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date: 29 March 2020

Abstract and Keywords

This article contends that China’s growth in the last decade has not been primarily due to trade but has been driven by growth in internal demand. Using a shift share approach, it shows that the export-driven portion of growth in manufacturing was smaller than that due to the domestic portion. Wage growth has occurred for urban workers and migrants alike and for workers across sectors—agricultural, manufacturing, construction, and others. It is argued that the “flying geese” pattern of development—where, as a country’s economy becomes more developed and costly in terms of doing business worldwide, production activities are spun off to neighboring countries—will be internalized in China. This pattern will occur domestically, rather than across borders as evidenced by the rising wages in the hinterland, relative to the coastal cities; although a wage differential will still exist.

Keywords: economic growth, internal demand, domestic demand, exports, manufacturing industry, wage growth

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