The Global Financial Crisis and the recent slowdown of China's growth have led to questions about the sustainability of China's growth. The argument is that, China is too dependent on external demand and that it needs to "rebalance" its economy toward domestic consumption. However, conventional measures of external: net exports-over-GDP and exports-over-GDP are biased and do not accurately measure the contribution of external demand to GDP growth. In this paper, we propose two measures that are simple modifications of the conventional measures. We argue that our proposed measures provide a more accurate estimate of the vulnerability of China's economy to external shocks, in the form of exports and FDI. Our estimates show that in 2001, exports and FDI accounted for 18.2% of GDP growth and by 2004 the share rose to 49 percent. During 2005During -2007, the contribution of exports and FDI to growth remained in the range of 38-40 percent. Our estimates also show that the impressive recovery of the Chinese economy in the post-crisis period owed at least 53% of its growth to exports and FDI. Based on these results, we conclude that the Chinese economy remains highly dependent on external demand in the form of exports and FDI, and re-balancing the economy towards domestic demand has not been achieved yet.
INTRODuCTION Before the coronavirus disease (COVID-19) outbreak, travel and tourism contributed 10.4% to global gross domestic product (GDP) and supported 319 million jobs (World Travel and Tourism Council [WTTC] 2019). International tourist arrivals reached 1.5 billion in 2019, and the United Nations World Tourism Organization (UNWTO) forecasted that international arrivals would grow by 3%-4% in 2020 (UNWTO 2020a). Arrivals in the Asia and Pacific region were expected to grow by 5%-6% in 2020. If managed well, this rapid expansion of tourism was expected to contribute to poverty reduction and inclusive growth (Chok, Macbeth, and Warren 2007; Mitchell and Ashley 2009; ADB 2017). Since March 2020, COVID-19 has paralyzed tourism as countries closed their borders, suspended commercial aviation, restricted domestic travel, and implemented physical distancing measures. The UNWTO reports 22% fewer international arrivals in the first quarter of 2020 compared with the same period in 2019, with the largest drop in the Asia and Pacific. In light of the pandemic, global arrivals could decline by up to 78% in 2020. This would place 120 million jobs at risk and reduce visitor exports by $1.2 trillion (UNWTO 2020b). Developing Asia, particularly tourism-dependent countries in Southeast Asia, is expected to be heavily affected (ADB 2020). The Lao People's Democratic Republic (Lao PDR) reported its first two COVID-19 cases on 24 March 2020 (Government of the Lao PDR, Ministry of Health n.d). A nationwide lockdown followed on 30 March 2020, prohibiting residents from leaving their homes except for essentials. All international ports of entry were closed to tourists, issuance of tourist visas suspended, and interprovincial travel banned. 2 Although hotels, resorts, and restaurants were allowed to continue operating under strict guidelines, travel restrictions severely undercut demand.
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