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.     

China＇s Economic Growth： International Spillovers

China's economic development since 1978 is one of the most significant events in recent history. Many aspects of this development have been extensively analyzed in the published literature. However, the implications of China's growth for other countries have been relatively neglected. The present paper attempts to fill this gap in the literature. The paper first presents some facts on China's role in the world economy, and then measures the impact of China's growth on growth in the rest of the world in both the short term and the long term. Short‐run estimates based on vector autoregression and error correction models suggest that spillover effects of China's growth have increased in recent decades. Long‐term spillover effects, estimated through growth regressions based on panel data, are also significant and have extended in recent decades beyond Asia. The estimates are robust to the effects of global and regional shocks, changes in model specification, and sample period.     

Trade Destruction and Trade Diversion: Evidence from China

Over the past three decades, we have seen a dramatic increase in the incidence of temporary trade barriers such as antidumping duties and countervailing duties. China has been at the receiving end of a large number of such measures. In this paper, we study how China's exports to its major trade partners have been affected when its major trade partners have used these measures either against China or against other countries. We find that Chinese exports to the country that imposed an antidumping duty decreased by approximately 35 percent. At the same time, an antidumping duty used by the importing country that was directed towards other countries but not against China led to an approximate 30‐percent increase in China's exports to the policy‐imposing country. These results remain robust across various specifications. Our findings have important policy implications. In particular, the magnitude of these effects highlights why it is important to curb the recent widespread use of these barriers.     

Remedy or Poison: Impacts of China's Outward Direct Investment on Its Exports

During the past decade, China's outward direct investment (ODI) and exports have experienced rapid growth, drawing increasing attention to the relationship between them. Using the gravity model based on panel data on China's ODI and trade to 174 countries and regions during 2003–2012, the present paper investigates the impacts of China's ODI on exports. We find that China's ODI to a host country significantly promotes China's trade with that economy: a 10‐percent increase in ODI stock can lead to a 2.14‐percent increase in exports, a 2.07‐percent increase in imports and a 2.87‐percent increase in net exports. The scale of the host country's economy, its infrastructure and its distance to China also have significant impacts on China's exports. Therefore, growth in ODI will facilitate China's trade and integration into the global economy, and enhance industrial upgrading in China by transferring the low‐end industries abroad.     

Pass-through Effects of Global Commodity Prices on China＇s Inflation： An Empirical Investigation

The present paper uses a two-step approach to estimate the pass-through effects of changes in international commodity prices and the RMB exchange rate on domestic consumer price inflation in China. We first estimate the pass-through effects of international commodity prices on producer prices and then estimate the pass-through effects of producer price inflation on consumer price inflation. We find that a l O-percent increase in international commodity prices would lead to China＇ s producer prices increasing by 1.2 percent 3 months later, which in turn would increase China＇ s domestic inflation by 0.24 percent over the same period. However, a 10-percent appreciation of the RMB exchange rate against the US dollar would help to reduce increases in producer prices by 4.4 percent over the following 3 months, which in turn would lead to a 0. 89-percent decline in consumer price inflation over the same period. Our findings suggest that appreciation of the RMB in an environment of rising global commodity prices and a weak US dollar could be an effective instrument to help contain inflation in China.     

Rebalancing China's Economy: Domestic and International Implications

This paper considers interactions between China's domestic and external imbalances and their global implications. We present scenarios detailing how a rebalancing of China's growth pattern from investment‐driven growth towards more consumption‐driven growth may occur in practice. Using input–output tables for 2012, we illustrate the knife‐edged nature of Chinese rebalancing, the linkages between expenditure‐side and production‐side rebalancing, and how an internal rebalancing could exacerbate external imbalances. A policy implication for China is that for rebalancing to be fast, consumption must be exceptionally resilient and the efficiency of investment must increase sharply. If rebalancing is too slow, the capital‐to‐output ratio will rise to potentially unsustainable levels and consumption will fail to attain levels of contemporary upper middle‐income economies by 2030. Global input–output tables (1995–2011) suggest that the patterns of Chinese rebalancing considered in our scenarios may generate substantial headwinds for exports to China by its trading partners.     

Impact of RMB Appreciation on Trade and Labor Markets of China and the USA： A Multi-country Comparative General Equilibrium Model

Since the recent economic crisis, the undervaluation of China's exchange rate has been a focus in the debate on the global policy mix. Using a non‐competitive input–output table, we establish a comparative‐static general equilibrium model to simulate the impact of real exchange rate changes on Sino–US trade and labor markets. The simulation shows that the impacts of a 10‐percent RMB revaluation on the trade surplus of China and the labor market of the USA are more modest than is generally perceived, and the negative impact on the output of the non‐processing industry in China is more significant than that on the processing industry. The Sino–US trade imbalance will continue to deteriorate, China's non‐processing trade surplus will decline and the processing trade will increase, with the combined effect being small. For the USA, labor‐intensive goods imported from China will shift to different Asian countries instead of transferring back to the US market. The simulation results indicate that the impacts of an RMB revaluation on both Chinese and US labor markets would be limited.     

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.     

Japanese Enterprises＇ Investment in China＇s Software Industry

I. Overall Conditions of Investment by Japanese Enterprises in China Starting from the 1980s, investment by Japanese enterprises in China has been growing continuously. In 2004, Japanese investors established 3454 firms in China, 6.15 percent more than in 2003. Contractual foreign investment amounted to US$9.162bn, 15.17 percent up from 2003, whereas the foreign investment actually used was US$5.452bn, up by 7.86 percent from 2003. In 2004, the number of newly established Japanese enterp…     

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.     

