Statistics Measure Of The Impact Of International Financial Crisis On China’s Economy

In August2007, the "subprime mortgage crisis” began sweeping the world’s majorfinancial markets such as the U.S., EU and Japan, thereby resulting in a major globalfinancial market liquidity crisis. Spreading and deepening rapidly, it graduallyevolved into the most serious international financial crisis since the GreatDepression of1929. The international financial crisis has not receded, but the Greekdebt crisis began to appear in December2009. Except for Greece, several “stareconomies” in Europe had also been involved in this crisis by2010and thesecountries within the euro zone faced with rising government debt crisis which was inurgently need for external relief. The “European sovereign debt crisis” is basically acontinuation of the impact of the "subprime crisis". Different from the past, theinternational financial crisis is showing some new features. The sphere, duration andextent of the influence, as well as the government intervention frequency, are greaterthan any of the previous ones. As the second largest economy, China is now in aperiod of economic restructuring. The adjustment and optimization of economicgrowth patterns and industrial structure is the primary goal of China’s economicreform and development in recent years. The outbreak and spread of the internationalfinancial crisis had not only impacted the global economy, but also had a greatnegative impact and influence on China’s economy. It not only significantlyinfluenced GDP and other macroeconomic indicators in a short-term, but moreimportantly influenced the medium-and long-term economic growth path and theadjustment of industrial structure which will be a tacit, long-term process, and has atime delay characteristics.This article first analyzes the classical theories of financial crisis transmissionand the writer believes that the impact of financial crisis is a growing, dynamicprocess rather than in a static condition. Besides, such kind of effect is a long-termone. Through the characteristics and effects of the international financial crisis,especially the great impact to the real economy, starting from the theories of economygrowth continuity and evolution of industrial structure, the author believes that thecrisis impacts the economy by three elements, capital, labor and technology, whichwork on the inner system of economy. They influence the driving force of economicgrowth, thereby affecting the evolution of economic growth path, as well as the adjustment of internal economic structure, especially the industrial structure. Theauthor constructs the theory framework of international financial crisis impactmeasure based on combining two perspectives-the driving force of economic growthand industrial structure, and two dimensions, flexibility and path of the effects. Theresearch ideas are set to focus on the investigation of medium-and long-termdevelopment trend, to measure the flexibility and path of the international financialcrisis’s impact on economic growth path, as well as those of the industrial structure.Based on the results of the measure, the author have briefly evaluated the stimuluspolicies during the international financial crisis and proposed advice for the gradualphasing out of follow-up policy interventions. In addition, the macroeconomicpolicies to enhance the sustainable economic development are given in order topromote the ability in withstanding the impact of international financial crisis.Second, based on the theoretical analysis framework, the author starts from theinternal driving force, production factors. Utilizing the Douglas production functionwhich assumes constant returns to scale and choosing the statistical model of the statespace, the writer finishes an empirical analysis of the time varying elastic effects ofinternational financial crisis to the economic growth through production factors suchas capital, technology and labor. The results reveal that the international crisis hadaccelerated the downward trend of China’s capital output elasticity. It is difficult tomaintain sustainable economic development of the capital driven economic growth.At the same time, the total factor productivity appears to decline increasingly and itschange has a negative effect on the contribution rate of economic growth.Third, in this section we start from the perspective of the impact of internationalfinancial crisis on the total path of economy. The writer not only investigates the timedelay changes of various factors of economic growth, but also applies the structuralvector auto-regression model to analyze the changes in various factors’ response timeand their intensity under the influences of international financial crisis. The studyshowed that obvious time delay changes existed in influence of technological progressand per capita capital on economic growth. The response time of economic growthover technical progress had shortened a quarter and the maximum response time overper capita capital was2quarters in advance of the international financial crisis.Compared with the time before the international financial crisis, the contribution rateof technical progress to economic development was much elevated while that of theper capita capital preached a substantial decline.Fourth, based on the industrial structure theoretical perspective, taking full account of the combined effects of crisis and policies over the growing path of threemajor industries, the author did an empirical analysis about the degree of deviationand impact of three industries by intervention analysis model. Furthermore, thestimulus intervention policies were assessed briefly. The international financial crisishad a major impact on the secondary and tertiary industries. The economicstimulus policy, significantly pulling the industry, has played a good role in the shortterm.Fifth, the writer further analyzed the flexibility of international financial crisis’seffect on three industries and simulated the elastic median-and long-term changetrack of three major industries over GDP. The rolling regression model based on ridgeregression was applied for empirical analysis. The results show that the internationalfinancial crisis had raised the elastic coefficient of primary industry over GDP andreduced that of the secondary and tertiary industry. It suggests that solely increasingthe capital investment of the secondary industry can no longer improve the quality ofeconomic growth. This serves as an empirical evidence to explore the economicindustrial restructuring and to achieve sustainable economic development.Finally, on the basis of the theoretical analysis of the effects of internationalfinancial crisis and the empirical measure results of China’s economy, taking thegradual abatement of effects of international financial crisis into account, the authorput forward the mechanism to withdraw the intervention policies. Moreover, thewriter provides measures and suggestions to the median and long-term control ofChina’s macro-economic policies based on the macro-objectives of sustainableeconomic development and optimization of economic structure adjustment.