Impacts of Sino-US trade friction and the COVID-19 pandemic on Shanghai
Abstract
This paper uses a computable general equilibrium (CGE) model to simulate Sino-US trade friction and the COVID-19 pandemic's effects on Shanghai's growth. We focus on reducing exports and transfers to ROC (rest of China) and the possible shrinking of production capacity caused by trade friction and the COVID-19 pandemic. Our results show that due to the unique trade relationship between Shanghai, the world market, and ROC, even if a reduction in exports and transfers to ROC, will only have a limited impact on Shanghai's economic growth. The decline in Shanghai's major manufacturing industries' production capacity will profoundly affect the Shanghai economy. Under the resonance of the impact of the Sino-US trade friction and the effect of the COVID-19 epidemic, preventing the shrinking of manufacturing capacity will be a significant challenge for the Shanghai economy. To ensure the sustainable growth of Shanghai's economy, promoting the improvement of TFP on the supply side is the most critical policy option for policymakers.