Global and Euro Imbalances： China and Germany

We analyze global and euro area imbalances by focusing on China and Germany as large surplus and creditor countries. In the 2000s, domestic reforms expanded the effective labor force, restrained wages, shifted income toward profits and increased corporate saving. As a result, the Chinese and German current account surpluses widened, and that of Germany has proven more persistent, with subdued domestic investment. China is an early-stage creditor, holding a short equity position and a longposition in safe debt. Germany＇s balanced net debt and equity claims mark it as a mature creditor thatprovides insurance to the rest of the world. China pays to lay off equity risk, while Germany, by contrast, harvests a moderate yield on its net claims. In both economies, the shortfall of the net international investment position from cumulated current account surpluses arises from exchange rate changes, asymmetric valuation gains, and, in Germany＇s case, credit losses.     

A Global Shortage of Safe Assets: A New Triffin Dilemma?

A number of researchers have claimed that the international monetary and financial system faces a Triffin dilemma in a new fiscal form. In particular, there is said to be a dilemma between satisfying the world’s demand for safe assets and maintaining the solvency of the issuer of such safe assets. On one horn of the dilemma, global deflation threatens if highly creditworthy sovereigns like the U.S. Treasury do not satisfy emerging market demand. On the other horn, a loss of creditworthiness of the issuer threatens as its government debt to gross domestic product (GDP) ratio rises to satisfy fast-growing global demand. This article suggests that the analogy drawn with the original Triffin dilemma is not tight since the safe asset dilemma does not have a clear cross-over point into instability. This paper casts empirical doubt on the claim that such a dilemma exists. On the demand side, emerging market central banks have actually turned to selling safe assets in the last several years, as against forecasts for an ongoing precautionary accumulation. U.S. Treasury yields have actually risen above those on generic private instruments, the opposite of the predicted widening spread of risky over safe yields. On the supply side, a substantial fraction of U.S. dollar reserve assets is invested in instruments other than U.S. Treasury securities. Reserve managers find safe assets among obligations issued by supranationals, national agencies and even large banks, which enjoy varying degrees of governmental support. Thus, demand for safe assets looks less secular than cyclical and the supply of safe dollar assets does not depend solely on U.S. fiscal deficits.     

Is China the Root Cause of Global Deflation？

The so-called" China exporting deflation”theory has been popular in the international businesscommunity recently. For example,international businessmagazines such as Us-based Business Week and Britainbased The Economist have discussed the topic of global deflation,in which the impact of floods of low-     

Adjustment of Global Imbalances and Its Impact on China＇s Economy

I. Introduction Global imbalances have aroused increasingly greater attention worldwide. The global current account deficits are mainly concentrated in the USA and the US current account deficit is rapidly expanding, whereas the counterpart surpluses are more and more concentrated in the East Asian economies,1 especially China and other East Asian economies other than China and Japan (including the four newly industrialized economies, Indonesia, Malaysia,72 Jianhuai Shi / 71 – 85, Vol.…     

A New Global Auto Industry？

This paper brings together a number of robust trade models to shed some light on the likely evolution of the global automotive industry. Vertical product differentiation, intra‐industry trade and fragmentation of production leading to international outsourcing are important features of the existing global automotive sector. The global automotive sector will most likely experience groundbreaking changes over the coming decades. The sector is confronted with a multidimensional technological revolution spurred by radical product innovation, shifts in customer demand and government incentives. A dominant driver will be growing public concern about climate change. China and India might well become leading players by 2050, if not earlier.     

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.     

The sophistication of exports: Is China special?

Recent studies have found that China is “special” in exporting highly sophisticated goods not comparable with its income level. In this paper we identify two measurement biases that account for this “China is special” observation. First, product quality has not been fully considered in the measurement of sophistication, which has caused an overestimation of the sophistication of China's exports. Second, the average income of China has been used to measure the export capability of China, which has caused an underestimation of China's capability of exporting sophisticated goods. After correcting the two measurement biases, China appears much less as an outlier in the cross-country comparison of the sophistication of exports.     