High‐speed Rail and Urban Economic Growth in China after the Global Financial Crisis

High‐speed rail (HSR) has been an important driver of China's economic expansion over the last decade. Using data of 285 prefecture‐level cities over 2010–2014, this paper proposes an endogenous economic growth model to explain how and why HSR may have propelled China's economic growth by reducing the time‐space between cities. The research results show that HSR has a potent effect on urban economic growth and regional convergence. Ceteris paribus, HSR appears to have accelerated economic growth by more than 0.6 percent and the pace of regional economic convergence by approximately 2 percent per annum over the data period. Our research findings have important policy implications for the sustainability of China's economic development, backed by HSR.     

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.     

How Much Will China Save? Projecting China's National Savings Through 2040*

This paper projects China's national savings through 2040 based on China's national account data, demographic data, and data on rural and urban life‐cycle income and consumption. Our baseline projections show that China's national saving in 2040 will be 16 times the current national saving. The annual growth rate of wealth will decline from 16.3 percent in 2012 to 9.5 percent in 2040. Lowering the growth rate of wealth accumulation to the current rate of return to wealth increases consumption through 2040; lowering the growth rate of wealth further may increase consumption more in the short run, but less in the long run.     

Sharing China＇s Bank Restructuring Bill

I. Introduction Bank restructuring, including resolution of non-performing loans (NPL) and the associated recapitalization of banks, is often costly, but is crucial for the stability and efficient functioning of banking systems.1 Although effectively stemming the flow of new NPL is necessary for sustained improvement in the banking system, the importance of dealing with the stock of legacy NPL still on the books of banks or within the system should not be understated: it might reveal the p…     

Vanishing of China's Twin Surpluses and Its Policy Implications

This paper argues that the twin surpluses in China's balance of payments will disappear in the future as a result of external and internal structural changes. China's current account surplus will diminish as a result of the decline in the goods trade surplus, the expanding service trade deficit and negative investment income. China's capital account might shift from surplus to deficit as a result of shrinking net direct investment inflows and more volatile short‐term capital flows. When the twin surpluses no longer exist, the normalization of the US treasury bond yields will be sped up, terminating the one‐way appreciation of the RMB exchange rate; the People's Bank of China's pressure to sterilize inflows will be alleviated, and new problems for the People's Bank of China's monetary operation will emerge; new financial vulnerabilities for the Chinese economy will arise. Finally, the present paper provides some policy suggestions for the Chinese Government to deal with the declining twin surpluses.     

Effects of China's Structural Change on the Exports of East Asian Economies

The Chinese economy is slowing down and is in the midst of a structural transformation from export‐led and investment‐led growth to domestic demand‐led and consumption‐led growth. While there are widespread concerns among China's trading partners about the effect of the slowdown in China's growth on their exports, China's structural changes are also likely to have a significant impact: for example, China will import fewer machines and more cosmetics. The central objective of the present paper is to empirically examine the effect of China's structural transformation on the exports of East Asian economies, which have close trade linkages with China. We find that economies that have failed to increase the share of consumption goods in their exports to China have suffered larger declines in their quantities of exports to China. In addition, economies that have suffered losses in their shares of China's parts and components imports have faced reductions in their shares in China's total imports.     

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.     

Growth Slowdown in China since 2008: Will There Be a Hard Landing in the Near Future?

China has witnessed an unprecedented great leap forward in investment since the 2008 global financial crisis, and at the same time real GDP growth has undergone a significant slowdown. This paper examines China's growth slowdown since 2008 up to 2013 using a growth accounting model in a systematic way. It is found that China's growth slowdown since 2008 almost completely comes from a sharp slowdown in total factor productivity growth. During this period, the positive effect on growth from expanding investment has been completely offset by the negative effect of the slowdown in total factor productivity growth. Currently, China's economy has slid into the Solow downward path. Under these circumstances, a soft landing is completely infeasible. Unless the Chinese Government implements substantial rebalancing and comprehensive and in‐depth market‐oriented reform, accompanied by large‐scale de‐investment (decreasing in the ratio of investment in GDP) and massive employment adjustment, China will be unable to avoid the Solow downward path, and a hard landing in investment will be inevitable in the near future.     

China＇s Free Trade Agreements with ASEAN, Japan and Korea： A Comparative Analysis

The role of China in East Asia's recovery from the recent global financial and economic crisis highlights China's position as an engine of growth for this region. From the viewpoint of China, there are many potential gains from entering into free trade agreements (FTAs) with its neighbors, who collectively form a large and fast‐growing market. In this paper, we qualitatively and quantitatively assess the four main permutations of China's FTAs with East Asian major economies: China–ASEAN, China–Japan, China–Korea and ASEAN+3. We compare the effects of these FTAs on China's output and welfare. Our comparative analysis shows that China will gain from all three bilateral FTAs, while gaining the most from the ASEAN+3. Because forming a region‐wide FTA, such as the ASEAN+3, is expected to be gradual and difficult, China should continue to engage in bilateral FTAs as a medium‐term and alternative strategy. However, in the long term, China should pursue a region‐wide FTA.     

On the trail of China's phantom farmers

Many studies of China's economy use standard yearbook data for China's farm labor force. These data massively overestimate the number of Chinese farm workers. Our calculations show that the number of “phantom farmers” actually working outside agriculture may easily surpass 100 million. This paper reveals the implausible implications of the standard data, uses information from cost surveys to derive new estimates of China's farm work force, and investigates the implications of the new, lower series for agricultural employment on the measurement and interpretation of recent Chinese growth.