The Impacts of the Shrinkage in Goods Exports on Chinese Economy: A CGE Model-Based Scenario Analysis

Focusing on the shrinkage in goods exports, this paper quantitatively analyzes the impacts of Sino-US trade war on growth, trade, industrial production of China. The method used here is a dynamic simulation for the period from 2019 to 2030 based on a recursively dynamic CGE model of 18 industries. The impacts are analyzed and assessed by providing 5 alternative scenarios and by comparing their deviations from the baseline scenario. Three alternative scenarios are diffident forms of reduction in goods exports, and two alternative scenarios are diffident hedging measures to the impacts. A comparison of alternative scenarios reveals that the reduction in goods exports will significantly affect the nominal GDP but cause trouble for the real GDP of China. As the hedging measure, the currency depreciation ultimately only affects the price, and the effect on the real GDP is very limited. To increase the domestic real investment will result in the increase in imports and significantly hedge the loss of nominal GDP and cause a larger-scale trade deficit, and therefore need to be used with caution.