What Caused the Sharp Downturn in the Chinese Economy during the Global Financial Crisis？ A Critical Note on Causality in Trade Linkage

In responding to a view that attributes sharp downturns in the Chinese economy in late 2008 and early 2009 to the ＂collapse of external demand,＂ the present paper scrutinizes three relevant issues： How have large Chinese importers behaved in a demand-price setting？ How have Chinese commodity imports and exports interacted in recent years？ Did the downturns in China＇s export growth come earlier and were they deeper than those in Chinese import growth？ All answers appear to suggest a conclusion contrary to the abovementioned view： sharp downturns in China＇s trade and economy during the reeent global financial crisis were, to a large extent, caused by certain domestic factors, or by factors that should not be regarded as entirely ＂external. ＂ Insomuch as globalization has advanced, a large economy like China＇s today faces new potential sources of macroeeonomic disturbances, from inside and outside.     

Employment Effectiveness of China＇s Economic Stimulus Package

Using an input--output method, this paper simulates the impacts of the global financial crisis and the decline of exports on China＇s economy and employment. With shrinking external demand, boosting domestic demand becomes crucial for maintaining economic growth and promoting employment. Our simulated results indicate that an investment scenario with employment as a priority can achieve the objective of employment maximization without significantly reducing growth. Public investment should focus on employment, education, health, housing and social security to rebalance China＇s economy so that it can realize sustained and stable economic growth.     

China＇s Economy in 2007/2008： Coping with Problems of Runaway Growth

Fuelled by high domestic investment and rapid export expansion, China ＂s economy grew by ll.4 pereent in 2007, the highest increase since 1994 and the fifth eonseeutive year of double-digit growth. Such spectacular growth performance is unprecedented in the world＇s economic history. However, the Chinese Government is again worried about a possible ＂hard landing＂for the economy, as no economy can sustain very strong growth for extremely long period without overheating. Cracks in China ＂s economy are indeed emerging. The eonsumer priee index shot up to 6.9percent in November 2007, the highest level in a decade, with the annual inflation for 2007 rising to 4.S pereent, well above the government＇s ＂comfort level＂ of 3 percent. This prompted China＇s top leadership to declare that reducing economic overheating and curbing inflation would be the top poliey priorities for 2008. To contain such cost-push inflation, the government has to tackle its root causes, such as excessive liquidity, which is caused by the undervaluation of the renminbi, which in turn is attributable to China＇s chronic external and internal maeroeeonomie imbalances~ High growth is likely to continue in 2008, at around l O pereent, with inflation of S-6 pereent expected, despite the anticipated tighter maeroeeonomie control measures and the more troubled external economic environment （e.g. the expected US economic slowdown）. Regardless, China ＂s fundamental problems associated with runaway growth will largely remain. In addition, if the US economy slips into a serious recession, the Chinese economy will not be able to deeouple from it and escape unscathed.     

Impact of the Global Financial Crisis on China： Empirical Evidence and Policy Implications

This paper applies a structural vector autoregression analysis to quantify the impact of the global financial crisis on China. It is found that the impact is indeed sizeable： a 1-percent decline in economic growth in the USA, the EU and Japan is likely to lead to a0. 73-percent decline in growth in China. The article discusses whether the current measures of fiscal stimulus are adequate to offset the sharp decline in external demand Although there is little doubt that the massive fiscal stimulus will largely offset the significant shortfalls in external demand, the current growth pattern in China will be increasingly unsustainable in the long term. China ＂s reform cycles suggest that external shocks are often opportunities for structural reforms. Therefore, the crisis could also be a catulyst for rebalancing China ＇s economic structure so as to return the economy to a sustainable path.     

Has Fiscal Federalism Worked for Macroeconomic Purposes？ The Chinese Experience 1994-2003

China＇s central government undertook major tax regime reform in 1994 that was characterized by fiscal federalism. In hindsight, this reform might be viewed as being more emphatic towards the revenue side than the expenditure side. The reform has resulted in certain success both for revenue shifting and inflation fighting purposes. However, the reform and its subsequent follow-ups have not addressed some fundamental issues pertaining to China＇s government finance system, such as the overhauling of the function of government finance and redrawing lines between the central and regional governments with regard to their fiscal responsibilities and duties. Moreover, fiscal federalism might have actually increased fiscal burden on the economy, especially on domestic sectors of the economy. However, coupled with enhanced policy support for China＇ s external development, fiscal federalism might have helped to further accelerate resource shifts toward the external sector, thus resulting in an unprecedented rapid expansion in China＇ s exports since the mid1990s.     

