Determinants of China's Exports to the United States and Japan

Abstract

Quarterly panel data on seventy-one industries from 1999 to 2007 are used to estimate China's exports with a view to exploring the driving forces behind China's remarkable export growth, particularly to the United States and Japan. The results indicate that there are some similarities and differences between the determinants of China's exports to these two countries. For example, an appreciation in the real exchange rate of the renminbi tends to have a significant negative impact on China's exports to both countries. However, the impact is much greater on Sino-U.S. trade than on Sino-Japanese trade due to China's higher dependence on Japan's intermediate goods. Empirical evidence also reveals that differences in income elasticities and economic growth rates might account for the more rapid increase in China's exports to the United States than to Japan.