The Influence of “Made in China” on the Great Moderation of the Global Economy:An Empirical Test Based on Value Chains

Social Sciences in China

Vol. 38, No. 1, 2017


The Influence of “Made in China” on the Great Moderation of the Global EconomyAn Empirical Test Based on Value Chains



Yang Jijun and Fan Conglai


We have collected data on China’s 22 main trading partners for 1984-2012 and used System GMM to study the influence of “Made in China” on the “Great Moderation” of the global economy. Our research shows that although trade scale, real effective exchange rate, oil prices, fixed capital investment and other variables have significantly expanded global economic volatility, “Made in China” has markedly restrained output growth rate fluctuations in countries around the world and price fluctuations in developed countries, helping the global economy develop with “high growth, low volatility.” “Made in China” is a long-term variable in the context of the global value chain. China needs to take advantage of global value chain restructuring to further upgrade and develop processing and manufacturing industry and expand its presence in the international market. It could choose to adopt a “mirror strategy” and launch trade sanctions targeting counterpart industries or enterprises to counter irrational trade sanctions from the developed countries. At the same time, however, it is important for China to make its own contribution to improve global economic governance and building a new international economic order in the era of global value chains by strengthening its policy coordination with other countries.


Keywords: global value chain, value-added trade, Made in China, processing trade, the Great Moderation