International Business Cycle Co-movements And Transmission Factors

Business cycle refers to a regular expansion and cotraction of economic activities along the general trend of economic development. It is an unavoidable phenomenon in every country or region. To some extent, it reflects the developing situation and contradition of an economic entity or even the entire world ecomomy. With the rapid development of international trade and capital flows, the features of economic globalization are more significant and economic ties among countries or regions are closer day by day. The ecomonic fluctuation in all countries or regions does not merely present its own characteristic, but also strongly present the tendency of co-movement.With the implemention of opening-up policy in China since1978, it has greatly strengthened links between China and the world economy. By2010, the scale of total gross domestic product has increased18times, reaching$6.04trillion, China has become the world's second largest economy. In the mean time, with the accelerating pace of China's integration into the world economy, the business cycle co-movements between China and the world have become increasingly evident. The world ecnomic fluctuations can affect China's economy through international trade, investment, finace and other channels. In this paper, we use China and its major trading partners as the research objects. Firstly, we divide China's business cycle into ten different stages and analyze the reasons for business cycle fluctuation in each stage, then we examine the feature of business cycle fluctuation in different countries, compare with the stability, sustainability and synchronization of business cycle fluctuation in China and its major trading partners. The result shows that almost all developed countries'business cycle are in front of China's, which have some stimulating impact on China's economy through trade, investment, technology diffusion and other channels. But in the emerging economies, they all lag behind to China expect South Korea, India, Brazil, which can indicate that China take a leading role among emerging economies.Secondly, we illustrate the transmission mechanism of international businiess cycle and Take China's actual situation into account.Through the estabilishment of panel data model, we examine empirically the impacts of trade intensity, trade pattern, foreign direct investment and industry structure on business cycle co-movements, and investigate the principal transmission factors and contributions of each factors to business cycle co-movements between China and its major trading partners. The empirical study results show:1. In the present stage of opening, trade channels and FDI channels have been the main transmission channels between China business cycle and the international business cycle.2. In the trade channels, intra-industry trade plays a dominant role in business cycle co-movement between China and its developed partners, while this impact between China and its developing partners are not very significant.3. In investment channels, FDI is positively correlated with GDP co-movement between China and its developing partners, but it's a just different situation between China and its developed partners. This indicates that developed partners'FDI and developing partners'FDI are of different types, so they definitely have different impacts on business cysle co-movements.4. Industrial structure similarity are positively correlated with business cycle co-movement whether with developed partners or developing partners.Finally, we put forward some suggestions on how to defense or avoid the impact of fluctuation from the world economy at the present stage and ensure a steady economic growth in China.