Will the Renminbi become a reserve currency?

In recent years, the authorities in the People’s Republic of China (PRC) have made great efforts to internationalize its currency. Will Renminbi (RMB) finally become a reserve currency? This paper addresses the above question from an institutional analytical framework. We find that if only economic fundamentals are used in the prediction, the expected share of the RMB in global currency reserves could reach 10% at the end of 2011. However, if institutional variables are included, the predicted share comes down to around 2%, which is a more realistic prediction. The work then proposes reform actions in developing China’s institutional environment so as to facilitate the RMB to realize the 10% potential. In general, we believe that the RMB’s international role should increase in the coming years, but it will take a relatively long period before it plays the role of a global reserve currency.     

How Would an Appreciation of the Renminbi and Other East Asian Currencies Affect China's Exports?

China's global current account surplus equaled 9% of Chinese GDP in 2006 and 11% of GDP in 2007. Many argue that a renminbi appreciation would help to rebalance China's trade. Using a panel dataset including China's exports to 33 countries we find that a 10% renminbi (RMB) appreciation would reduce ordinary exports by 12% and processed exports by less than 4%. A 10% appreciation of all other East Asian currencies would reduce processed exports by 6%. A 10% appreciation throughout the region would reduce processed exports by 10%. Since ordinary exports tend to be simple, labor-intensive goods while processed exports are sophisticated, capital-intensive goods, a generalized appreciation in East Asia would generate more expenditure-switching towards US and European goods and contribute more to resolving global imbalances than an appreciation of the RMB or of other Asian currencies alone.     

Does the market care about investor protection practices in China?

This study develops a scorecard with which to measure the investor protection practices of major listed firms in China during 2007–2010. We use time-series data to examine the relationship between the change in firm investor protection practices and market performance. Our results show that firms exhibiting improvements in investor protection practices manifest a subsequent increase in buy-and-hold abnormal returns. The results further indicate that the changes in the sub-index have different effects on a firm’s future performance. Shareholder rights to be rewarded seem to have the most significant and positive effect on a firm’s future performance for both local and international investors. Moreover, international investors pay attention to their rights to information. Our results provide evidence in support of the notion that the market does care about firm’s investor protection practices. The findings are robust to other measures of firm performance.     

China Bashing: Does Trade Drive the “Bad” News about China in the USA?

A monthly index of “bad” news about China as reported in the USA from January 1990 to December 2008 is developed in this paper. “Bad” is defined as news touching on the following issues: human rights, Tibet, child labor, democracy, and repression. Using this bad news index, this paper documents a peculiar finding: 3–4 months after a trade deficit shock to the US–China bilateral trade balance, the frequency of bad news published about China by US media outlets rises sharply, then dies off slowly. Statistical analysis reveals that the likelihood that this finding is just a coincidence is relatively small—about 1%. In addition, this paper finds a robust association between the annual number of Congressional hearings on China and the US–China bilateral trade deficit. These results suggest that “China bashing” may be endogenous to fluctuations in the US–China bilateral trade balance.     

China’s efforts to contain Renminbi’s depreciation and the relating impacts

China began to face Renminbi (RMB) depreciation pressure since 2014Q2, and the 8/11 reform in 2015 exacerbated the RMB depreciation pressure against USD. To contain the depreciation pressure, the People’s Bank of China (PBC) adopted three methods. Firstly, PBC tried to stabilize the exchange rate by selling USD and purchasing RMB, which resulted in the fast shrinking of China’s foreign exchange reserve. Secondly, PBC strengthened the regulation of capital outflows, which caused the stagnation of RMB internationalization. Thirdly, PBC frequently changed the pricing mechanism of the daily fixing of RMB to USD, which led to the reverse of the liberalization of RMB exchange rate. Under the new environment of RMB depreciation pressure and much lower foreign exchange reserve, Chinese government changed its strategies and became more cautious and pragmatic in outward foreign direct investment, RMB internationalization, and Belt & Road Initiative construction.     

How does anti-corruption campaign affect the labour income share in China?

