Processing trade,exchange rates and China's bilateral trade balances

This paper analyzes the role of processing trade in China's bilateral trade balances and the impact of the yuan's appreciation on China's processing trade. The analysis is based on panel data covering bilateral processing trade between China and its partners from 1993 to 2008. The empirical results show that: (1) processing trade accounted for 100% of China's annual trade surplus during the period; (2) China's processing trade showed a significant regional bias—77% of processing imports originated from East Asia while only 29% of processing exports was destined to the region in 2008; and (3) a real appreciation of the yuan would negatively affect both processing imports and exports—specifically, a 10% real appreciation of the yuan would reduce not only China's processing exports by 9.1% but also its processing imports by 5.0%. Based on these empirical findings we conclude that the combined effect of the yuan's appreciation on the balance of processing trade and thus China's overall trade balance will be limited.     

Understanding China's demand for resource imports

Is China's demand for resources driven predominantly by domestic factors or by global demand for its exports? The answer to this question is of interest given the highly resource-intensive nature of China's growth, and is important for many resource-exporting countries, such as Australia, Brazil, Canada and India. This paper provides evidence that China's (mainly manufacturing) exports have been a significant driver of its demand for resource commodities over recent decades. First, it employs input–output tables to demonstrate that, historically, manufacturing has been at least as important as construction as a driver of China's demand for resource-intensive metal products. Second, it shows that global trade in non-oil resource commodities can be described by the gravity model of trade. Using this model it is found that, controlling for other determinants of resource trade, exports (and the manufacturing sector more generally) are a sizeable and significant determinant of a country's resource imports, and that this has been true for China as well as for other countries.     

China＇s Import-exchange Rate Linkage： Evidence from the China-bound Exports of Japan and Korea

This paper examines how the China-bound exports of Japan and Korea are related to exchange rates, motivated by the fact that processing trade makes up a large proportion of China＇s trade, and that Japan and Korea are the leading source countries for processing imports. Because processing imports are inputs for exports, the link between such imports and China＇s exchange rates are ambiguous. We estimate export functions that include China＇s RMB real effective exchauge rates （REER） along with bilateral real exchange rates （B RER） using Johausen ＇s cointegration method aud find that the RMB REER significantly affects Japanese and Korean exports to China, even more so than BRER in most cases examined. These two exchange rates appear in the export equations with opposite signs. Subsequently, we use the estimated model to illustrate the importance of accounting for a concurrent change in B RER when analyzing the effects of a hypothetical RMB revaluation on China＇s trade balances despite the apparently weak imports-B RER linkage.     

Two sides of the same coin: The economic and environmental effects of China's international trade from a global value chain perspective

China's accession to the World Trade Organization (WTO) has led to rapid economic growth and international trade development. However, China is also challenged with a heavy environmental burden due to the massive carbon emissions transferred through trade. By splitting production activities into traditional trade and global value chain (GVC) activities, this paper uses an intercountry input-output (ICIO) framework to study the imbalances of the economic and environmental effects between China's imports and exports at different levels. We define the indices value added per embodied emission in imports and exports (VPM and VPX, respectively). Additionally, we find a large gap between China's VPM and VPX, primarily because developed economies gain much higher value added per embodied emission than China gained through exports in GVC activities. Then, we study how to narrow the gap between China's VPM and VPX. The application of multiplicative structural decomposition analysis (SDA) and the logarithmic mean Divisia index I (LMDI-I) approach reveals the total and bilateral-sectoral contributions of the driving factor effects to the changes in China's VPM and VPX. The results provide tailored implications for promoting the comprehensive economic and environmental benefits of China's imports and exports.     

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.     

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.     

Global production networks and China's processing trade

This paper unveils a systematic pattern in China's processing trade. In a cross-section of Chinese provinces, the average distance traveled by processing imports (import distance) is negatively correlated to the average distance traveled by processing exports (export distance). To explain this pattern, we set up a three-country industry-equilibrium model in which heterogeneous firms from two advanced countries, East and West, sell their products in each other's markets. Each firm can use two modes to serve the foreign market. It can directly export its products from its home country. Alternatively, it can indirectly export to the foreign market by assembling its product in a third low-cost country, China, which is located in the vicinity of East. Our model establishes two theoretical predictions relating China's geographical location to its processing trade patterns. First, China's processing exports are negatively affected by both an increase in import distance and a rise in export distance. Second, China's processing exports to East Asian countries are more sensitive to export distance and less sensitive to import distance than its processing exports to non-Asian countries. We find empirical support for both predictions.     

