FDI and Economic Development: Evidence from China’s Regional Growth

Abstract:

Using China’s provincial data for 1978–2011, we examine the channels through which foreign direct investment (FDI) affects China’s regional growth and inequality. We find that FDI facilitates growth by enhancing physical and human capital accumulation. FDI also has a negative effect on output growth by crowding out domestic investment, reducing local government revenue, and increasing the opportunity cost of technology innovations. The imbalance of FDI inflows among regions widens the interregional growth gap through its effect on physical capital accumulation and technology progress while it narrows the growth gap by affecting the level of higher education, industrial structure, government revenue, degree of openness, and trade surplus.     

Asset Pricing and Share Reforms: An Anatomy of China’s Investable Stocks

This paper investigates the impact of China’s 2001–2003 share reforms on its investable stocks’ asset-pricing mechanisms. We show that the reforms have caused the size and dividend effects to attenuate for B shares but not for H/red-chip shares; the book-to-market effect to strengthen for H/red-chip shares but not for B shares; the liquidity effect to lessen more for H/red-chip shares than for B shares; and the earnings-to-price effect to decline for H/red-chip shares but not for B shares. These results have practical implications for investors of China’s investable stocks and for the Chinese companies that issue investable shares.     

The Economic Impact of Korean Reunification on Major Trade Partners: An Empirical Analysis Based on the World Input–Output Tables

Using the 2011 Word Input–Output Database (WIOD), we examine the economic impact of Korean reunification on Japan, China, the United States, and Russia by industry. We conduct a standard Leontief-type analysis with the assumption of supply constraints in the unified Korea. The results of our analysis show that Korea’s major trade partners would experience a substantial increase in GDP and employment through Korea reunification. In particular, we found that China would benefit the most from Korea reunification.     

Regional Transfer of Haze Pollutants Embodied in China’s Foreign Trade and Factors Affecting It: A GMRIO-Based Empirical Analysis

The paper estimated the balance of emissions embodied in bilateral trade and the pollution terms of trade between China and six major world economies, including USA, Japan, and others, from 1995 to 2009, and then discussed the factors affecting them using the Structural Decomposition Analysis method. We find that, with the exception of Taiwan, the balances of the haze pollutants emissions embodied in bilateral trades were negative between China and the each of the rest five, and this was mainly resulted from the China export scale effect and intermediate input structural effects. We also find that China has become the “Pollution Refuge” for the economies like USA and Japan.     

Total Factor Productivity and Energy Intensity: An Empirical Study of China’s Cement Industry

China is the largest cement producer and consumer in the world. The cement industry’s rapid growth has led to a large demand of energy. This study reviews China’s cement industry in terms of energy intensity and examines the effects of technological progress on energy intensity. It also discusses the feasibility of achieving China’s energy reduction targets. We employ the Granger causality test and find that the total factor productivity or technological progress causes the energy intensity of the cement industry. Impulse responses analysis also proves that in the long run the technological change contributes to the decline in energy intensity of cement production.     

The Impact of Oil Price Shocks on the Returns in China’s Stock Market

The main goal of this paper is to study the relationship between oil price shocks and mainland China’s stock market. From empirical study, we have found that the impact of oil price shocks on stock prices in China has been mixed. In contrast to the conventional wisdom that higher oil prices may cause lower stock prices, positive shocks to oil-market-specific demand resulted in both higher real oil prices and higher stock prices, which helps explain the boom of the Chinese stock market as oil prices were increasing in 2007. However, global oil demand and supply shocks had no significant effects.     

Shanxi Merchants’ Multilevel Financial System in Ming and Qing Dynasties,China

In the Ming and Qing Dynasties (1368–1911), China saw rapid development in industrial and commercial sectors. Over this period, a group of merchants originating from the inland province of Shanxi gradually built a multilevel financial system and became leaders in China’s banking sector. The system of financial institutions they established (pawnshops, seal shops, money shops, loan banks, and draft banks) each had a unique business model, with specific target client group and carefully designed risk management. They were also interconnected to allow for flexible capital flows, contributing to the fast economic growth in this period. Nevertheless, the traditional system also had limitations, leading to its replacement by modern banks eventually.     

Chief Financial Officers’ Power,Institutional Environment,and Corporate Effective Tax Rate: Evidence from China

Abstract

In this study, we investigate how chief financial officers’ (CFOs’) power and institutional environment influence corporate effective tax rates (ETRs). Using a sample of Chinese listed firms from 2004 to 2010, we find that firms with expert power or political power CFOs enjoy a low effective tax rate. Furthermore, CFOs’ expert power plays a more important function in reducing ETR in regions with a better institutional environment compared to those with less-developed institutions. CFOs’ political power is the most important factor in reducing ETR in regions with a less developed institutional environment than in those regions with a better institutional environment.     

Does FDI Increase Industrial Energy Consumption of China? Based on the Empirical Analysis of Chinese Provinces Industrial Panel Data

The article builds the simultaneous equations model of the total effect of FDI influencing China’s industrial energy consumption, Chinese provinces industrial panel data as the study sample, uses 2SLS and GMM methods to empirically estimate the equations model, and elastic analysis to calculate the magnitude and direction of the different effects at the path of FDI. The results show that the total effect of FDI influencing China’s industrial energy consumption is negative, the entry of foreign capital increases by 1%, the total effect is to make China’s industrial energy consumption increase by 0.19%, the negative FDI scale effect (0.15%) and FDI composition effect (0.21%) overwhelm the positive FDI technique effect (0.17%).     