Impact of Global Financial Crises on the Indonesian Economy： An Input-Output Analysis

The debt crisis in the European Union （EU） and the U.S. has significant potential impact on the economy of Indonesia. U.S. sub-prime mortgage crisis in 2008 has a strong impact on Indonesian economy, that Indonesia＇s gross domestic product （GDP） slowed down to below 5% during 2009. Until October 2012, Indonesia＇s export growth is starting to grow negatively on some sectors when the crises in the EU and the U.S. have started or overall grew by -6%. Although the slowdown does not occur in all sectors, the impact spreads to other sectors as the existence of industrial linkage among sectors. The objective of the study is to look at the impact on the sector level on various indicators such as GDP （value added） and employment. Input-output analysis will be used in the simulation. Indonesia input-output table of 2005 is applied as the data base. The simulation results show that if exports decline occurs in the U.S., the economic growth will be -0.20%. Meanwhile, if it occurs in the EU, the growth of GDP will be -0.24%. If some Asian countries face the fall of demand of Indonesian export, GDP growth declines by 0.61%. The fall of exports demand from some Asian countries, EU countries and the U.S. will cause the GDP growth by -1.06%. The crisis occurring in both the US and the EU has decreased export demand from those countries and region including some Asian countries. The impact to employment seemed to be minimal, only -0.47% of total labour force.     

Past Successes and New Challenges： China＇s Foreign Trade at a Turning Point

Since 1979, China has recorded a remarkable trade performance, which has been driven by international processing and the offshoring strategies of foreign firms. The diversification of Chinese exports and their technological upgrading have been phenomenal However, there is also inertia, illustrated by the persistent dualism of the trade sector, the unrelenting specialization in downmarket products and the deteriorating terms of trade. These weaknesses have helped its partners to adjust to the rise of this new trade power. In the past decade, China＇s economy has faced the adverse effects o fan export-led growth and the global crisis has revealed its vulnerability. China is now forced to rebalance its economy. This will imply major changes in foreign trade, in favor of ordinary trade and away from processing. In the foreseeable future, China is unlikely to become the driver of international demand but will remain the engine of Asian economic integration.     

China and the Global Financial Crisis： Assessing the Impacts and Policy Responses

The present paper explores the role of China in the creation of the current global financial crisis and the impacts of the crisis on its economy. It argues against the view that the ＂saving glut＂ in China （along with other Asian emerging economies） played a significant causal role in the crisis. The global financial crisis did not engender much damage in China＇s financial structure, thanks to the relatively closed, bank-centered financial system. However, the impacts on the ＂real＂ side of the Chinese economy were hard felt. Growth and employment have fallen, largely due to the decline in exports and foreign direct investment. The crisis reveals the vulnerability of the export-dependent growth pattern. Policy responses of the Chinese Government, including monetary, fiscal and social policies, have helped to stem the downfall of the economy in the immediate term, but some of the policies have not addressed the structural problems of the Chinese economy and might well aggravate such problems over time. The present paper proposes a tentative reform blueprint to rebalance the economy and to sustain long-term growth.     

Adoption of International Financial Reporting Standards Has Enhanced Chinese Company Transparency

The research reported here shows that China＇s recent adoption （ASBE） has increased the quality of Chinese financial reporting of Accounting Standards for Business Enterprises With China＇s decade of World Trade Organization （WTO） membership marked by dazzling economic growth, it is useful to reflect on how financial reporting itself can assist in the country＇s future progress. Critical to the success of ensuring strength for this burgeoning economy is attraction of foreign investment capital. As China＇s internal consumption grows,     

RMB Internationalization and Its Implications for Financial and Monetary Cooperation in East Asia

