Causes Of Economic Fluctuations In China’s Industrial Sector And Heterogeneity Study

Industry plays an important role in the development of the national economy and has always been an important force driving China’s economic growth.Therefore,maintaining a stable and healthy operation of the industrial economy is crucial to preventing macroeconomic ups and downs.However,in recent years,the development of China’s industrial sector is facing difficulties.On the one hand,the industrial economy has an imbalance in the structure of supply and demand.On the other hand,the sluggish real economy has driven more capital out of the real economy and turned to the virtual economy.Due to various other reasons,the growth rate of industrial value added has been in a state of great volatility,which has brought certain impacts and challenges to the development of industry and industrial enterprises.Therefore,it is of great significance to make a scientific and effective empirical research on the development of China’s industrial economy,to find out the current laws or causes of industrial economic fluctuations in China,and analyze the specific causes of fluctuations in various industries within the industry for the sustainable development of the industrial economy.The paper will take the industry sector and its 32 internal sub-sectors as the research object.By combining the econometrics method with the relevant theories of economic fluctuations,we will conduct an empirical study on the causes of the volatility characteristics in the overall operation of the industrial economy from three aspects:aggregate demand,Macro-control and industry itself..The empirical part is divided into two levels as a whole:The first level is to analyze the causes of industrial fluctuations by constructing a vector autoregressive model.The impulse response is used to analyze the response of the industrial economy to various factors.Then use the variance decomposition to decompose the contribution rate of each factor to industrial economic fluctuations,and then find out the main factors leading to industrial economic fluctuations.On the second level,the 32 sub-sectors of the industry are divided into resource-intensive,labor-intensive,capital-intensive and technology-intensive types according to factor density.By building a panel VAR model for different factor-intensive industries,the paper will analyze the heterogeneity of the causes of fluctuations,and discuss the differences in the internal factors of different industries,with a view to proposing suggestions to promote the stable development of different types of industries.The study found that monetary policy,fixed asset investment and GDP are the main causes of industrial economic fluctuations in China from the overall perspective of industry,while technological progress,fiscal policy and exports have little effect on industrial economic fluctuations.Impulse response analysis shows that monetary policy,fixed asset investment,GDP and fiscal policy have a positive impact on the economy;The shock of technological progress have a negative impact on output,and this is related to the unsuitability of technological progress in China’s industrial sector.Meanwhile,the positive impact of export shocks on output is relatively short-lived and unsustainable.From the perspective of sub-sectors,the main causes of fluctuations in the four types of industries are monetary policy,fixed-asset investment and GDP.The volatility in resource-intensive and labor-intensive industries is more affected by fixed-asset investment than in capital-intensive and technology-intensive industries.What’s more,volatility of capital-intensive and technology-intensive industries is more affected by GDP than resource-intensive and labor-intensive industries.The impact of technological advances,exports,and fiscal policies has little contribution to volatility across industries.Therefore,it can be concluded that monetary policy is the biggest cause of industrial value-added fluctuations.At present,China’s industry growth still relies on investment to drive.The pulling effect of technological progress on industrial economy is not obvious,and the capital-biased technological advancement even has a negative effect on the industry.overcapacity in industry still needs to be solved urgently;the contribution of exports to the development of industrial economy is small.Therefore,the government should adopt an appropriate monetary policy to adjust the operation of industry,otherwise it will lead to large fluctuations in the economy;Besides,forming a market-oriented financial resource allocation mechanism will be good for getting rid of the development mode of excessive dependence on investment and resource input to build a new type of economic growth mode with technological innovation as the core driving force;The government also should optimize the direction of technological advancement,improve the utilization rate of production capacity of enterprises,strive to upgrade the grade of industrial manufactured goods;At last,establish advantageous industries in line with China’s national conditions,and enhance the export competitiveness of industrial products.