Comovement of Chinese provincial business cycles

In this paper, we establish a turning point chronology for the Chinese provincial deviation cycles during the period 1989-2009. The existing work has exclusively focused on the national business cycle. We detect different properties of the provincial deviation cycles. Using the mixture models clustering approach of Chris Fraley and Adrian Raftery (2002), we find that provinces can be classified among seven major clusters as a function of standard measures of cyclical characteristics. The results show that while the majority of coastal provinces remained in expansion around the Asian crisis, the nation as a whole was in recession. We uncover that all Coastal provinces are synchronized with the national cycle except Hainan. Further, the main four national recessions that occurred during this period are well diffused across the country.