Tuuli McCully (Aalto University) - China Trade Exposure Index

Tuuli McCully (Aalto University) - China Trade Exposure Index

Abstract
The essay studies countries’ economic dependence on China. As China will continue to integrate more deeply into the global economy and financial markets over the coming years, measuring and identifying other countries’ economic exposure to developments in China is becoming increasingly relevant. This essay builds a tool to measure and compare countries’ exposure to the Chinese economy through trade channels, using principal component analysis. The resultant China Trade Exposure Index ranks countries based on their economic dependence on trade with China. The essay further shows that the China Exposure Index is significant in explaining countries’ cyclical economic growth co-movement with China, with a higher ranking implying a stronger real GDP growth correlation.

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