1 Trade Dynamics of China and Trade Dynamics of China and India: India: Challenges and Opportunities Challenges and Opportunities Mahvash Saeed Qureshi Trinity College University of Cambridge and Guanghua Wan United Nations University World Institute of Development Economics Research The Eighth Global Development Network Conference Beijing, January 14-16, 2007
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Trade Dynamics of China and Trade Dynamics of China and India:India:
Challenges and OpportunitiesChallenges and OpportunitiesMahvash Saeed Qureshi
Trinity College University of Cambridge
and
Guanghua WanUnited Nations University
World Institute of Development Economics Research
The Eighth Global Development Network ConferenceBeijing, January 14-16, 2007
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I. IntroductionII. China and India: the New Asian TigersIII. Trade Structure of China and IndiaIV. Potential Trade Competition &
Complementariy V. Dynamics of Trade CompetitionVI. Conclusions and Policy Implications
Presentation Presentation OutlineOutline
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• China and India: emerging global economic players
• High economic growth rates• Rapidly rising share in world exports• Large inflows of foreign investment• Engines of demand growth in commodities• Positive demographics
I. IntroductionI. Introduction
• The new Asian drivers: threat or opportunity?
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Introduction (cont.)Introduction (cont.)
• Potential Trade Impacts• ‘Complementary Effect’• ‘Competitive Effect’ in third markets• ‘Competitive Effect’ in domestic markets
• Key Factors• Similarity of export structures• Complementarity of export-import structures• Flexibility and speed of adjustment
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• Earlier research…• Focus on China • Impact on specific geographical regions
• Goals of the paper• Comparative analysis of trade of China & India
Dynamics of Trade CompetitionDynamics of Trade CompetitionTable 8: Empirical results for trade indices of China
Notes: *, **, *** indicate significance at 10%, 5% and 1% levels, respectively; constant included in all specifications.
CS TCI (i) (ii) (iii) (iv) (Real GDP)j 0.0114** 0.0129** 0.0228*** 0.0217*** (Real GDP per capita)j 0.0027*** 0.0044*** -0.0030** -0.0067*** (Economic freedom index)j 0.013 0.0112 0.0260*** 0.0283*** (Telephone mainlines)j 0.0001** 0.0001** 0.0002*** 0.0001*** (RCA raw material)j -0.0041* -0.0038 0.0027** 0.0019** (RCA tropical agriculture)j -0.0053*** -0.0056*** -0.0019 -0.0017 (RCA animal products)j 0.0056*** 0.0058*** -0.0026 -0.0037* (RCA cereals)j -0.0082*** -0.0079*** -0.0044** -0.0036 (RCA labour intensive)j -0.0084 -0.0078 -0.0149*** -0.0193*** (RCA machinery)j 0.0335* 0.0363* 0.0431*** 0.0316* (RCA capital intensive)j 0.0285*** 0.0276*** 0.0078 0.0089 (RCA chemicals)j -0.0046 -0.0045 0.0148 0.0119 Year dummies No Yes No Yes Partner country dummies Yes Yes Yes Yes Observations F-statistic for all regressors Adj R-squared F-statistic for fixed effects Hausman chi-square
421 8.63*** 0.97 103.55*** 39.51***
421 6.95*** 0.98 104.56*** 56.62***
421 8.65*** 0.98 53.77*** 78.81***
421 6.90*** 0.98 57.97*** 95.39***
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Dynamics of Trade CompetitionDynamics of Trade CompetitionTable 9: Empirical results for trade indices of India
Notes: *, **, *** indicate significance at 10%, 5% and 1% levels, respectively; constant included in all specifications.
CS TCI (i) (ii) (iii) (iv) (Real GDP)j 0.0034 0.0018 -0.0041 -0.0091 (Real GDP per capita)j 0.0112*** 0.0091*** -0.0050*** -0.0014*** (Economic freedom index)j -0.0011 -0.0059 -0.0060 -0.0062 (Telephone mainlines)j 0.0001*** 0.0001*** -0.0001 -0.0001 (RCA raw material)j 0.0000 0.0012 -0.0066 -0.0013 (RCA tropical agriculture)j -0.0038*** -0.0024 -0.0081** -0.0065** (RCA animal products)j -0.0053*** -0.0067*** 0.0005 -0.0020 (RCA cereals)j 0.0031*** 0.0038*** -0.0042* -0.0039 (RCA labour intensive)j 0.0099** 0.0085* -0.0090 -0.0181** (RCA machinery)j -0.0266* -0.0299** 0.0402* 0.0603* (RCA capital intensive)j 0.0171** 0.0182** 0.0269*** 0.0301*** (RCA chemicals)j 0.0303*** 0.0245*** -0.0233* -0.0280* Year dummies No Yes No Yes Partner country dummies Yes Yes Yes Yes Observations F-statistic for all regressors Adj R-squared F-statistic for fixed effects Hausman chi-square
421 23.22*** 0.97 110.29*** 64.71***
421 23.34*** 0.97 138.74*** 43.14***
421 3.15*** 0.91 33.40*** 59.29***
421 3.97*** 0.92 36.54*** 48.56***
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• Chindia experiencing change in export composition & RCA
• China tough competitor for• India, East Asia, Mexico, Western Europe, USA
• India tough competitor for• Neighbouring South Asian countries
• Potential for expanding trade… • China and India• East Asia, Europe and USA in manufactures• Latin America and Africa in resource based commodities
VI. VI. ConclusionConclusion
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• Lessons for the developing countries• Human capital• Productivity and efficiency• Increasing saving and investment• Improving infrastructure• Improving business climate
Conclusion Conclusion (cont.)(cont.)
• Work in progress• Econometric analysis of trade impacts• Including the services sector