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.     

China： Unscathed through the Global Financial Tsunami

This paper investigates the reasons behind the resilience of China＇s economy to the global financial tsunami. China ＇s economy is lowly leveraged in its banking, household, public and external sectors and, therefore, is less plagued by the global deleveraging than most developed economies. Chinese domestic sectors have improved significantly over the past decade, giving them larger capacity to cope with external shocks than during the Asian financial crisis a decade ago. Contrary to the conventional wisdom that China＇s economic growth is highly dependent on exports, we find that the main growth engine for China is domestic demand. Destocking, rather than falling exports, was the main cause of the sharp economic slowdown in China in late 2008 and early 2009. Therefore, the global economic slowdown should have limited impact on China＇s economy. We forecast a sustained eeonomic recovery in China in 2009-2011, with real GDP growth exceeding 10 percent in 2010.     

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.     

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.     

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.     

Growing Economic Interdependence of China and the Gulf Cooperation Council

The six nations of the Gulf Cooperation Council （GCC） have approximately 40percent of total proven oil reserves as well as 23 percent of the world＇s gas reserves. Although rising oil revenues have led to greater outward investment flows, there is also a growing need for significant expansion of the domestic energy sector＇s capacity. Meanwhile, China＇s sustained economic boom has resulted in China emerging as the world＇s second largest consumer and importer o foil, with close to 40percent of its import demand presently sourced from the GCC. This share will grow significantly in the future. Commercial relations between the GCC and China have to date been dominated by energy-related bilateral investment flows and China＇s oil imports. Although this will continue to be a central feature, trade and investment links in non-energy areas will further broaden and deepen the relationship. China ＇s relationship with the USA in terms of energy is also emerging as a major issue. Rather than being competitors, a mutual dependence on stable and secure supplies from the GCC highlights the need for a cooperative relationship.     

China as a Global Manufacturing Powerhouse： Strategic Considerations and Structural Adjustment

This study examines the nature and consequences of China＇s rise to the center of world economic affairs through manufacturing-led development. Our historical analysis shows that China is still well short of the point in its developmental process where its growth might be reasonably expected to slow, or the energy, resource and carbon intensity of growth to recede. The study argues that the current trajectory of industrialization will have to be altered when China becomes more actively engaged in dealing with structural issues at home and abroad against the background of the unwinding of global imbalances. One profitable strategy that China might employ wouM be to approximate the incredibly fruitful mass-market integration efforts of the USA that eventually elevated it to its position of global primacy. The cyclical re-emergence of excess capacity in Chinese heavy industry, serious questions about the medium term ability of other major regions to accommodate further large gains in Chinese market share, and the stark conflict between the contemporary style of industrial development and the health of the biosphere indicate strongly that now is the time to catalyze the required adjustment and reform processes that will underpin sustainable long-run prosperity.     

What India Can Learn from China and Vice Versa

A partial convergence of the Indian and Chinese growth models is likely. Judging from China's experience, sustaining India's impressive economic performance of recent years will require a significant further opening of its economy (externally and internally), higher savings and investments, especially in physical infrastructure and social services, and stronger labor absorption in the modern sectors. The base of India's current economic boom - software, IT-related services and high-end manufacturing - is narrow compared to China's. Poor performance in agriculture is responsible for still significant poverty in many parts of rural India. Bilateral India-China ties, including trade and investment, are increasing rapidly and could help to bring about the structural economic changes India needs. Through its exports to China, India is becoming linked to global supply chains centered on China. The notion that India-China relations are, or are bound to become, fundamentally antagonistic, held by many in the USA, is mistaken and potentially dangerous.     

Analysis of China＇s Renewable Energy Development under the Current Economic and Technical Circumstances

At present, the development of renewable energy relies mainly on government support. The government invests in a considerable number of projects to improve public welfare and to assist in poverty relief If China is to replace fossil fuels on a large scale with renewable energy sources, the production costs and prices of renewable energy must be brought down. All countries are facing the challenge of moving to a more secure and low-carbon energy system without weakening economic and social development. In this regard, China is facing an even greater challenge in terms of economic cost, as cheap coal remains the main energy form. Technical innovation and industrialization in the area of renewable energy is an important means of lowering cost. China is in for a period of high-speed development of its economy and the rising demand for energy is irreversible. If the technical progress and development speed of renewable energy lags behind the growth in demand, it will be difficult to realize the improvement of its energy structure.     

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.     

