Home Bias,Border Effect and Internal Market Integration in China: Evidence from Inter‐provincial Value‐added Tax Statistics

This paper examines the home bias in regional trade and the integration of the internal market in China using inter‐provincial value‐added tax statistics. The administrative border between regions is an important trade barrier that results in home bias. Using a border effect model, we find evidence of home bias in provincial trade and relatively low border effects in domestic‐products trade in China. Moreover, the multilateral resistance model, based on a microeconomic foundation, also has strong power in explaining border effects in provincial trade. The empirical results imply that in accordance with some developed economies, China's market integration appears to have reached a high level.     

Foreign direct investment, regional market conditions and regional development

This paper uses regional panel data to investigate the mechanism whereby foreign direct investment (FDI) has contributed to China's regional development through quantifying regional marketization levels. It is found that FDI inflow generates a demonstration effect in identifying regional market conditions for investment in fixed assets and hence affects industrial location. In addition, its effects on regional export and regional income growth have varied across east, central and west China since the second half of the 1990s, depending on differences in FDI orientation between different regions. In east China, geographical advantage in exports attracts FDI inflow and FDI promotes exports. In addition, the rise of the FDI–GDP ratio increases east China's share in national industrial value added. These effects contribute positively to regional income growth in east China although there is a direct crowding‐out effect between FDI and domestic investment (as input) in growth. In contrast, the negative impact of FDI inflow on regional export orientation in central China weakens its contribution to regional income growth. Furthermore, the contribution of the improvement in the market mechanism to regional development is evidenced in attracting FDI, in promoting export and directly contributing to regional income growth.     

A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration

This paper studies the degree of integration of China's domestic market and investigates the determinants of inter‐provincial trade barriers under the rubric endogenous trade policy theory. I rely on industry‐level trade flows extracted from provincial input–output tables to develop a model that analyzes the magnitude and evolution of Chinese provinces’ engagement in domestic trade by computing all‐inclusive indicators of trade barriers. Results underline that over the 1990s, not only was China's domestic market fragmentation along provincial borders great, but it also has become more severe at least between 1992 and 1997. The investigation of province‐level and industry‐level trade barriers confirms the relevance of applying the framework of endogenous protection to explain the level of impediments to trade between Chinese provinces. Findings emphasize that provinces’ domestic trade protection pursues a dual objective of socio‐economic stability preservation and fiscal revenues maximization.     

Modeling of the impact of the financial crisis and China's accession to WTO on China's exports to Germany

We focus on discussing the impact of China's accession to WTO and the financial crisis on China's exports to Germany, particularly in agricultural products, based on some most recent proposals. Firstly, structural breaks caused by those events are detected. Then the Box–Cox model and a new tree-form Constant Market Share (CMS) model are fitted to discover the long-term impact of those events on the trade relationship between China and Germany and the growth causes of China's exports to Germany. We found that China's accession to WTO had a negative short-term impact on China's exports and its market share in agricultural products, but a positive short-term impact on its market share in industrial products and a positive long-term impact on its exports and market share in both classes. The tree-form CMS model shows the growth of China's exports to Germany due to competitiveness after this event was much higher than before. The financial crisis exhibited a negative short-term impact on China's exports to Germany, but a positive short-term impact on China's market share and the trade relationship between both countries in industrial products. China's market share in agricultural products was not affected by the financial crisis.     

Accounting for the China–US Trade Imbalance: An Ownership‐Based Approach

This paper focuses on measuring the trade imbalance between China and the United States (US) within the framework of the ownership‐based approach. It extends the baseline model developed, respectively, by NAS, Julius, and BEA into a three‐country framework, consisting of the domestic economy, the foreign economy, and the rest of the world. The results of the study show that the non‐US foreign direct investment in China is mostly responsible for China's trade surplus with the US. As a result, China's ownership‐based trade surplus is surprisingly small relative to the conventional measure.     

DOES MARKET‐ORIENTED ECONOMIC TRANSITION ENHANCE ENTERPRISE PRODUCTIVITY? EVIDENCE FROM CHINA'S ENTERPRISES

Using a panel of China's enterprises from 1999 to 2007, this paper examined how market‐oriented economic transition affects the productivity of China's enterprises given the various stages of enterprises in the commercialization process and given the market segmentation among Chinese different regions. The main findings are that: (i) enterprises with higher degrees of commercialization have relatively higher productivity, whereas enterprises with higher degrees of market segmentation have relatively lower productivity; (ii) the commercialization process and market segmentation act indirectly affect productivity through enterprises' capacity to export, innovate and obtain business loans; and (iii) the indirect effects are found to be significantly different between the commercialization process and market segmentation, highlighting the effects of the market‐oriented economic transition on enterprises' productivity. This paper provides reliable enterprise‐level evidence regarding the sources and evolution of enterprise productivity during different stages of market‐oriented economic transition in China.     

