What does the Chinese market need? An empirical study of the determinants of Chinese imports, 1996--2008

This study provides an in-depth analysis of the determinants of import demand in China through a multilevel approach. Using disaggregated data over 1996--2008 and a dynamic panel model, we find that the Chinese import market is predominantly characterized by quality competition. However, the nature of the competition varies across different industries. In line with theory, quality plays an important role in industries that are characterized by the potential for quality improvement and product differentiation, whereas price is key in industries in which quality and product differences are rather small. Moreover, private consumption expenditure is more influential than other categories of expenditures. Additionally, variables that can influence the relative price of import products, such as the exchange rate, tariffs and the domestic price index, also have an impact on import demand.