The effect of oil price on China's exports

The increase in oil prices in recent year's has Occurred concurrently with a rapid expansion of Chinese exports in the world markets, despite China being an oil importing Country. in this paper we develop a theoretical model that explains the positive correlation between Chinese exports and the oil price. The model shows that Chinese growth call lead to all increase ill oil prices that has a stronger impact oil its export competitors. This is due to the large labor force surplus of China. We then examine this hypothesis by estimating a reduced form equation for Chinese exports Using Rodrik [Rodrik, Dani, 2006. What's so special about China's exports? China and World Economy 14, 1-19.]'s measure of export competitiveness, together with the oil price, productivity, real exchange rate, and foreign industrial production over the monthly 1992-2005 period. The results Suggest a stable relationship and yields slightly positive values for the price of oil and elastic coefficients for export competitiveness, along with the expected negative elasticity for the real exchange rate. (C) 2009 Elsevier Inc. All rights reserved.