Who benefits from China’s coal subsidy policies? A computable partial equilibrium analysis

Using a computable partial equilibrium model with monopolistic competition and based on global coal production, trade and consumption data in 2014, this study simulates the economic and welfare impacts of China’s coal subsidies at the industry level. Simulation results show that, first, the government’s subsidies have greatly promoted China's coal output, but may aggravate the overcapacity in China’s coal industry. Second, China's coal subsidies have significant trade destruction effects and its coal imports fall by more than 20% annually. Third, if considering the environmental cost, China's coal subsidies cause not only huge net welfare loss to China, but also harm to the global environment, thus no country benefits from China's coal subsidies.     

Unity versus Collaboration: Construction of China's Belt and Road Free Trade Agreement 2.0 Network

In the context of the United States prioritizing bilateral as well as trilateral trade agreements and China's regional economic integration strategy based on the Belt and Road (B&R) Initiative, the B&R free trade agreement (FTA) and the US–European–Japanese FTA (UEJFTA) have become the two regional economic integration processes with the greatest potential impact on the world economic landscape. The present paper examines the game situation as well as the economic effects of China's B&R‐FTA 2.0 network against the United States' UEJFTA to study the optimization of China's B&R FTA system. By constructing a four‐country extended game model under a two‐part expansion, we find that an increase in members will promote the welfare of each country when there is a single regional trade agreement; the potential member countries tend to choose larger organizations for higher economic benefits when there are several regional trade agreements. Our quantitative simulation shows that promoting the construction of the FTA 2.0 network based on the B&R can significantly alleviate the impact of FTA entered into by the United States with its major trading partners.     

Trade liberalisation,market competition and wage inequality in China's manufacturing sector

Economic reforms of the late 1980s have contributed to rapid economic growth in China. While the overall standard of living has improved, economic growth has also resulted in an increase in income inequality. Rising income inequality can increase social tensions that can impede further economic growth. By making use of firm level panel data, this paper focuses on the impact of increased market competition and trade liberalisation on skilled–unskilled wage inequality in China's manufacturing sector. A theoretical model is used to argue that trade liberalisation and market competition can affect skilled–unskilled wage inequality. Based on this result, an econometric model is specified. The empirical analysis presented in this paper shows that increased trade liberalisation has contributed to an increase in skilled–unskilled wage inequality in China's manufacturing sector. However, increase in market competition has the opposite effect.     

GLOBALIZATION,TRADE, AND WAGES: WHAT DOES HISTORY TELL US ABOUT CHINA?

Newly assembled data show that, as China opened up to global trade during the early 20th century, its exports became more unskilled‐intensive and its imports more skill‐intensive. Difference‐in‐differences estimates show that World War I dramatically increased Chinese exports, raising the relative demand for the unskilled workers producing them. When the war ended, trade costs declined and China's terms of trade increased, further stimulating exports. A simulation of a dynamic general equilibrium model demonstrates that the effects of the war on China's terms of trade produces a decline in the skill premium similar to what China experienced in the 1920s.     

China's Fiscal Decentralization and Regional Economic Growth

The present paper applies Lucas's theory of endogenous growth and Stiglitz's theory of local public goods to build an econometric model consisting of five simultaneous equations to study China's fiscal decentralization effects on regional economic growth. The model is estimated by two‐stage least squares using a set of panel data on 31 Chinese provinces during 1996–2005. The estimated results show that China's fiscal decentralization increased the local governments' expenditure on physical infrastructure and education, which led to the rising local physical capital stock and human capital levels, respectively, and then resulted in the growth of regional economies.     

Labour Unrest in the Global Political Economy: The Case of China's 2010 Strike Wave

This paper argues that whilst the relationship between US consumerism and China's low-wage production has underpinned China's economic growth in recent years, policy-makers are increasingly cognisant of heightened internal and external vulnerabilities, namely increased domestic social unrest and downturns in US demand. Despite calls for increased domestic consumption, opinion remains divided as to the extent to which policy-makers will make a genuine departure with China's export-orientation. This paper argues, however, that the direction of the Chinese political economy will depend much on the transformative role of workers’ struggles. Placed in a broader north-east Asian comparative perspective, we argue that China appears to be on the verge of a transition towards a limited labour supply, as evidenced in increasing labour shortages, rising wages costs and new forms of labour unrest. An in-depth case study of the strike at Nanhai Honda in 2010 suggests that China's migrant workers are beginning to develop a class consciousness and move from reactive to proactive demands. Furthermore, the response of the Chinese state and employers has shifted from one of outright repression to one of accommodation. These trends are likely to be highly significant in terms of China's uneven integration into the global economy.     

The impact of world manufacturing growth on Australia's trading position

Michal Kalecki's pricing analysis is found to provide a fruitful basis for an examination of the impact of world business cycles on Australia's international trade. Australia's terms of trade are found to move procyclically with world manufacturing production as implied by application of the analysis. Implications of the change in the terms of trade for domestic producers and consumers are developed by adapting Kalecki's analysis to an open economy context. Fluctuations in world manufacturing are found to have a negligible impact on Australia's export volume and a strong positive impact on her import volume as expected based on application of the adapted analysis.     

