Transformation of China's energy sector: trends and challenges

The conclusions presented here sum up the contributions in the Special Issue regarding the managing of China's energy sector, particularly regarding the demand and profile of energy as well as the marketization of the sector. Strategic, organizational and policy issues relevant to the main theme are set out. Both demand and supply scenarios for the nation's energy are seen as in flux, as the economy slackens and dependence on imports rises. Unprecedented levels of urban environmental pollution and steady growth of energy consumption in the wake of a rising living standard have brought the issue to headline-prominence as never before. China's rapidly increasing renewable energy will not change its heavy reliance on coal and a lesser extent oil in the coming decade. After decades of transformation, China's energy sector now operates in a domestic market characterized by strong governmental influence and monopolistic state firms. Abroad, China's firms are exposed to heavier market pressure and competition. While the state's policies have succeeded in ensuring energy supplies and propelling China's renewable energy manufacturers into global prominence and opening up domestic market, much room for improvement exists in the competitiveness of the domestic market and domestic energy firms, transparency of pricing and the effectiveness of regulation.     

China's exports,export tax rebates and exchange rate policy

This paper examines the relationship between China's exports, export tax rebates and exchange rate policy. It offers an explanation for why China's exports continued to rise under RMB real appreciations during the Asian financial crisis. Based on a traditional export demand model, we test our hypothesis that the counteracting effects of China's export tax rebate policy have diminished the effectiveness of real exchange rates in facilitating the resolution of trade imbalances under the current pegged exchange rate regime. We find evidence that RMB real appreciations during the crisis negatively affected China's exports, but the negative effects were mitigated by the positive effects of export tax rebates. We also find evidence of a long‐run relationship between China's exports and the other explanatory variables. The empirical evidence suggests that under the pegged exchange rate regime with limited adjustments, real exchange rate movements alone cannot resolve China's external imbalances. The policy implication of this study is that China needs to redirect its decades‐long export‐oriented development strategy to one that emphasises domestic demand‐oriented development and to replace the current pegged exchange rate regime with a market‐oriented more flexible exchange rate regime.     

China's National Champions: The Evolution of a National Industrial Policy—Or a New Era of Economic Protectionism?

In this article we ask a series of related research questions concerning China's recent industrial policies, particularly the 10th and 11th five‐year economic policy plans. Our questions go to the nature of China's long‐term competitiveness of its national champions, and to what extent Chinese government policies are evolving to domestic protectionism that adversely affects foreign invested enterprises' (FIEs) competitive position in the Chinese economy. We thus evaluate the nature of the five‐year economic policy plans, their adverse impact on FIEs operating in China, and the rise of designated Chinese national champions (in the 11th five‐year economic policy plan) to compete with major FIEs on a global scale. However, we suggest that the role of the Chinese government's recent industrial policy, when compared to Michael Porter's “Diamond of National Competitive Advantage” recommended government policy approaches, may not augur well in the long‐term for China's national champions. © 2013 Wiley Periodicals, Inc.     

An empirical study about the impacts of China's accession to the WTO on the telecommunications industry in China

Post‐China's accession to the World Trade Organization (WTO), China's telecommunication industry now needs to face a much stronger competition in a relatively open market that has a number of diverse rivalries. There are specific benefits and risks associated with both domestic telecommunication (telecom) companies and foreign investors in the telecommunication or information technology area. To meet with these new challenges and take advantage of the competitive, strategic advantages to penetrate the market, both China's telecom industry and foreign investors must understand the impacts of China's accession to the WTO on its telecommunication industry and hence make the necessary adjustments and/or implementation improvements. In specific, we carefully examine the impacts such as prices, quality, and local protectionism in this article. We draw the findings based on the data collected from a survey and the resulting statistic analysis.     