English timber imports from Northern Europe in the eighteenth century

Abstract

English commercial history has tended to concern itself with tracing the pattern of exports, especially of textiles, rather than that of imports. There are, however, certain commodities on the import side that have attracted more attention than others—strategically important articles, for example, such as tar and pitch, which used to be designated as ‘naval stores’. These commodities, together with iron, constituted northern Europe's most important contribution to English imports in the eighteenth century.¹ The import of ‘naval stores’, like that of iron, was based upon northern Europe's vast forest resources combined with proximity to England. Of the regions within the orbit of English trade, only North America could boast continuous tracts of forest on a comparable scale; but the long transatlantic crossing retarded such imports from America, for wood and wood products were bulky commodities in relation to their value.     

The impact of destination tariffs on China’s exports: Country,firm, and product perspectives

Based on multi-product heterogeneous firm trade theory, we combine China's customs data with the World Integrated Trade Solution’s (WITS) tariff data from 2002 to 2013 and analyze the impact of destination tariffs on China's exports at the country, firm, and product levels. The results reveal that tariffs had a negative effect on country-level exports and their extensive margins. After controlling for the inter-firm composition effect, tariffs had negative effects on firm-level exports and their intensive margins, but positive effects on their extensive margins. After also controlling for the within-firm export composition effect, tariffs had a negative impact on the exports of core products; however, the negative impact diminished as the core grade and technological content of the products increased. Using these elasticities to analyze Sino-U.S. trade frictions, we determine that the additional U.S. tariffs reduced China's exports of high-tech products more than its medium- and low-tech products.     

Vertical trade and China's export dynamics

This paper examines how China's exports are affected by exchange rate shocks from countries that supply intermediate inputs to China. We build a simple small open economy model with intermediate goods trade to show that due to the intra-regional trade in intermediate goods, a devaluation of other Asian currencies does not necessarily hurt China's exports, as imported intermediate goods could become cheaper. The effect of intermediate goods costs depends critically on the share of intermediate goods used in China's export goods production and the degree of exchange rate pass-through in imported intermediate goods prices. If prices for intermediate goods are not very sticky, the effect through this channel could be large, and China's exports could even benefit. We find that these findings do not depend on China's choice of currency invoicing between the RMB and the US dollar or the choice between fixed and flexible exchange rate regimes.     

China's Competitive Performance: A Threat to East Asian Manufactured Exports?

We examine China's competitive threat to East Asian neighbors in the 1990s, benchmarking performance by technology and market. Market share losses are mainly in low-technology products; Japan is the most vulnerable market. China and its neighbors are raising high-technology exports in tandem: international production systems here are leading to complementarity rather than confrontation. In direct trade with its neighbors, China is acting as an engine of export growth, with imports outpacing exports. This may change, however, as China climbs the value chain and takes over activities that have driven East Asian export growth even within integrated production systems.     

The impact of China's trade liberalisation on the greenhouse gas emissions of WTO countries

We examine the effects of China's trade liberalisation, post entry into the WTO, on the greenhouse-gas (GHG) emissions of its trading partners. Using complementary estimators we establish that China's liberalised trade had significant effects on the GHG emissions of its trading partners. Increased exposure to Chinese exports increased the growth of consumption-based emissions while reducing production-based emission. The increase in consumption-based emissions was larger than the decrease in production emissions. Consumption emissions increased both through a scale effect (consumption increased) and a composition effect (consumption became more emissions intensive). Decomposition analysis suggests that the link between exposure to Chinese exports and the increase consumption-based emissions is the emissions embodied in imports: The emissions embodied in imports increased and imports became more emissions intensive. The increase in imported emissions was not offset by a reduction in domestic production of emissions either in final consumption goods or exports. (JEL: Q53, Q54, Q55).     

森林认证对中国林产品出口影响的实证分析

采用引力模型中“单国模式”,利用面板数据研究森林认证对中国林产品出口的影响。实证研究表明,中国对主要出口的24个国家的林产品出口额受到进口国的人口数量、中国与进口国之间的直线距离以及进口国对森林认证的重视程度的综合影响,其中人口数量的增加促进了我林产品出口额的增长,而国与国之间的距离以及进口国对森林认证的重视程度阻碍了中国林产品的出口。     

US and China aid to Africa: Impact on the donor-recipient trade relations

This paper investigates the impact of the US and China's foreign aids to Africa on trade flows between donor and recipient countries. Evidence from the gravity model estimates reveals that the two donors' exports are strengthened by their aids to African partners. Interestingly, China's aid shows a positive effect on its total volume of trade and imports from Africa, while the aid from the US exhibits little impact on the US-Africa total trade and its imports from Africa. A possible explanation for such a difference could be due to the dissimilar national interests of donors in Africa. This study finally suggests that African countries should accelerate the pace of advancing domestic economies and rely less on foreign assistance, in order to establish a fairer and more equal international economic order.     