Based on the difference-in-difference (DID) methodology, this paper empirically investigates the impact of the current anti-corruption campaign on the share of labour income in China. Using a firm-level data on Chinese corporations listed on Shanghai and Shenzhen Stock Exchanges from 2009 to 2015, we find that the campaign contributes to the rise in the labour income share, while there is considerable heterogeneity. The magnitude of the effect depends on firm’s ownership and market power. This paper advances the existing studies examining the nexus between corruption and income distribution from a novel perspective.     

Debunking the myth about China’s low consumption

This article argues that the generally held belief about China’s consumption being too low is a myth based on the misapplied Keynesian theory and inaccurate official statistics. The article identifies three sources of underestimation of household consumption by China’s official statistics: housing consumption is grossly underestimated, private consumption paid by companies is not accounted for, and most importantly, high income households are significantly underrepresented in the household surveys on which household consumption statistics are based. A re-estimation suggests that the rate of China’s consumption is more than 60% of GDP, not the official 48–49%, and it is comparable to the level experienced by the high income East Asian economies during their rapid growing years.     

How employment insurance recipients make decision about insolvency?

Beyond the maximum insurable income, the size of the shortfall increases with the worker's income, leaving unemployed workers with little or no room to maintain a decent life while meeting all their other obligations. This situation is even more perilous in an indebted society where the debt per income ratio hovers at around 175%. This paper contributes to the literature by identifying the key socioeconomic and demographic indicators that dictate the insolvency choice (bankruptcy or consumer proposal) of Canadian insolvent employment insurance recipients. Using Canadian data, we show that low employment insurance leads debtors to eat up their asset and incur more debt, which ultimately make bankruptcy more appealing to them than proposal.     

Labor Law in China: How Does It Contribute to the Economic Security of the Workforce? A Commonsian Reading

By adopting the “reasonable value” notion applied to the labor relationship as proposed by John R. Commons, I study the way in which labor legislation in China can be understood as the search for a status of employment security for rural migrant workers. However, the Chinese labor market is experiencing growth in a particular form of informal labor: delegated and temporary labor. I analyze this contradiction not as a failure of the legislation itself, but as the product of a particular institutional context which provides a way to skirt the law, and thereby diminish its effectiveness. Finally, in a non-democratic state, labor law — which has been instrumentalized and mobilized within a form of state corporatism — reveals that very significant challenges exist for building a truly secure status for employees.     

Philosophical Consideration about the Sustainable Development of the Economy in West China

I. IntroductionExploiting western regions in China is to develop theeconomy of the west, narrow the disparity of the westand the east, make the west and the east realize thecommon prosperity and keep the nation's prosperity andstability. The development of western regions is not merelya great economic issue, but also a great national problem(the ethnic minority of our country occupies more west)and a political issue. If the development of the east andthe west were not balanced, it will likely…     

Public capital in the 21st century: as productive as ever?

The global financial crisis and the euro area sovereign debt crisis that followed induced a rapid deterioration in the fiscal positions of countries across the globe. In the ensuing fiscal adjustment process, public investments were severely reduced in many countries. How harmful is this for growth perspectives? Our main objective is to find out whether the importance of public capital for long run output growth has changed in recent years. To this end, we expand time series on public capital stocks for 20 OECD countries and estimate country-specific recursive vector autoregressive (VAR) models. Results show that the effect of public capital shocks on economic growth has not increased in general, although results differ widely between countries. This suggests that the current level of public investments generally does not pose an immediate threat to potential output. Of course, this could change if low investment levels are sustained for a long time.     

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).     

How Wealthy are the Rich?

Underreporting and undersampling biases in top tail wealth, although widely acknowledged, have not been statistically quantified so far, essentially because they are not readily observable. Here we exploit the functional form of power law-like regimes in top tail wealth to derive analytical expressions for these biases, and use German microdata from a popular survey and rich list to illustrate that tiny differences in non-response rates lead to tail wealth estimates that differ by an order of magnitude, in our case ranging from 1 to 9 trillion euros. Underreporting seriously compounds the problem, and we find that the estimation of totals in scale-free systems oftentimes tends to be spurious. Our findings also suggest that recent debates on the existence of scale- or type-dependence in returns to wealth are ill-posed because the available data cannot discriminate between scale- or type-dependence, on one hand, and statistical biases, on the other hand. Yet both economic theory and mathematical formalism indicate that sampling and reporting biases are more plausible explanations for the observed data than scale- or type-dependence.     