Banking and the Macroeconomy in China: A Banking Crisis Deferred?

The downturn in the world economy following the global banking crisis has left the Chinese economy relatively unscathed. This paper develops a model of the Chinese economy using a DSGE framework with a banking sector to shed light on this episode. It differs from other applications in the use of indirect inference procedure to test the fitted model. The model finds that the main shocks hitting China in the crisis were international and that domestic banking shocks were unimportant. However, directed bank lending and direct government spending was used to supplement monetary policy to aggressively offset shocks to demand. The model finds that government expenditure feedback reduces the frequency of a business cycle crisis but that any feedback effect on investment creates excess capacity and instability in output.     

China's ‘New Normal’: Is the growth slowdown demand- or supply-driven?

China's ‘New Normal’ has been much discussed in recent years. An important aspect of the New Normal is the growth slowdown from levels of around 10% per annum to a more modest 6 or 7%. Not surprisingly, there has been widespread discussion of whether the slowdown is permanent or not and, in either case, what the sources of the slowdown are. However, much of this discussion has been based on informal analysis of the data rather than formal econometric results. We make a move in the direction of formal empirical analysis of this issue by estimating and simulating a vector autoregressive (VAR) model which distinguishes between demand, supply and foreign shocks as possible drivers of changes in economic growth. We analyse both two-variable (growth and inflation) and three-variable (foreign growth, domestic growth and inflation) VAR models and identify demand, supply and foreign shocks, using a modification of the Blanchard-Quah identification procedure. In the two-variable model we identify two shocks (demand and supply) and find that the slowdown since the GFC has been mainly supply-driven. This conclusion is not changed when a foreign growth variable is added to the model and a foreign shock is allowed for – we find that demand continues to be of relatively little importance, that the foreign shock also makes little contribution to explaining the long-run growth decline in China which continues to be driven by long-term supply factors. This conclusion is robust to a number of alternative formulations of the model. Thus, the growth slowdown may, indeed, be characterised as the ‘New Normal’.     

China: Workshop of the world?

Because China's transformation process is complex and remains open-ended, there are many partial answers provided to the many questions asked by foreign observers and Chinese people alike about where China is heading. The argument here is that it is wrong to assert China's coming collapse, just as it is not correct to assert that the dynamics so visibly at work in China will lead to China becoming the world's workshop. It is closer to the truth to maintain that the dynamics at work in China can lead in any direction, and that the necessary, let alone the sufficient conditions for them leading to a desirable outcome are daunting, but not impossible to achieve. This article suggests both necessary and sufficient conditions for China to emerge as the world's workshop, and then looks forward to assess whether we may expect regime change or political development.     

UK External Imbalances and the Sterling: Are they on a Sustainable Path?

An updated version of Krugman’s 1993 MMF framework is used to consider the implications of buoyant domestic demand for the real exchange rate and debt dynamics. The updating includes a Taylor rule for monetary policy and explicit treatment of external assets and liabilities. In response to an exogenous rise in the aggregate demand, short-run appreciation of the real exchange rate is followed by a prolonged decline as external debt accumulates and net wealth deteriorates. Whether in equilibrium the real exchange rate is stronger or weaker depends crucially on a comparison of real interest rates and the growth rate. If the domestic growth rate is higher than global real interest rates, the currency may strengthen in the long run despite the deterioration of net external assets. To see whether the strength of sterling is sustainable, the analysis is briefly calibrated to UK data over the last decade. Blanchard et al. (The US current account and the dollar. CEPR DP no 4888, 2005) suggest that international liabilities to be treated as imperfect substitutes: so we check to see how this would affect our results.

Should China Join the New Trans‐Pacific Partnership?

