CHINA SPILLOVERS: AGGREGATE AND FIRM-LEVEL EVIDENCE - Research paper

Oct 3, 2026

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We estimate spillovers from demand- and supply-driven shocks originating in China to foreign countries and firms. The study combines a Structural Vector Autoregression (SVAR) approach with broad domestic activity measures and narrative evidence to separate supply versus demand components of China’s growth. It then evaluates how GDP (and firm revenue) in partner economies responds. Findings indicate stronger reactions to Chinese supply shocks, synchronized slowdowns in China with declines abroad, and heterogeneous effects driven by trade input-output linkages.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages69

Reading Time2 h 54 min

AccessFree to download

Abstract

Introduction

China’s role in the global economy

Methodology and identification

SVAR framework and shock decomposition

Empirical results

GDP and firm revenue responses

DISCUSSION PAPER SERIES DP21111 CHINA SPILLOVERS: AGGREGATE AND FIRM-LEVEL EVIDENCE Alexander Copestake, Melih Firat, Davide Furceri and Chris Redl INTERNATIONAL MACROECONOMICS AND FINANCE ISSN 0265-8003 CHINA SPILLOVERS: AGGREGATE AND FIRM LEVEL EVIDENCE Alexander Copestake, Melih Firat, Davide Furceri and Chris Redl Discussion Paper DP21111 Published 02 February 2026 Submitted 01 February 2026 Centre for Economic Policy Research 187 boulevard Saint-Germain, 75007 Paris, France 2 Coldbath Square, London EC1R 5HL Tel: +44 (0)20 7183 8801 [www.cepr.org](www.cepr.org) This Discussion Paper is issued under the auspices of the Centre’s research programmes: International Macroeconomics and Finance Any opinions expressed here are those of the author(s) and not those of the Centre for Economic Policy Research. Research disseminated by CEPR may include views on policy, but the Centre itself takes no institutional policy positions. The Centre for Economic Policy Research was established in 1983 as an educational charity, to promote independent analysis and public discussion of open economies and the relations among them. It is pluralist and non-partisan, bringing economic research to bear on the analysis of medium-and long-run policy questions. These Discussion Papers often represent preliminary or incomplete work, circulated to encourage discussion and comment. Citation and use of such a paper should take account of its provisional character. Copyright: Alexander Copestake, Melih Firat, Davide Furceri and Chris Redl CHINA SPILLOVERS: AGGREGATE AND FIRM LEVEL EVIDENCE Abstract We estimate the spillovers of demand-and supply-driven shocks in China to foreign countries and firms. We combine a Structural Vector Autoregression (SVAR) framework with a broad-based measure of domestic economic activity in China and narrative evidence on domestic shocks to distinguish supply versus demand components of Chinese growth. We then assess the responses to such shocks of GDP (revenue) in other countries (firms) . The results suggest that: (i) global GDP responds more to Chinese supply shocks than to Chinese demand shocks; (ii) both supply and demand slowdowns in China are followed by declines in partner country GDP and firm revenue, especially in countries and firms with stronger trade linkages to China; and (iii) Chinese supply shocks have larger impacts on countries and firms with relatively stronger input linkages to China, while Chinese demand shocks have larger impacts on countries and firms with relatively stronger output linkages to China. JEL Classification: F14 Keywords: Network spillovers [Alexander Copestake-acopestake@imf.org](Alexander Copestake-acopestake@imf.org)[ ](Alexander Copestake-acopestake@imf.org)International Monetary Fund Melih [Firat-mfirat@imf.org](Firat-mfirat@imf.org) International Monetary Fund [Davide Furceri-dfurceri@imf.org](Davide Furceri-dfurceri@imf.org) International Monetary Fund and CEPR [Chris Redl -credl@imf.org](Chris Redl -credl@imf.org)[ ](Chris Redl -credl@imf.org)International Monetary Fund China Spillovers: Aggregate and Firm-Level Evidence ° Alexander Copestake±, Melih Firat ×, Davide Furceri ∂ and Chris Redl÷ ABSTRACT We estimate the spillovers of demand-and supply-driven shocks in China to foreign countries and firms. We combine a Structural Vector Autoregression (SVAR) framework with a broad-based measure of domestic economic activity in China and narrative evidence on domestic shocks to distinguish supply versus demand components of Chinese growth. We then assess the responses to such shocks of GDP (revenue) in other countries (firms) . The results suggest that: (i) global GDP responds more to Chinese supply shocks than to Chinese demand shocks; (ii) both supply and demand slowdowns in China are followed by declines in partner country GDP and firm revenue, especially in countries and firms with stronger trade linkages to Chin

FAQs

How does the paper distinguish supply-driven versus demand-driven shocks in China?

It uses an SVAR framework together with broad measures of domestic activity and narrative evidence to separate supply and demand components of Chinese growth.

What do the results say about global GDP responses to Chinese shocks?

Global GDP responds more to Chinese supply shocks than to Chinese demand shocks.

Do Chinese slowdowns affect partner countries and firms differently?

Yes. Both supply and demand slowdowns in China are followed by declines in partner country GDP and firm revenue, especially where trade linkages to China are stronger.

Oct 3, 2026

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