Technological progress and sustainable development: what about the rebound effect?

Sustainability concepts that rest on the idea of resource- or energy-efficiency improvements due to technological progress tend to overestimate the potential saving effects because they frequently ignore the behavioral responses evoked by technological improvements. Efficiency improvements also affect the demand for resources and energy, and often an increase in efficiency by 1% will cause a reduction in resource use that is far below 1% or, sometimes, it can even cause an increase in resource use. This phenomenon is commonly labeled the rebound effect, which is well-known among energy economists, but never attracted much attention in ecological economics. The paper starts with the traditional neoclassical analysis of the rebound effect in a partial equilibrium framework that concentrates on the demand of one particular energy service such as mobility or room temperature. It also provides an overview of some of the main empirical studies based on this model that mostly confirm the existence of the rebound effect, but are controversial about its actual importance. However, we have to go beyond the neoclassical single-service model in order to take care of the variety of possible feedback affecting energy use. The paper presents two important expansions of the single-service model in order to show the potential relevance of the rebound effect to ecological economics. First, it is shown that in a multi-services model it proves to be difficult to make general statements about the relevance of the rebound effect. In this case, the overall effect of an increase in energy efficiency on total energy use depends on the on the assumptions about the substitutability between the services considered and the direction of the income effect. Second, the paper also tries to take care of the fact that changes in resource use or energy use are frequently just ‘side-effects’ of other forms of technological progress. Especially technological change of a time-saving nature can have a large influence on energy use as many time-saving devices (for example, faster modes of transport) require an increase in energy consumption that is frequently reinforced by a ‘rebound effect with respect to time’. This effect will be especially strong when wages are high and, at the same time, energy prices are low, as is currently the case in most industrialized countries. Consequently, the paper also provides a strong argument for the introduction of energy taxes.     

The US–China Phase One trade deal: An economic analysis of the managed trade agreement

In light of the recent tit-for-tat trade dispute between China and the US, interest in quantifying the effects of the so-called Phase One agreement has risen. To this end, this paper quantifies the impact of the asymmetric managed trade agreement using such a multi-country open-economy dynamic general equilibrium model. Besides assessing the direct implications for China and the US, this paper analyzes trade diversion effects. The model-based analysis finds noticeable positive (negative) impacts of the agreement for the US (China) as well as negative spillover effects for countries not directly affected by the managed trade deal due to trade diversion. The impact of possible future trade agreements is also examined.     

What's so great about the Great Moderation?

This paper examines how volatilities of output growth and inflation have changed over a long period for eight countries. We obtain a number of robust empirical results based on a variety of different econometric methods. The lowest volatility occurs during or shortly after the Great Moderation period. Volatility is reduced during that time for most of the countries; however, these reductions in volatility pale in comparison with stability gains achieved during two other periods. One of those periods is the Postwar Moderation, which began near the end of World War II for each country. Not only is the decline in volatility impressive, but also the volatility is typically at the lowest level up to that point in a sample or at least has fallen to a low not seen for decades. And those reductions in volatility are statistically significant, in contrast to the Great Moderation. A second fall in volatility that in nearly all cases exceeds that of the Great Moderation is for inflation during the 1920s. And this moderation in inflation during the 1920s is statistically significant in almost every case. Overall, these and a number of other notable changes in volatility are remarkably robust across countries, different data sources, and alternative econometric methodologies. For example, implementation of a broad-based fixed exchange rate system is typically associated with a substantial reduction in macroeconomic volatility. Another finding, obtained from structural vector autoregression models, is that the changes in volatility for each variable are primarily driven by a fundamentally different type of disturbance.     

How remote is the offshoring threat?

Advances in communication technology make it possible for workers in India to supply business services to head offices located anywhere. This has the potential to put high-wage workers in direct competition with much lower paid Indian workers. Service trade, however, like goods trade, is subject to strong distance effects, implying that the remote supply of services remains limited. We investigate this proposition by deriving a gravity-like equation for service trade and estimating it for a large sample of countries and different categories of service trade. We find that distance costs are high but are declining over time. Our estimates suggest that delivery costs create a significant advantage for local workers relative to competing workers in distant countries.