After President Donald Trump's ill‐advised pullout from the Trans‐Pacific Partnership (TPP) and despite the absence of the US, the remaining 11 Asian and Pacific countries agreed on a deal, renamed the Comprehensive and Progressive Agreement for Trans‐Pacific Partnership (CPTPP). The accord took effect on 30 December 2018 and provides rigorous, up‐to‐date rules for Asia‐Pacific trade, but excludes the region's two biggest economies: the US and China. In this paper, we calculate that Chinese membership in the CPTPP would yield large economic and political benefits to China and other members. The CPTPP, in its current form, would generate global income gains estimated at US$147bn annually. If China were to join, these gains would quadruple to US$632bn, or a quarter more than in the original TPP with the US. But to join the CPTPP, China would have to undertake unprecedented reforms and manage complex political challenges.     

Slow Pass-through Around the World: A New Import for Developing Countries?

Developing countries traditionally experience pass-through of exchange rate changes that is greater and more rapid than high-income countries experience. This is true equally of the determination of prices of imported goods, prices of local competitors’ products, and the general CPI. But developing countries in the 1990s experienced a rapid downward trend in the degree of pass-through and speed of adjustment, more so than did high-income countries. As a consequence, slow and incomplete pass-through is no longer exclusively a luxury of industrial countries. Using a new data set—prices of eight narrowly defined brand commodities, observed in 76 countries—we find empirical support for some of the factors that have been hypothesized in the literature, but not for others. Significant determinants of the pass-through coefficient include per capita incomes, bilateral distance, tariffs, country size, wages, long-term inflation, and long-term exchange rate variability. Some of these factors changed during the 1990s. Part (and only part) of the downward trend in pass-through to imported goods prices, and in turn to competitors’ prices and the CPI, can be explained by changes in the monetary environment—including a fall in long-term inflation. Real wages work to reduce pass-through to competitors’ prices and the CPI, confirming the hypothesized role of distribution and retail costs in pricing to market. Rising distribution costs, due perhaps to the Balassa-Samuelson-Baumol effect, could contribute to the decline in the pass-through coefficient in some developing countries.     

A View of the Occupational Structure in Imperial and Republican China (1640–1952)

Despite being considered a prime indicator of economic change, the occupational structure does not figure prominently in the debate regarding the economic development of early modern China. One reason is the virtual absence of occupational data before the start of the twentieth century. In this paper, we make a first attempt to sketch the occupational structure between ca. 1640 and 1952 using a variety of unique and rather fragmented occupational sources. We find that the share of persons working in agriculture remained stable until the mid-nineteenth century, with the share in industry showing some growth thereafter.     

Fiscal Sustainability in the Euro-Zone: Is There A Role for Euro-Bonds?

This paper assesses the fiscal sustainability of ten Eurozone member countries at a national and aggregate level. It is carried out in light of the relevant literature on monetary unions and the framework of the European Monetary Union vis-à-vis the current sovereign debt crisis. The impact of Eurobonds, which are considered as a viable solution, on fiscal sustainability was empirically tested. The results indicate that only three countries appear to be structurally sustainable whereas the majority of the countries are only sustainable in the short-run and two countries are structurally unsustainable. However, the sustainability of the Eurozone is greatly improved when the Eurobonds are used.     

What explains the intention to bring mobile phones for recycling? A study on university students in China and Germany

The analysis investigates the determinants of the intention to bring mobile phones for recycling. The paper is based on data regarding the determinants of bringing mobile phones for recycling collected from university students in Autumn 2016 (N = 1013) in both the Chinese and German academia. Using structural equation modeling, we examine the direct and indirect effects of social norms, knowledge about the environmental benefits of recycling and a pro-environmental attitude on the intention to recycle mobile phones. We find confirmation that attitude, social norms, and knowledge contribute positively and significantly to the intention to bring phones for recycling. As for three mediating effects tested, attitude mediates the relationship between knowledge and intention, as well as between social norms and intention. Knowledge as a mediator between social norms and attitude does not have a highly significant effect. Looking at the results of the Chinese and German sub-samples, we find that social norms have no direct effect on intention for the German sub-sample, but an indirect one through attitude. Knowledge has no significant effect for the German sub-sample. Results for the Chinese sub-sample indicate an indirect effect of social norms on attitude via knowledge, while knowledge itself has an indirect effect on intention through attitude.