Dutch Disease and Deindustrialization: Symmetrical and Asymmetrical Impact of Oil Rent on Value-Added Industry in China

This article examines the phenomenon of deindustrialization, particularly in the context of China, and explores its relationship with the energy sector, specifically oil rents as a percentage of GDP in the short and long term in China over the period 1990–2021. The study found conflicting results using a variety of econometric models, including ARDL and NARDL, and asymmetric causality tests. While the ARDL model suggests that oil rents have a positive impact on industrial value creation in the short and long term, the NARDL model suggests a negative relationship. Furthermore, the causality test shows that a positive shock to oil rents leads to a negative shock to industrial value added, indicating the existence of unidirectional causality. These results suggest the existence of “Dutch disease” in China, where the expansion of extractive industries has negatively impacted manufacturing and led to deindustrialization.