Little Divergence: Evidence from Cotton Textiles in Japan and China 1868–1930

This paper looks at the role of textile exports in Japan and China's economic development in the period of 1868–1930 as a major explanation for the “Little Divergence” between the two countries in the context of the “Great Divergence” between Europe and Asia. Because of textiles' large weighting in proto‐industrialization gross domestic product (GDP), we postulate that China's initial 20‐year lag in textiles vis‐à‐vis Japan turns out to be fatal for its industry and that it eventually ordains totally different development patterns for the textile industry in the two countries, which ultimately led to different growth patterns for the overall economy. Although both countries saw rapid growth of textile exports, the nature of those exports and the entailed position of each country in the industry value chain of trade were quite different. We then use Granger causality tests to show that in one case (Japan) it is in support of the export‐led‐growth hypothesis (ELG) while in another (China) it is not. Our study then also explains why Japan's industrial revolution took place much earlier than China's.     

WTO accession,trade expansion,and air pollution: Evidence from China’s county‐level panel data

This study provides evidence that trade expansion has contributed to the degradation of air pollution in China. On the basis of different responses of counties’ trade to China's World Trade Organization accession at the end of 2001, we exploit air pollution data from NASA to construct a difference‐in‐differences predicted trade as an instrument for our identification. We document statistically significant and robust evidence on trade expansion, which accounts for approximately 60% and 20% for the increase of PM_2.5 and SO₂, respectively, in China. Findings on trade pollution relation are robust to various tests. Deterioration in the environment is mainly driven by scale and trade in polluting sectors.     

Oil shocks,policy uncertainty and stock returns in China

This paper examines the interdependence of China's policy uncertainty, the global oil market and stock market returns in China. A structural VAR model is estimated that shows that a positive shock to economic policy uncertainty in China has a delayed negative effect on global oil production, real oil prices and real stock market returns. Shocks to oil market‐specific demand significantly raise China's economic policy uncertainty and reduce the real stock market returns. As measured by a spillover index, the interdependence between these variables has been rising since 2003 as China's influence in the oil market has increased. An equivalent spillover index calculated for the US is smaller and has been largely flat over time.     

Born like China,growing like China

This paper studies the effects of China's one‐child policy on saving and foreign reserve accumulation. Fertility control increases the saving rate both by altering saving decisions at the household level, and by altering the demographic composition of the population at the aggregate level. I show that demographically induced changes in saving explain the build‐up of a large foreign surplus in China. As in Song, Storesletten, and Zilibtti (2011), the model features contractual and financial market imperfections. Government‐owned firms are less productive but have full access to the credit market. Entrepreneurial firms are more productive but face credit constraints. As labour switches from less productive to more productive firms, demand for domestic bank borrowing decreases. As saving increases while demand for loans decreases, domestic savings are invested abroad, generating a foreign surplus. The model predicts that China's foreign reserve accumulation will soon begin to slow down in response to recent relaxation of the one‐child policy.     

Exchange‐rate Effects on China's Trade*

Though China's share of world trade exceeds that of Japan, little is known about the response of China's trade to changes in exchange rates. The few estimates available have two limitations. First, the data for trade prices are based on proxies for prices from other countries. Secondly, the estimation sample includes the period of China's transformation from a centrally‐planned economy to a more market‐oriented one. We address these limitations with an empirical model explaining the shares of China's exports and imports in world trade in terms of the real effective value of the renminbi. The specifications control for foreign direct investment and for the role of imports of parts to assemble exports. Parameter estimation uses disaggregated monthly trade data and excludes China's decentralization period. We find that a 10 percent real appreciation of the renminbi lowers the share of aggregate Chinese exports by nearly one percentage point. However, the estimated response of imports is negligible and lacks precision.     

出口国技术水平与进口国知识产权保护的互动效应对出口国出口贸易的影响——基于中国出口贸易的实证

利用2007—2014年中国对112个国家出口贸易的面板数据,实证研究了中国技术水平、进口国知识产权保护及两者的交互效应对中国出口贸易的影响。结果显示:中国技术水平与高收入进口国知识产权保护的交互效应对中国出口贸易的影响显著为负,而与低收入进口国知识产权保护的交互效应的影响并不显著。这说明,中国出口产品技术水平的提升,对高收入进口国企业的威胁加大,迫使其建立更严苛的贸易壁垒,抑制中国企业出口。     

Recent developments in China's labor market: Labor shortage,rising wages and their implications

China's abundant supply of cheap labor has played an important role in its remarkable economic and social development. Recently, however, China has experienced a labor shortage and rising wages, implying that the country's long‐lasting competitive advantage based on its “unlimited” labor supply and low costs is vanishing. We find that structural demographic changes, regional economic growth disparities and the household registration system may have caused the labor shortage. Furthermore, China's continued low wages, relatively low labor share of gross national income, declining proportion of household consumption to GDP , and productivity improvements as well as increasing unit labor costs can be used to explain the recent wage increases. The dramatic development of its labor market signals that China is entering a new stage of economic development. The country's prior successful model of economic development needs to be adjusted to adapt to the new situation in its labor market to achieve sustainable economic development.