Trade,Determinants, and Causality: A Case of Hong Kong's Exports to The United States

This paper examines recent development in Hong Kong's exports to the United States. It explains the trade flows by estimating five demand-equations for exports. Besides, vector autoregressions are fitted to test the causal relationship among exports, exchange rates and income. Our study suggests that a sustained high growth rate of Hong Kong's exports of principal commodities to the United States contribute to the chronical bilateral trade surplus for Hong Kong. Variations in income and exchange rates, the major determinants of Hong Kong's exports, “cause” exports to change as indicated in the causality test. [420]     

Impact of US monetary policy rate shock and other external shocks on the Hong Kong economy: A factor‐augmented vector autoregression approach

This paper uses the factor‐augmented vector autoregression framework to study the impact on the Hong Kong economy of the diverging monetary policies by the Fed, the European Central Bank (ECB) and the Bank of Japan as well as the slowdown of the Mainland economy. The empirical results show that shocks in US monetary policy rate mainly affect interest rate‐sensitive sectors in Hong Kong and that monetary easing from the European Central Bank and the Bank of Japan somewhat offsets the impact of tightening of the Fed. The transmission of external shocks is through trade and capital markets. Real variables such as real GDP growth and the unemployment rate are more sensitive to the economic slowdown in Mainland China. It is estimated that the combined effect of the four external shocks will on average lower Hong Kong's quarterly GDP growth by 0.6 percentage points and quarterly inflation by 0.2 percentage points in the first four quarters. However, Hong Kong's financial stability, particularly with regard to loan quality, banks’ capital and liquidity, is well maintained by macroprudential policies, suggesting that Hong Kong's financial system is resilient to external shocks.     

The Impact of the China Factor on the pre-1997 Hong Kong Economy: a macroeconometric analysis

After the reunification of Hong Kong and China in 1997, Hong Kong is assured of a high degree of autonomy by the Basic Law. However, there remains some worry about the territory's economic viability and financial stability. Whether Chinese policies and China's remarkable growth momentum could continue to boost Hong Kong's prosperity has become an issue of concern. As the Chinese economic reform proceeds, the ‘China factor’ has been generating an increasing influence on the performance of the Hong Kong economy. Unfortunately, there have been very few rigorous quantitative analyses of this rapidly evolving development. To fill the gap, we have constructed a macroeconometric model of Hong Kong which takes into detailed account the linkages of the two economies including trade and capital flows. Estimation of the model incorporates error correction techniques to establish short-run dynamics and long-run equilibria. Our findings have identified crucial channels through which the ‘China factor’ has exerted impact on the Hong Kong economy. It is shown that the factor was not overwhelming up to the recent past, in terms of its stabilizing effects in the financial market and its stimulation on growth, although its influence may rise in the post-1997 era.     

Long–run price and income elasticities of demand for Hong Kong exports: a structural cointegrating VAR approach

This article revisits a system of export volume and price equations to estimate the long–run price and income effects in the demand for Hong Kong's exports. Using a recently developed restricted cointegrating VAR approach it tests theorybased restrictions and obtains estimates of the long–run structural coefficients. The estimation results provide supporting evidence for the theory–based restrictions and suggest that the demand for Hong Kong's exports is both price and income elastic. This article is therefore able to present a long–run model of Hong Kong's exports that is both theory and data consistent, and long–run elasticities that are economically interpretable. The short–run properties of the model are illustrated by means of persistence profiles, which confirm the cointegrating vectors tendency of convergence.     

Exchange‐rate volatility and US–Hong Kong industry trade: is there evidence of a ‘third country’ effect?

In an effort to better understand the determinants of trade flows worldwide, researchers have recently incorporated external volatility (in addition to that of the partners’ bilateral exchange rate) into their models. The so‐called ‘third country’ effect is present if adding this term changes the bilateral volatility estimates that are found when external volatility is omitted. This study examines US exports to Hong Kong for 143 industries, and imports from Hong Kong for 110 industries, and finds two key results. First, expected inflation due to Hong Kong's dollar peg leads to increased US exports in a large number of industries. Second, comparing our results with those of a previous study shows strong evidence of a ‘third country’ effect, especially for US imports. Nonparametric tests suggest that these effects differ by sector: for both exports and imports. Manufacturing industries that enjoy a large trade share are less likely to experience this effect once external volatility is incorporated into the analysis.     

