Effects of the Global Financial Crisis on Chinese Economy

Abstract

China is one of very few countries to escape the world financial crisis and experienced only a mild slowdown in economic activity without a recession. Experts point out that the global financial crisis in United States has had no major impact on China. Also, it has been estimated that China was less affected by the financial meltdown than other countries, due to its more closed financial system. The aim of this paper is to investigate the effects of the global financial crisis on Chinese economy. For this reason we have studied two models; one is the E-GARCH Model, which estimated the effect of the crisis on the Chinese stock exchange, and second is the Extended Gravity Model with Panel Least Square Method, which examined how China’s exports have been affected by the global financial crisis. Our empirical results suggest that global financial crisis moderately impacted the Chinese stock exchange and but it badly affected China’s exports.