The sustainability of trade deficits in the presence of endogenous structural breaks: Evidence from the Indian economy

This study examines the long-run relationship between exports and imports of the Indian economy during 1950–51 to 2008–09. Applying unit root test and cointegration technique that allows for endogenously determined structural break in the relationship, the results do not support the existence of any long-run equilibrium relationship between exports and imports and interest payments on net debt for India. Individually exports and imports have multiple breaks clustered roughly around three periods: early and mid seventies – the ‘comfort period’ in the country's balance of payments; 1986–87 that witnessed a sudden jump in exports trend after experiencing a flat trend in the first half of 1980s; and 1997–98 following the East Asian currency crisis. The findings imply that India's macroeconomic policies have not been very effective to ensure sustainability of trade deficit in the long-run and suggest that India is in violation of its international budget constraint.     

Trade,Investment and Economic Interdependence between South Korea and China*

The Korean economy has been significantly affected by the emergence of China. It is now the largest market for Korean exports and a major supplier of its low‐cost imports but has at the same time become a serious challenger to Korea in the world markets for manufacturing exports. This paper investigates changes in China's export structure and its effect on Korea, and bilateral trade between the two. It also examines the motives for Korean investment in China and its effect on bilateral trade and cross‐border production networks.     

International trade,FDI (foreign direct investment) and embodied CO2 emissions: A case study of Chinas industrial sectors

This paper calculates CO₂ emissions embodied in China's international trade using an input–output analysis, for the period 2000–2010. Based on industrial panel data, the two-step GMM estimation is used to test the impacts of FDI, trade openness, exports, imports and per capita income on CO₂ emissions. The results suggest that: (1) China's growing trade surplus is one of the important reasons for the rapidly rising CO₂ emissions; (2) large FDI inflows further aggravate China's CO₂ emissions; and (3) the industrial sector's per capita income and CO₂ emission relationship show inverted-U environmental Kuznets curve. Therefore, in order to achieve environmentally sustainable development of the economy, China should make efforts to transform its trade growth mode, adjust foreign investment structure, strengthen energy efficiency and develop a low-carbon economy.     

中国纸和纸板出口价格的影响因素分析

基于2000—2020年中国纸和纸板出口相关数据，运用多元回归模型实证分析影响中国纸和纸板出口价格的因素。研究发现，废纸进口价格、其他竞争者价格、出口集中度、汇率是影响中国纸和纸板出口价格的关键因素。对中国3类主要出口品种的异质性分析显示，箱纸板出口价格的主要影响因素为废纸进口价格、资金成本、出口集中度、汇率，涂布印刷纸出口价格受到木浆进口价格、全球涂布印刷纸需求量、对外贸易依存度、汇率的影响，包装盒纸出口价格受到废纸进口价格、对外贸易依存度、汇率、环境保护的共同影响。基于此提出提升纸和纸板出口竞争力的对策建议。     

Trade in factor income and the US-China trade balance

US multindoational enterprises sell considerable amounts of products to China's domestic consumers that are “made” in either China or other countries. However, these sales are not counted as US exports to China. To account for this, we propose a beyond-borders approach to measuring trade flows that explicitly considers firm ownership, termed “trade in factor income (TiFI),” that defines the US-owned factor income induced by China's final demand as US exports to China. Applying this approach to OECD data, we find that on average from 2005 to 2016 in TiFI terms, US exports to China were 20.34% and 8.21% greater, China's exports to the US were 1.64% and 16.04% less, and the US trade deficits with China were 17.4% and 32.0% less than the trade figures reported in value added and gross terms, respectively. The concept of TiFI transforms trade measures from a territory-based “made in” label to a factor income-based “created by” label.     

Chinese exports and productivity gains: panel evidence

This paper examines the impact of imports from China on the labour productivity levels of importers, using unbalanced data from 1994 to 2006. It is hypothesised that imports from China increase importer countries' labour productivity levels. Using cross‐section, fixed and random‐effect models, a statistically significant, positive relationship is found between the share of a country's imports from China and labour productivity in the manufacturing sector of that country. Moreover, it is found that imports from China have a larger impact on China's main Asian‐Pacific trade partners and countries with higher manufacturing shares in their total exports.