Estimation of Chinaʹs disaggregate import demand functions

We estimate the disaggregate import demand functions for three basic classes of goods as defined in the System of National Accounts (SNA): capital goods, intermediate inputs, and final consumption goods, and use the findings to shed light on the effects of Chinaʹs economic growth on its current account. The results showed that as China switches from exports to domestic demand as a key driver for economic growth, Chinaʹs trade surplus would be expected to shrink rather quickly.