Understanding Chinaʹs demand for resource imports

Is Chinaʹs demand for resources driven predominantly by domestic factors or by global demand for its exports? The answer to this question is of interest given the highly resource-intensive nature of Chinaʹs growth, and is important for many resource-exporting countries, such as Australia, Brazil, Canada and India. This paper provides evidence that Chinaʹs (mainly manufacturing) exports have been a significant driver of its demand for resource commodities over recent decades. First, it employs input–output tables to demonstrate that, historically, manufacturing has been at least as important as construction as a driver of Chinaʹs demand for resource-intensive metal products. Second, it shows that global trade in non-oil resource commodities can be described by the gravity model of trade. Using this model it is found that, controlling for other determinants of resource trade, exports (and the manufacturing sector more generally) are a sizeable and significant determinant of a countryʹs resource imports, and that this has been true for China as well as for other countries.