China 's Economic Impact On China

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China becomes the second largest economy in this world and it has showed the remarkable economic performance over the last two decades after The United States. China’s gross domestic product (GDP) as Share of World GDP at PPP 25 years ago only reached around 4.7%, now China contributes 16.32% of world GDP. China exports the relative cheap products that lowered consumer prices across the globe, and its imports have had a major impact on global commodity prices. China also has become a major hub of interindustry trade. Regarding those facts, China may become the engine of the world economy. China is now the third largest market for Indonesia’s product exports behind United States and Japan. The largest import of China from Indonesia is the coal, crude palm oil (CPO), and natural rubber. Most of the Indonesia commodities export to China is the input of China manufacturing activities. In addition, since the ASEAN China Free Trade Agreement (ACFTA) has been signed, there is an increasing trade integration between ASEAN countries and China (Chandra & Lontoh 2011). Since China’s economy has emerged as a major player in the world economy, China economic performance may influence other countries including Indonesia. China’s growth could influence other countries’ growth through a number of channels (Arora & Vamvakidis 2011). First, China’s imports of commodities, processing input, and increasingly, final products have a direct positive impact on the exports and GDP trading
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