港澳台—中国对外开放的独特优势

中国对外开放三十多年,经济发展速度之快举世瞩目。作为对外开放的典型标志,对外贸易和引进外资更是突飞猛进,成为世界贸易排名第二、发展中国家引进外资最多的经济体。中国对外开放之所以取得如此成就,港澳台地区功不可没,甚至可言,如果没有同文同种的新型工业化经济体港澳台与中国内地的密切经贸往来,中国对外开放将经历较长的探索阶段。港澳台地区是中国对外开放最早的也是迄今最主要的投资者,是中国承接国际产业转移最重要的推动者,也是中国进军国际市场的最重要中介与平台。无论是珠三角经济带还是长三角经济带,港澳台企业都是重要的支柱力量。中国最早的区域经济一体化协议,是与香港和澳门签署的,今后中国的自贸区战略,港澳台地区将成为核心。     

The behaviour of Hong Kong stock prices

The primary function of a stock market is to allocate resources to the most profitable investment opportunities. If stock prices provide accurate signals for resource allocation, firms are able to make correct production–investment decisions, and investors are able to choose the most suitable stocks for investment. These choices are only possible if the market is efficient, that is, if stock prices ‘fully reflect’ all available information.

Hong Kong is now an international financial centre. Although Hong Kong's stock market is ranked as one of the five largest in the world in terms of turnover, little research has been devoted to the behaviour of its stock prices. This is a study of the efficiency of Hong Kong's stock market. It is based upon two widely accepted statistical tests, namely, serial correlation analysis and runs tests. Data used cover the daily prices of 28 major Hong Kong stocks over a period of four years from 1977 to 1980. The evidence is mixed; it does not provide clear support for the efficient market hypothesis.     

The cohort effect of political change on language speaking: Evidence from Hong Kong

It has been proven that language is a symbol of culture and politics. This study investigates the cohort effect of Hong Kong's handover on the language spoken in adulthood based on the 2006 and 2011 Hong Kong population censuses. We find that Mandarin is more likely to be used by Hong Kong natives who were exposed to the transfer of sovereignty over Hong Kong in 1997 during their school-age years, especially the generation that were exposed during their primary-school years. This cohort insisted on speaking Mandarin, even when the political environment changed from 2006 to 2011. Our evidence reveals that the political change that occurs during one's school-age years has a long-term impact on an individual's behaviour in adulthood. Further discussion indicates that exposure to political change such as regime transfer during school-age years impacts an individual's national identity.     

内地与香港双边贸易流量与潜力研究——基于贸易引力模型的实证分析

内地各省市（自治区）的GDP和人均GDP、香港人均GDP、绝对距离以及泛珠三角区域合作组织等解释变量,是影响双边贸易流量的主要因素;各因素的影响程度互有不同,内地各省市（自治区）对香港的出口贸易潜力也存在一定差异。因此,内地与香港应采取针对性的措施,进一步加强经贸交流和合作,充分发挥各自的区位优势和竞争优势,实现两地经济的共同繁荣。     

Endogenous Government Expenditure: A Test of Wagner's Hypothesis For Hong Kong

In the last two decades a revival of interest in wagner's thesis of an endogenous public sector has led to a series of empirical tests of its validity. In its barest essentials, this paper attempts to find efficient estimates of income elasticities of demand for real total government expenditure as well as for its disaggregated functional groups as a means of verifying Wagner's expectation for the Hong Kong economy. Our empirical estimates indicate that Hong Kong's public finance setting is a synchronization of a worldwide tendency for public sector expansion according to the Wagnerian expectation. These findings lead us to raise a number of policy questions concerning the financial sustainability of Hong Kong's budget system over time. [320]     

Pricing in International Markets: a "Small-country" Benchmark

The paper studies export pricing to market (PTM) in a “small‐country” context using a panel of disaggregated exports from Hong Kong since 1992. Conventional wisdom is that PTM is commonplace—except for US exports. This study provides a benchmark by which to interpret the puzzling behavior of US export prices. Empirically, Hong Kong's export price behavior is comparable to that of the US. This similarity reinforces the idea that PTM behavior is also a function of home market conditions and the ability to price discriminate across markets. There is little evidence of differences in PTM across Hong Kong's export destinations.     