This paper emphasizes the importance of the denomination of financial assets rather than trade invoicing as a long-term determinant of an international currency. China needs to liberalize and open its financial system and make the RMB fully convertible, and to adopt a moreflexible exchange rate system to speed up its currency internationalization, for which China could follow either a global or regional approach. The global approach is a riskier and more unpredictable strategy because it would demand a scope and timeframe of financial liberalization that is likely to be beyond China＇s institutional capacity over the coming decade. There are two options that could be taken in following the regional approach. One is creating an ASEAN＋ New 3 （the Chinese Mainland, Hong Kong, and Taiwan） RMB bloc and the other is liberalizing China＇s financial industries and internationalizing the RMB by playing a leading role in East Asia＇s economic integration within the framework of ASEAN＋ 3, This paper concludes that the latter is a more realistic and effective approach for China.     

Financial Development, Economic Growth and Adaptive Efficiency： A Comparison between China and Pakistan

The strong economic growth in China is difficult to reconcile with its inefficient financial system. The puzzle of China＇s financial development and growth can be explained through a dynamic criterion of adaptive efficiency, rather than through allocative efficiency. Using the framework of an autoregressive distributed lag model, the present paper tests the hypothesis that the GDP growth rate is dependent on financial development along with other variables in China and Pakistan. The hypothesis cannot be rejected in both cases. However, the results show that economic growth has a negative relationship with credit to the private sector in China. We conclude that financial development is a source of China＇s high growth rate and that the banking system is still under an evolutionary process, involving the pursuit of social objectives instead of the sole objective of profit maximization. Our results provide some implications for other developing countries like Pakistan.     

Development in China＇s Foreign Trade： 2003-2012

China＇s foreign trade has entered a new stage, marked by some profound changes since 2003. After 5 years ＇consecutive high growth, China＇s foreign trade experienced a significant slowdown in growth following the onset of the global financial crisis in 2008. The purpose of this article is to present a review of the development in China＇s foreign trade over the past l O years, and to explore important changes that have taken place during this period of time. A majorfinding of the presentpaper is that the traditional forces driving the high export growth in China, that is, low-cost labor, low-cost resources and low-cost money, have been disappearing. The policy implication is that over the next l O-15 years, the most important conditions for sustaining high export growth will be promoting the development and export of private enterprises in traditional heaw industries and high-technology industries, and relying on technological progress and high produc6vity to propel export expansion.     

Is the Export-led Growth Hypothesis Enough to Account for China＇s Growth？

One of the missing pieces preventing us from understanding recent Chinese economic development is the role played by openness and capital accumulation in this process. The question is whether the sharp economic＇ growth that the Chinese economy has experienced is another case of export-led growth due to the open-door policy or whether, on the contrary, this growth has been caused by high domestic savings and investment rates （and the consequent capital accumulation）. To answer this question, we employed an empirical framework of the cointegrated vector autoregressive model. The empirical results show that both investment （in physieal capital and R＆D） and exports, as well as the exchange rate policy, are relevant factors in explaining China＇s long-run economic growth over the past 4 decades.     

Do High-technology Exports Cause More Technology Spillover in China？

The volume of China’s high-technology exports has grown sharply since the implementation of its export promotion strategy "Revitalizing Trade through Science and Technology" in 1999.This paper investigates whether technology spillover effects are greater for hightechnology exports than for primary manufactured goods exports.We present a generalized multi-sector spillover model to identify both between spillover effects from exports towards non-exporters and within-spillover effects among export sectors.Using panel data for 31 provinces in China over the period from 1998 to 2005,we find that although high-technology export sectors have higher productivity compared with other sectors,this productivity advantage does not lead to technology spillover to both domestic sectors and other export sectors,and export technology spillover mainly derives from traditional export sectors rather than high-technology export sectors.As such findings can be largely attributed to the fact that China’s high-technology exports depend significantly on processing trade by foreign- invested firms,policy implications are discussed in relation to how to best promote the role of China’s high-technology exports during economic expansion.     

