The outlook for the world's developed economies has deteriorated severely in recent weeks, with growth momentum weakening sharply as the US and Europe plunges deeper into the debt crisis.

This naturally gives rise to concerns about China's economic growth. Discernibly, Chinese exports would become the hardest hit considering that the US, Europe and Japan accounted for 48 percent of China's total exports in 2010.

For a long time, people have been using the ratio of total export value to GDP to measure China's reliance on exports, dubbing the country as export-oriented. This is not a fair statement. The argument lies in how the export reliance of an economy is measured.

In the first half of 2011, this ratio stood at 25.6 percent for China. This figure may look high but it is far from being indicative and should not be construed as a quantitative evaluation of the Chinese economy's actual reliance on exports.

In a nutshell, total export value and GDP are two different and incomparable concepts. The former measures the gross value of export goods, while the latter quantifies the value of domestic production. A direct comparison of the two overestimates the country's reliance on exports.

This however, can be done by first of all converting the total export value to the corresponding value added of export goods, or by converting the GDP to the corresponding social production value. Currently, there are no available statistics of the social production output value in China, and therefore the latter conversion is infeasible.

As regard to the former conversion, the statistics of value added of export goods do not exist either, but we can do the conversion in an alternative and indirect way and derive the conversion ratio approximately as 26 percent, based on the fact that the ratio of added-value to gross value for industrial production averaged 26 percent for the past five years.

In turn we can derive the value added of export goods-to-GDP ratio approximately as "25.6% x 26% = 6.7%". In view of this, the Chinese economy should be regarded as domestic demand-oriented rather than export-oriented, as domestic demand constitutes more than 90 percent of the economy.

We may also explore the impact of exports on an economy by examining the three-component composition of GDP - consumption, capital formation and net exports. From a macroeconomic point of view, net exports can be seen as a form of value added of export goods, and therefore the net exports-to-GDP ratio can be another representation of the impact of exports on the economy. This ratio peaked at 4.0 percent in 2010 for China, indicating an even smaller role of exports in the Chinese economy.

The total export value-to-GDP ratio can be instrumental in comparing the relative export reliance for different countries. Such a comparison however indicates that in 2010 the ratio of 25.6 percent for the mainland was much lower than those of many emerging economies such as South Korea (46 percent), Taiwan (64 percent), Vietnam (68 percent) and Malaysia (84 percent), as well as those of developed economies like Germany (38 percent), let alone Hong Kong (174 percent) and Singapore (158 percent).

In short, China's GDP growth depends primarily on domestic demand rather than exports which accounts for less than 10 percent of the GDP. In other words, the slowdown in developed economies will curb China's export growth to a certain extent but the country's economic growth will be less affected.

Meanwhile, a recession in developed economies will result in a considerable slowdown or decline in China's exports, but with the support of domestic demand, the Chinese economy will maintain a reasonably high growth rate. In 2009, for instance, China's exports dropped 16 percent but its economy grew 9.2 percent, partly supported by the 4-trillion yuan investment stimulus program. Even without this program, the economy could still manage to grow not less than 7 percent.

It suggests that China's economic growth will remain above 8.5 percent despite the weakening prospect for developed economies, and should not be lower than 7 percent even if a double-dip in the developed economies becomes a reality next year.

The author is senior vice president, chief economist & strategist for China banking group at CITIC Bank International. The opinions expressed here are entirely his own.

(HK Edition 09/08/2011 page2)