Magnitude and volatility of Taiwan's net foreign assets against Mainland China: 1981–2009

The ongoing private capital inflows from Taiwan to China is a steady concern for Taiwan's policymakers. According to the official data, Taiwan's private enterprises have cumulatively invested about US$ 150–280 billion in China since 1987. However, the figures are widely perceived to be an underestimation and there exists a huge gap even between the estimations conducted by different government departments. The purpose of this paper is to re-estimate Taiwan's net foreign assets (NFA) against China, revising the so-called “dark matter” hypothesis proposed by Hausman and Sturzenegger (2006, 2007). In contrast to the current statistics being limited to registered direct investment or census investigation, the advantage of our model is that direct investment, portfolio investment, and the possible knowledge and property spillovers are included. We show that changes in Taiwan's NFA against China over GDP are negative in economic and political turmoil, such as the missile crisis in 1995, Asian financial crises in 1997–98, and global tsunami in 2007–09. From 2000, the growth rates we simulate are never lower than the official data till 2009. We also suggest some possible economic causes that lead to the huge Taiwan's NFA against China.     

China's Foreign Trade: A “New Normal”

Since the global financial crisis of 2007/2008, China's foreign trade has continued to grow faster than international trade, but its drivers are now different from those prevailing before. The participation of the Chinese economy in the global production chains through processing activities is no longer the main driver of its trade performance. The new driving force of change is ordinary trade, based mainly on local inputs and domestic demand. China, which played a major role in the globalization process as an export base for multinational companies, is now shifting to having a “normal” foreign trade system, which is more closely integrated into the domestic economy.     

China＇s Economy in 2005： At a New Turning Point and Need to Fix Its Development Problems

I. High Growth, Higher Stakes China’s economy in 2005 experienced another year of surging growth, with its total GDP(based on recent revision) expanding at 9.9 percent to reach 18.23 tn yuan (US$2.26 tn).1 Growth in 2005 was slightly lower than the 10.1 percent in 2004; but it was nonetheless very high. Sustained high growth is accompanied by potential high risks, and it inevitably raises the issue of future sustainability of high growth. Although the Chinese economic policy-makers in 200…     

Bigger Than You Thought: China's Contribution to Scientific Publications and Its Impact on the Global Economy

China's advance to the forefront of scientific research is one of the 21st century's most surprising developments, with implications for a world where knowledge is arguably “the one ring that rules them all.” This paper provides new estimates of China's contribution to global science that far exceed estimates based on the proportion of papers with Chinese addresses in databases of international journals. Address‐based measures ignore articles written by Chinese researchers with non‐Chinese addresses and articles in Chinese language journals not indexed in those databases. Taking account of these contributions, we attribute 36 percent of 2016 global scientific articles to China. Taking account of increased citations to Chinese‐addressed articles relative to the global average as well, we attribute 37 percent of global citations to scientific articles published in 2013 to China. With shares of articles and citations more than twice its share of global population or GDP, China has achieved a comparative advantage in knowledge that has implications for the division of labor and trade among countries and for the direction of research and of technological and economic development worldwide.     

Exporting National Champions： China＇s Outward Foreign Direct Investment Finance in Comparative Perspective

We examine the extent to which Chinese development banks have financed the globalization of China＇s ＂national champion ＂firms： specifically, through outward foreign direct investment （OFDI）. We create a database of Chinese fnance for OFDI and compare our results to the existing literature and available data on Japan, Korea and other Asian nations. We estimate the total value of China＇s OFDI finance from 2002 to 2012 at US$14Obn. As a percentage of total OFDI, China＇s lending is roughly three times higher than Japan ＇s, the previous global leader in OFDl finance. We identify two major reasons for China＇s high （31 percent） ratio of OFDl lending to total OFDI. First, China has a greater incentive to give OFDI loans than Japan or Korea ever did because its borrowers are statelowned so it can more easily channel funds to targeted areas. Second, China has a greater capacity to give OFDI loans because it has significantly higher savings and foreign exchange reserves than Japan and Korea.     

Would China＇s Sovereign Wealth Fund Be a Menace to the USA？

The sovereign wealth club acquired a new member with the official launch of the China Investment Corporation （CIC） on 29 September 2007. The arrival of CIC has further heated up debate regarding sovereign wealth funds （SWFs） and their potential implications for global financial markets. This is because, in carrying out its investments, CIC can tap into China＇s huge official foreign exchange reserves, which by April 2008 had surged to US$1.76tn. CIC＇s initial working capital of US$2OObn makes it the fifth largest SWFs in the world today. This article seeks to analyze CIC＇s investment strategies, as well as their potential economic and political implications for global as well as US financial markets.     

Chinese Renminbi Arrival in the “Tripolar” Global Monetary Regime

Since the financial crisis hit in 2007, the US dollar privilege has not only become “exorbitant” but “extortianate.” Countries such as China are no longer willing to allow the USA to exercise this extortionate behavior. The potential geopolitical implications of a US dollar decline are immense. The USA would lose its privileged seigniorage position and with that the ability to achieve permanently higher returns on foreign assets than the returns paid to foreigners who invest in the USA. The global economy is already close to operating with three regional exchange rate anchors: the US dollar; the euro; and, increasingly, the renminbi. Hence, the transition to a tripolar system could occur sooner than many assert. Nevertheless, given the importance of financial deepening and integration in the internationalization of currencies, any shift will still be gradual.