rendered it particularly vulnerable to the Great Recession of 2008-2009. Using customs statistics data, we show that China’s export juggernaut before the crisis heavily relied on imported inputs from within East Asia. When the crisis unfolded, a large portion of China’s negative export demand shock was thus transferred to its neighbors through a reduction in the import demand for their inputs. We conclude with a discussion how a deeper understanding of a country’s integration in global value chains is key to determining its macroeconomic resilience.