The China–United States Bilateral Trade Balance: How Big Is It Really?

There are huge discrepancies between the official Chinese and US estimates of the bilateral trade balance. The discrepancies are caused by different treatments accorded to re-exports through Hong Kong, re-export markups, and trade in services. Deficit-shifting between China, on the one hand, and Hong Kong and Taiwan, on the other, owing to direct investment in China from Taiwan and Hong Kong, is partly responsible for the growth in the China–US bilateral trade deficit. The 1995 China–US bilateral balance of trade in goods and services, adjusted by both re-exports and re-export markups, may be estimated as US$23.3 billion, a large deficit but considerably smaller than the often-cited official US figure of US$33.8 billion.     

ECONOMIC INTERACTIONS: CHINA VIS-A-VIS HONG KONG

Hong Kong's role has been integral to China's unprecedented economic growth, but privatization ranks first in importance. Another key factor is Beijing's putting economic reform before political reform. Giving democracy to a society in chaos likely makes matters worse. Hong Kong and China both have profited from their partnership. As China has opened up to allow transformation into a market economy, Hong Kong has provided informational impetus for change, a capitalist model to copy, and middleman functions for China to participate in outside-world goods and financial markets. The collapse of Communism in China and elsewhere has increased the supply of cheap labour perhaps by 2 billion. Manufacturing countries with expensive labour and high cost welfare programmes—such as those in the United States, Canada, and Europe—will have difficulty. Capitalists in these countries will do well by investing abroad but not in their own countries. Though wrong in detail, the factor price equalization theorem—that international movement of goods and international movement of factors of production are equivalent—basically is correct. If China continues moving toward privatisation and joining the international community, it will become fiercely competitive, and prospects will be bright for both China and Hong Kong. However, China's recent drift from capitalism clouds those prospects. Fundamentally, three kinds of rights systems exist: (i) a capitalist system, with well defined private property rights, protected by law, where control of resources is based on ownership; (ii) a hierarchical system, such as Communism, where control of resources is based on one's rank in the hierarchy; (iii) a system of corruption, where control of resources is based on bribes and patronage. China rapidly had been making a transition from the second system to the first but recently seems to have derailed into the third. In any case, Communism's collapse is one of the great events in human history. The hero of that event is Deng Xiaoping—not Gorbachev, nor Thatcher, nor Reagan. Hong Kong, by contributing significantly to China's capitalist movement, has led the Communist world to change.     

Effects of capital flow on the equity and housing markets in Hong Kong

The revival of strong capital flows to emerging economies following the global financial crisis in 2008–2009 has rekindled the debate on effects of excessive capital inflows. We study the effects of official and illicit capital flows on Hong Kong, which is a small and open economy with minimal restrictions on cross‐border fund movements. It is found that the official and illicit capital flow measures display a low level of comovement and exhibit differential effects on Hong Kong's equity and residential housing markets. The results highlight the complexity of managing capital flows, and the relevance of sector‐specific capital management policies.     

The Impacts of WTO Membership on Economic/Trade Relations Among the Three Chinese Economies: China, Hong Kong and Taiwan

Based on CGE model simulations, the present study examines the impacts on the growth of GDP, social welfare, the terms of trade, the volume of trade and trade dependence, under alternative scenarios of a WTO with and without the membership of China and Taiwan. In general, the three Chinese economies, China, Hong Kong and Taiwan, will be benefited by China and Taiwan's WTO memberships. The world trade will increase by more than $130 billions in real terms ($63.6 billions of exports and $66.5 billions of imports). Among them, more than 60 percent will be shared by China, and 10 percent shared by Taiwan. The intermediate role of Hong Kong in trade and investment relations across the Taiwan Strait will diminish, Taiwan's trade dependence on China will increase, but China's trade dependence on Taiwan will decrease. However, trade flows across the Taiwan Strait will focus more on intra‐industry trade.     

