Social Sciences in China (Chinese Edition)

No.10, 2015

 

The Influence of “Made in China” on the Great Moderation of the Global Economy—An Empirical Test Based on Value Chains

(Abstract)

 

Yang Jijun and Fan Conglai

 

Our research collects data from 22 of China’s major trading partners from 1984 to 2012 to analyze the influence of “made in China” upon the “Great Moderation” of the global economy using the System GMM method. Our results show that such variables as scale of trade, real effective exchange rates, oil prices and fixed capital investment significantly magnified global economic fluctuations, but “made in China” had a significant effect in checking fluctuations in each country’s rate of output growth and markedly decreased price fluctuations in developed countries, thus helping the global economy sustain a “high growth, low volatility” regime. In the global value chain, “made in China” is a long-term variable. China should employ the reorganization of the global value chain to further enhance and develop its processing and manufacturing and to expand its international market space. Faced with developed countries’ irrational trade sanctions, it should selectively employ a counter-sanction “mirror strategy” against counterpart or similar enterprises and should strengthen policy coordination with other countries to improve global economic governance and build a new order for the international economy in the age of the global value chain.