Economic Relationships of Shanghai with the Rest of China and the World: A CGE Model Analysis
Lin Sun, Nazrul Islam

Abstract
The purpose of this paper is to examine the linkages of the Shanghai economy with the rest of China (ROC) and the rest of the world (ROW) using a Dynamic Computable General Equilibrium (DCGE) model. The model distinguishes 14 sectors. Based on relationships observed during the sample period, the paper offers simulations for the 2017-2020 period. The results indicate that with respect to ROC, Shanghai is more of a supplier than a source of demand. With respect to ROW, however, Shanghai is both a supplier and a source of demand, reflecting a high degree of integration of Shanghai with the world market (globalization). Because of the two way integration with the world market and the large domestic demand that it caters to, Shanghai is more in a position to withstand adjustments in the exchange rate of Yuan.

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