Impacts of business environment changes on global manufacturing in the Chinese Greater Pearl River Delta: a supply chain perspective

Business operating conditions have changed substantially in the Chinese Greater Pearl River Delta (GPRD) due to the Chinese currency appreciation, rising labour costs, highly volatile oil prices and new processing trade policies. Such changes have triggered manufacturers to rethink their global operations. This article studies potential global manufacturing trends from a supply chain perspective. A mixed integer programming model suggests that these changes have negatively affected the region's competitive advantages as its labour-intensive production mainly targets at the mass market and competes on low costs. Three production relocation trends are affirmed, i.e. the relocation to lower-cost areas within China, lower-cost Asian countries and areas near end markets. However, it is also discovered that the GPRD region still attracts businesses with its formation of industrial clusters, the enhanced comparative advantage against competing regions in inland China or Asian lower-cost countries under high oil prices, and Hong Kong's being a robust location choice to host trade operations.     

香港和内地证券市场的动态竞争关系研究——基于A+H交叉上市公司的实证分析

交叉上市引起不同证券市场对有限投资者和资金资源的竞争。文章在阐述证券市场竞争的Lotka-Volterra模型基础上,通过2006-2010年38家A+H交叉上市企业的日交易数据实证分析了香港和内地证券市场之间的动态竞争过程。结果表明,两市场之间的动态竞争关系从交叉上市初期的捕食—诱饵关系逐步演化为目前的竞争互惠关系,且这种动态演化过程与企业交叉上市顺序没有显著的相关性。这说明内地证券市场正在不断完善,鼓励企业境外上市和A股回归将有利于内地证券市场的发展,而且互惠合作应是未来证券市场竞争的发展趋势。     

Trade with China: do the figures add up?

There are wide discrepancies in bilateral trade data compiled by China and by its trading partners, particularly the United States. This paper investigates the main reasons, notably the role of Hong Kong as an entrepôt, and develops a methodology to provide more accurate estimates for these trade flows. It extends the Sung—Lardy method in recent literature and achieves a reconciliation of the two data sets by China and by its major partners. The method recognizes that both the Chinese and the partners' data are likely to be distorted and demonstrates that a complete picture can he constructed by using data recorded from Hong Kong. A new estimate of the re-export margins in Hong Kong on Chinese exports is presented and used in the data reconciliation exercises, and problems of valuation and transit lag when comparing an export series with its counterpart import series are taken into account by the new method. The effects of using proved data are demonstrated in an application to examine fair market access in China—US bilateral trade undertaken by Tower (1993).     

人民币区域接受程度： 指数构建与影响因子计量 ——以东盟及中国香港为例

金融危机以来,改革现有的国际货币体系,逐步推进“去美元化”进程,已是国际社会共识。周边化及区域化是人民币国际化进程中的重要阶段,建立人民币区域接受程度监测指标体系,具有重要意义。本文基于对东盟及中国香港人民币使用情况的分析,提出人民币区域接受程度指数的构建框架并进行影响因子的计量分析,实证结果表明：(1)在政策推动及市场需求双重作用下,未来东盟人民币接受程度将持续提升,但短期内受经济政治影响会出现较大反复;(2)受政策推动、存款规模较小以及贬值预期影响,中国香港人民币贸易接受程度的提升快于金融接受程度,提高人民币存款占比有助于提升人民币接受程度;(3)中国香港经济状况对人民币接受程度的影响力要高于内地,反映出货币国际化是市场自发选择的过程;(4)由于货币替代影响双边货币政策效果,中国香港通胀水平、利率以及内地通胀水平会受中国香港人民币接受程度的反向影响。     

CROSS‐BORDER MARRIAGE COSTS AND MARRIAGE BEHAVIOR: THEORY AND EVIDENCE

This article analyzes cross‐border marriages between mainland China and Hong Kong (HK). We examine the effects of a reduction in cross‐border marriage costs following an increase in marriage‐migration quotas and the handover of HK to China. We find that cross‐border marriages mainly involve men from the low tail of the HK attribute distribution. We also find that HK women's position in the marriage market and within households deteriorated following the reduction in cross‐border marriage costs and that their disadvantaged position exerts an incentive effect on their labor market behavior. These outcomes are consistent with our matching model.