This paper examines the structural changes of the Chinese economy and how they have affected Korea’s exports to China. Focusing on the evolution of China’s role in the global value chain, we estimate the impact of China’s external demand and domestic demand. We also shed light on the effect of compositional changes in China’s GDP on Korea’s exports to China. The results of the VAR analysis suggest that external demand had a significant impact on Korea’s exports to China prior to 2008, while Chinese domestic demand became more important afterwards. Moreover, Chinese investment is the most important factor in determining Korea’s exports to China, and Chinese private consumption has recently been gaining relevance.
 

Executive Summary

1. Introduction

2. Literature Review

3. The Structural Changes of the Chinese Economy

3-1. The Compositional Change in China’s GDP
3-2. China’s Import Intensity-Adjusted Demand
3-3. The Evolution of Korea？China Trade

4. Empirical Analysis: VAR Approach

4-1. Model Specification
4-2. Empirical Results
4-3. Export by Type of Goods

5. Conclusion and Implications

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