How Reliant are East Asian Economies on Final Demand in China and the G-3?

After thirty years of economic transformation, China has become one of the largest economies in the world, accounting for an estimated 11 per cent of the world’s economic output (in purchasing power parity terms) and contributing nearly 27 per cent to global growth in 2007 (IMF, 2008). Expanding at an average rate of 9.6 per cent per annum over the past decade, China’s economy was driven by a rapid buildup in physical capital, robust growth in export-oriented industrial production and a steady rise in consumption. In particular, supported by rising income levels, total consumption expenditure in China grew significantly by an average of 7.4 per cent per annum between 1997 and 2007, contributing an average of 4.1 percentage points to annual GDP growth over this period.

Leveraging on China’s rapid economic growth, many East Asian economies have intensified their efforts to reach China’s consumers or plug themselves into China’s production processes through supplying raw materials and intermediate goods. These efforts have strengthened trade flows between China and East Asian economies in recent years. As a result, the export exposure of many East Asian economies to China has increased significantly (Exhibit 1).

The views expressed in this paper are solely those of the author and do not necessarily reflect those of theMinistry of Trade and Industry or the Government of Singapore.

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