Book contents
- Frontmatter
- Contents
- List of tables
- preface
- 1 Introduction: Foreign trade in China's economic development
- Part I Foreign trade reforms, economic efficiency, and trade patterns
- Part II Foreign trade, shortage, and inflation
- 4 Foreign trade and consumer goods imbalance: theory
- 5 Foreign trade and internal imbalance: empirical evidence
- 6 Conclusion: The prospect of foreign trade reforms
- Notes
- References
- Index
5 - Foreign trade and internal imbalance: empirical evidence
from Part II - Foreign trade, shortage, and inflation
Published online by Cambridge University Press: 06 July 2010
- Frontmatter
- Contents
- List of tables
- preface
- 1 Introduction: Foreign trade in China's economic development
- Part I Foreign trade reforms, economic efficiency, and trade patterns
- Part II Foreign trade, shortage, and inflation
- 4 Foreign trade and consumer goods imbalance: theory
- 5 Foreign trade and internal imbalance: empirical evidence
- 6 Conclusion: The prospect of foreign trade reforms
- Notes
- References
- Index
Summary
The theoretical model developed in Chapter 4 suggests that in a centrally planned economy such as China's an expansion of foreign trade will tend to worsen the degree of consumer goods imbalance. In this chapter, I discuss empirical evidence concerning the relation between foreign trade and the degree of consumer goods imbalance in China in the postreform period, leaving the empirical estimation of the contribution of foreign trade to the growth of the money supply (and open inflation) to Chapter 6. Two major tasks are involved: The first is to develop an indicator of the degree of consumer goods imbalance and the second is to use that indicator to determine the contribution of foreign trade fluctuations to the changes in the degree of consumer goods imbalance in China during the period of economic reforms. I first provide a detailed discussion of the concept of consumer goods imbalance in relation to central planning.
The concept of consumer goods imbalance
In this study, a consumer goods imbalance is considered to be present when there is an imbalance in the demand for and supply of consumer goods. In an economy characterized by price flexibility, and, therefore, full employment, prices will adjust to eliminate the excess demand for or supply of consumer goods. Hence, the rate of increase in consumer prices will be a proper indicator of the degree of consumer goods imbalance. Conversely, in an economy characterized by price stickiness and unemployment, the rate of unemployment will change with market imbalances. Therefore, the degree of market imbalance can be reflected by the rate of unemployment.
- Type
- Chapter
- Information
- China's Foreign Trade ReformsImpact on Growth and Stability, pp. 147 - 175Publisher: Cambridge University PressPrint publication year: 1990