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.     

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.     

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.     

The Structure of China's Imports: A New Framework

Using the elbow function method to determine the number of classification groups of goods and applying the K‐means algorithm to classify technical goods, this paper constructs a scientific classification framework of commodity structure and then measures the changes in China's import commodity structure. It is found, first, that from 2000 to 2012, the import commodity structure in China underwent structural change. Shares of non‐agricultural primary products and high‐technology products increased significantly, whereas shares of low–medium‐technology products and medium–high‐technology products declined. Second, from 2000 to 2006, the overall technology level of China's imports declined, but then increased from 2007 to 2012. Therefore, the Chinese Government should increase the share of high‐technology and extra‐high‐technology products in total imports to stimulate structural transformation in manufacturing industries to make full use of foreign advanced technology and to prevent stepping into a low‐end import commodity structure.     

Economic Benefits and Environmental Costs of China's Exports: A Comparison with the USA Based on Network Analysis

This paper decomposes economic benefits (value‐added) and environmental costs (CO₂) of exports according to their sources, and maps the global value network (GVN) and the global emissions network (GEN) for China's exports during 1995–2009 from national, sectoral and national–sectoral perspectives. A comparison is conducted between China and the USA. National GVN and GEN show that shares of value‐added and CO₂ emissions from China in its GVN and GEN both decreased first then increased after 2006, while shares from the USA in its GVN and GEN generally decreased. Sectoral GVN and GEN show that among China's exports, “electrical and optical equipment” and “electricity, gas and water supply” were, respectively, the sectors that obtained the most value‐added and emitted the most CO₂. National–sectoral GVN and GEN for China exhibited reciprocal and disassortative patterns, and in‐strengths and out‐strengths of GVN and GEN for China's exports were mainly captured by several domestic country–sector pairs.     

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.     

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.     

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.     

CO2 Emissions Embodied in China＇s Foreign Trade： An Investigation from the Perspective of Global Vertical Specialization

In light of the growth in vertically specialized in global trade, the present paper uses input output tables from the World Input-Output Database to construct an environmental multi regional input-output model to calculate the CO2 emissions embodied in China＇s international trade during 1995-2009. The advantage of this model lies in its incorporation of the re exported CO2 emissions component embodied in trade and its ability to differentiate domestic sourced CO2 emissions from foreign-sourced CO2 emissions in trade. The results show that carbon emissions embodied in both China＇s exports and imports increased significantly during 1995-2009. One important reason for this is that the re-exported carbon emissions embodied in China＇s imported intermediate inputs increased substantially during this period. Our research reveals that accelerating the transformation of trade pattern and upgrading processing trade should be emphasized in the formulation of policy to prompt CO 2 emissions abatement in China.     

Analysis on CO2 Emissions Transferred from Developed Economies to China through Trade

Based on a global input–output model, this paper investigates the CO₂ emission transfer between China and developed economies through trade. The results show that approximately 15–23 percent of China's production‐based emissions during 1995–2009 were induced by the production of goods and services satisfying final demand in developed economies. Decomposition of emission transfers shows that trade of intermediate products played a significant role in emission transfer from developed economies to China. Most developed economies have consumption‐based emission responsibilities that are higher than their production‐based responsibilities, whereas China's consumption‐based responsibility is significantly lower than its production‐based responsibility. We argue that a fair and efficient carbon accounting approach should take CO emission transfers from developed economies to developing economies into consideration. It is important that China and its developed trade partners cooperate in reducing emission transfers.     

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.     

Competitiveness of China's Manufacturing Industry and its Impacts on the Neighbouring Countries

This paper investigates the rapid growth of China's share in the international commodity market and the structural changes of China's commodity exports. It demonstrates a significant improvement of international competitiveness in China's manufacturing sector. The panel data analysis, based on a Solow–Swan type growth model on China's 37 manufacturing industries from 1991 to 2002, reveals that the main sources of the strengthened competitiveness of China's manufacturing sector have been mainly from Total Factor Productivity (TFP), while labour productivity has been increasing and capital productivity has been falling. A preliminary empirical analysis on the impacts of China's increasing competitiveness finds that there are negative correlations between China and most of its neighbouring countries, both newly industrialised economies and other Southeast Asian developing economies. However, there is no evidence of negative impacts of China's increasing competitiveness on developed countries such as the United States and Japan.     

Reorganization of Intra‐ASEAN 5 Trade Flows: The ‘China Factor’*

There are claims that China's influence on ASEAN is direct in that she has encouraged more exports to flow into her huge markets and changed trade flows among member countries. Demand and supply are thus deemed to have become more China‐centered. This study therefore explores the plausibility of China as a ‘factor’ that influences bilateral intra‐ASEAN 5 trade flows through demand (exporting country) and supply (importing country). The results imply that China's integration in the region increases the size of the key ASEAN member economies export market. There is also no indication that import sourcing from China by ASEAN 5 countries reduces export expansion within the latter. The results accord with the fact that although China has become an important export destination and an import source for individual ASEAN 5 countries, this has not reduced intra‐ASEAN 5 trade.     

Estimation of China＇s Embodied CO2 Emissions during 2000-2009

The problem of CO₂ embodied in international trade has attracted increasing attention in China. To analyze this issue, the present paper directly calculates emission factors for 15 industries in 2002, 2005 and 2007. We then examine a consumption‐based system and a single‐region input–output model to estimate China's embodied emissions during 2000–2009. Our results show that, when a consumption‐based system is adopted, China's emissions are lower than those reported by some international organizations. The rapid growth in China's exports is a key determinant of China's rising total emissions. All countries should strengthen their cooperation in improving their current greenhouse gas inventories. Furthermore, China needs to encourage trade in low‐carbon products and technology.     

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).     

Are China's Exports Crowding Out or Being Crowded Out? Evidence from Japan's Imports

Previous studies have investigated whether Chinese exports have crowded out those from other countries. However, what has yet to be considered is the evidence based on different quality varieties. Using the most detailed Harmonized System 9‐digit product‐level data, the present paper provides evidence of crowding‐out and crowded‐out effects across different product quality segments and across manufacturing sectors by quality segments. The empirical evidence presented in this paper shows that the crowding‐out effects of Chinese exports have been greatest at the lower end of the quality spectrum but less significant at the higher quality spectrum. Moreover, since 2007, China's own exports of lower quality manufactured goods have been increasingly crowded out. The key policy implication is that China's export path is in line with that taken by other Asian economies in previous decades; the crowded‐out effect could achieve win–win outcomes for countries involved; and lower income countries would do well to be open to receive those relocated low value‐added industries from China. However, the relocation policy in China is best implemented gradually as climbing up the product quality ladder takes time.     

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.     

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.     

Explaining the Productivity Growth Gap Between China and India: The Role of Structural Transformation

Chinese and Indian aggregate productivity growth has been significantly different over the last 30 years. This paper studies the role of structural transformation in accounting for the aggregate productivity growth gap between two economies. We calibrate a neoclassical model of structural transformation for China and India. The model implies that higher productivity growth in China's manufacturing and agriculture accounts for most of the aggregate productivity growth gap between the two countries. According to the development strategy of China's government, China would start a new phase of structural transformation whereby employment is moving from manufacturing to services. Since the productivity growth gap in services is pretty small between China and India, if China wants to remain superior in relative productivity, it should improve the productivity growth rate of services. In contrast, the relative performance in India hinges on closing its productivity gap in agriculture and manufacturing relative to China.     

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.