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Economics Research International
Volume 2011 (2011), Article ID 926484, 9 pages
http://dx.doi.org/10.1155/2011/926484
Research Article

Implications of the Global Financial Crisis for China: A Dynamic CGE Analysis to 2020

1Department of Economics, Waikato Management School, Hamilton 3240, New Zealand
2School of Economics, University of Adelaide, Adelaide, SA 5005, Australia
3Center for Global Trade Analysis, Purdue University, West Lafayette, IN 47906, USA
4Department of Economics, University of Melbourne, Parkville, VIC 3010, Australia

Received 2 June 2011; Accepted 4 August 2011

Academic Editor: James R. Barth

Copyright © 2011 Anna Strutt and Terrie Walmsley. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The global financial crisis resulted in a significant downturn in the global economy, with impacts felt throughout the world. In this paper, we use a dynamic global general equilibrium model to explore the longer-term impacts of the financial crisis, with a particular focus on China. The economies of most countries suffered to some extent, with the extent of declines in the long run likely to depend on the extent to which investment declines. Our results suggest that overall the financial crisis leads to international trade falling by approximately 14 percent from the 2020 baseline level. Within this, the composition of trade changes, particularly reflecting changes in demand for construction of investment goods and increasing longer-term demand from economies like China. We also briefly consider the impact of a more protracted recovery from the crisis, which has even more significant impacts on the global economy.