Real-Estate Risk Effects on Financial Institutions’ Stock Return Distribution: a Bivariate GARCH Analysis

This paper examines two relationships using the bivariate generalized autoregressive conditionally heteroskedastic (GARCH) methodology. First, the relationship between equity returns of commercial banks, savings and loans (S&Ls) and life insurance companies (LICs), and those of the real-estate investment trusts (REITs), a proxy for the real-estate sector performance. Second, the relationship between conditional volatilities of the stock returns of these financial intermediaries (FIs) and that of REITs. The former relationship allows the spillover of returns between the real-estate and the financial intermediation sector to be analyzed. The latter allows an investigation of the prevalence, direction and strength of inter-sectoral risk transmission to be carried out. Several interesting results are obtained. First, the equity returns of the FIs considered follow a GARCH process and should be modeled accordingly. Second, as found in the literature, returns on REITs should be modeled using the Fama-French multiple factor model. However, this model has to be extended to incorporate a GARCH error structure. Third, all FI returns considered are highly sensitive to REIT returns and the effects are both statistically and economically significant. This is an indication that shocks to REITs returns spillover to the former markets. Fourth, spillover of increased volatility in the real-estate sector to S&Ls and LICs is significant but not to commercial banks.     

Empirical investigation of changes in policy uncertainty on stock returns—Evidence from China’s market

This study finds evidence that a rise in economic policy uncertainty (EPU) leads to a decline in stock returns in Chinese market; however, a positive coefficient was observed in the lagged EPU as stock prices rebound. This phenomenon also holds true for a rise in uncertainty innovations in fiscal policy, monetary policy, trade policy and global policy. The evidence leads to conclude that policy uncertainty premiums should be priced into China’s stock prices. An escalation of U.S. policy uncertainty has a significantly harmful effect on Chinese stocks regardless of whether firms are stated own or listed on U.S. market.     

Income Distribution and Aggregate Saving: Theory and China’s Evidence

Using a parsimonious heterogeneous-agent general equilibrium model, this study reveals a positive causal effect of income inequality on the aggregate saving rate. In the model economy, benevolent individuals save to leave offspring bequests. Since bequests are luxury, the rich have a higher marginal propensity to save. Then, else equal, a fall in income inequality will lower the economy-wide saving rate. The model predicts an augmented aggregate saving function: the aggregate saving rate depends positively not only on the aggregate income level, but also on the dispersion of income. We find some empirical support for this hypothesis using China’s province-level longitudinal data.     

Research on the Transmission of the Influence of the Quantitative Easing Policy on China’s Housing Price Bubble

The Federal Reserve has implemented the second round of quantitative easing monetary policy (QE2) in November 4th 2010, which has dealt a heavy blow upon the liquidity of China.The sudden dollar overhang causes great pressure of RMB appreciation. Based on the analysis of the following chain-reactions, this paper discovers and concludes the potential transmission mechanism of how QE2 influence China’s housing price bubble. At last, related policy recommendations are proposed.     

Green M&A,legitimacy and risk-taking: evidence from China’s heavy polluters

Green merger and acquisition (M&A) activities may improve heavy polluters’ regulatory and organisational legitimacy, allowing greater access to resources and enhancing risk-taking capacity. Adopting a proprietary 2008–2013 dataset, we examine outcomes from green M&A for China’s heavy-polluting firms. We find that heavy polluters’ green M&A is associated with greater risk-taking. Greater access to resources, and reduced financing constraints and tax liabilities suggest improved legitimacy. These effects are positively related to state ownership and government intervention in the M&A process. Our findings support the Porter hypothesis and have policy implications for green management of heavy polluters in emerging markets.     

China’s Antitrust Policy: Recent Developments and Decision Patterns

Abstract:

In this paper, we review recent antitrust policy developments in China. First, we use a sample of all merger cases reviewed by the Ministry of Commerce (MOFCOM) from August 2008 to September 2012 to provide an econometric analysis of merger review patterns. We find that MOFCOM tends to impose restrictions on mergers involving large corporations and does not distinguish between horizontal mergers and vertical and conglomerate mergers. In addition, European firms and U.S. firms face higher chances of restrictions than do firms from other countries. Finally, we provide a qualitative analysis of the investigations against price agreements.     

Determinants of Exports in China’s Meat Industry: A Gravity Model Analysis

ABSTRACT

What are the major determinants of China’s meat exports flows? In addressing this question, we propose a commodity-specific gravity model. This study has employed a unique dataset of 20 years (1997–2016) for China’s pork exports flows to its 31 regular trading partners to estimate the commodity-specific gravity model. The PPML and Heckman selection models are simultaneously estimated to confirm the robustness of the findings. The results reveal that GDP, exchange rate, common language, and country land area are the significant factors affecting the Chinese pork exports flows. Moreover, China’s WTO membership, the ‘Belt & Road’ Initiative, and the common borders have a positive significant impact on its exports of pork.