China＇s Economy in 2006/2007： Managing High Growth for Faster Structural Adjustment

China's economy in 2006 continued to register high growth of 10.5 to 10.7 percent with low inflation (CPI at 1.3 percent),dissipating fears of a hard landing. Since its accession to the WTO,China has become a significant global economic player,and is the favorite destination for many regional and global production networks. China is now a truly economic power (jingji daguo). China's economic leadership is also increasingly confident of its ability to manage China's domestic economic growth and its growing relations with the outside world. Although China's growth is expected to slow down in 2007 to approximately 9.5 percent,the national mood now is one of "more balanced" growth rather than "fast growth". Therefore,the building of a "harmonious society" is to be emphasized in China,while letting economic growth solve the burning social and environmental issues. In 2007,the government will also need to deal with various internal and external macroeconomic imbalances. The renminbi will be under even stronger pressure to revalue,given China's record trade surplus of US$160bn and foreign reserves of US$1tn.     

China＇s Role in Global Climate Change Mitigation

China contributed a majority of the growth in global greenhouse gas emissions in the first 11 years of this century The trajectory of emissions has changed radically since then, as China has irrplemented its Cancun 2010 commitment to reduce the 2005 emissions intensity of economic activity by 40-45percent by 2020. The change in trajectory has been reinforced by China＇s new model of economic growth, with its greater emphasis on equity in income distribution, consumption and services. The large-scale deployment of low emissions technology in China is lowering the cost of transition to a low carbon economy all over the world. China ＇ s new emissions trajectory improves the opportunity For the international community to meet the 2℃ climate target. It is essential that the changes in China are brought to account in shaping global mitigation ambition.     

Business Cycle in China since the Lehman Crisis： Interaction among Macroeconomic Policy,Economic Growth and Inflation

The major objectives of China＇s macroeconomic policy are to stabilize economic growth and inflation, which, in turn, are important factors determining key prices, such as the policy interest rate, the renminbi exchange rate and stockprices. In a framework that distinguishes different phases of the business cycle based on whether the current period＇s economic growth rate and inflation rate are above or below their ＂＇normal＂ values, this paper analyzes the interaction among macroeconomic policy, economic growth and inflation in China since the Lehman crisis, and the implications for these key prices. The path of China＇s economy indicates that stimulus measures taken by the government during the recession phase and tightening measures implemented during the overheating phase have helped minimize the fluctuation over the business cycle. Our analysis shows that Chinese authorities tend to rely more on adjusting the exchange rate than the interest rate to stabilize the economy. Comparing with conditions at the time of the post-Lehman recession, the current slowpace of economie growth in China may reflect not only weakening demand, but also a lowerpotential growth rate associated with the arrival of the Lewis turning point.     

Economic Policies for a Harmonious Society： A Symposium Editorial Introduction

China＇s remarkable economic growth has produced dramatic structtral and socioeconomic change. Economic growth has solved many problems but the accompanying changes in the economy and society have brought new problems to the fore. This has been recognized by China＇s Government in the recent emphasis that it has placed on the need to create a ＂harmonious society.＂ The new leadership will wish to devise new policies for the current challenges and those ahead.     

Is China up to the Test？ A Review of Theories and Priorities for Education Investment for a Modern China

This paper reviews the key theories relating to the role of education in economic development and social change and how education, as a critical component of total factor productivity, contributes to sustained economic growth. It examines how China ＂s education policy reflects the country＇s unique dual economy. Focusing on the post-reform period, the paper contends that while progress has been made, there are risks to China＇s future growth prospects from failing to reap the benefits of sound education policy. It argues that if the Chinese education system is to continue to be a driver of rather than a drain on economic growth, and if China is to successfully manage its transition towards more inclusive, sustainable and equitable growth, reforms will be needed to improve the quality of education at all levels and to create an environment in which China＇s extensive human capital is duly recognized and respected. Crucially, the education system should be transformed to ensure it promotes a comprehensive range of human capabilities, including those that go beyond the part humans play in augmenting production possibilities.     

英文文摘

Cultural and Creative Industry Development China Rethinking
At present, the fundamental issue of China＇s economic structure is to resolve the contradictions. The new urgent consumer market needs to be expanded and the new demands hot spots urgently need to be created. In this financial crisis, China＇s economic development has to not only solve the internal and external structural imbalances but also stimulus the formation of new growth engines.