Economic Growth and The Expanding Export Sector: China 1952–1985

In this paper Granger's test is employed to examine the causal relationship between the size of the export sector and national income per capita (as well as their respective growth rates) for China for the period 1952–1985. Our empirical results favour a bi-directional causal sequence between these two variables. However, these findings disappear when a similar test is used for the sub-period 1952–1978. The difference in results between these two sample periods points to a change in causal relation after 1978 which coincides with the adoption of an “outward looking” strategy by the Chinese government in that same year. 124