Globalization of R&D and China: An Introduction

In this introduction, we discuss the recent changes in multinational corporations' (MNCs) research and development (R&D) strategies and China's rising role in this new development. Significant changes include: 1) More and more corporations have started overseas R & D operations; 2) the missions of many overseas R&D facilities have shifted from the traditional supplementing and supporting roles to become critical and strategic components of MNCs' global R&D networks; and 3) MNC overseas R&D operations have expanded their geographic reach to carefully selected developing countries. China has benefited from such changes and has become one major attraction for such R&D facilities due to its rich endowment of low-cost and well- trained scientists and engineers as well as its fast growing domestic market and burgeoning foreign investment in manufacturing. The explosion of foreign R&D investment has also been accompanied by the rapid growth of China's domestic investment in R&D. The growth in both domestic and foreign investment in R&D implies that China will improve its position in global economic and technological competition. However, it is unclear to the rest of the world about the implications of China's rising R&D and whether or not China can capture the value from the presence of foreign R&D centres. We conclude that issues related to China's science and technology development in general and foreign R&D in China in particular warrant more research in the future.     

Understanding the role of China's domestic market in the (unequal) growth of world economy

This study investigates the rising role of China's domestic market expansion from 1995 to 2011 in the world economy's growth. China maintained high domestic expenditure growth during the entire period, with even bigger increases in the last years, when the global financial crisis and subsequent economic recovery occurred. The expenditures facilitated rapid growth through high demand for durable goods, which are produced across widely fragmented Asian channels. At the same time, China integrated further into the global economy and imported intermediate goods increasingly became embedded in goods for domestic sale. These two forces combined to magnify the impact of China's market expansion on foreign economies but disproportionately more on its neighbouring countries and sectors related to durable goods production. Specifically, our estimates suggest that the expenditure growth in China over the 2009–11 period added about 1 percentage point to the annual GDP growth rate in Taiwan, Malaysia and Korea, while the NAFTA and EU member countries typically benefited by less than 0.1 percentage point.     

Concerns About Advertising Practices in a Developing Country: An Examination of China's New Advertising Regulations

This article examines China's 1993 Interim Regulations on the Advertising Agency System and Interim Advertising Censorship Standards as reflections of a developing country's concerns over advertising practices. Four issues facing a developing country such as China are identified: (1) The influence of foreign advertising practices on the domestic advertising industry; (2) the urge to speed up the learning process of advertising skills and know-how; (3) the threat of advertising to the indigenous culture; and (4) the government's authoritarian role in maintaining order. The new regulations are conceived as the Chinese government's remedies to these issues. The article concludes with a discussion on the enforcement problems and consequences of the regulations on China's advertising industry.     

Globalisation and Industrial Policy: The Case of China

After a quarter of a century of industrial policy, China's objective of nurturing a group of globally competitive state‐owned enterprises appears to have succeeded beyond most expectations. However, China's SOEs are far from catching up with the world's leading firms. Protection through state ownership in a massive, fast‐growing economy has permitted China's SOEs to earn large profits and achieve high market capitalisations, but this is not the same thing as building globally competitive firms. The fact that China's industrial policy has been unsuccessful after a quarter of a century of intense effort demonstrates how difficult it is to construct an industrial policy in the era of capitalist globalisation, which has produced intense global industrial concentration across large parts of the global value chain. Although the detailed content of the next stage of reform of China's large state‐owned enterprises is unclear, China's determination to build a group of globally competitive large companies remains undimmed.     

The Business(es) of the Chinese State

The state industrial sector is the Achilles heel of China's otherwise remarkable economic performance over the past two decades. Most other countries in transition from socialism have transformed SOEs into commercial entities through systematic, market‐driven restructuring and privatisation to become more efficient and competitive. In China, a series of innovative, if often administrative, insitutional reforms since 1978 have begun to achieve the Chinese authorities' goal of ‘separating governemtn from business.’ But the Chinese State still maintains ownership of key enterprises, and government agencies carry out shareholder functions typically performed by private owners in a market economy. Although privatisation and restructuring of SOEs is occurring, it mostly pertains to small and medium sized firms. For the principal businesses, by contrast, the creation of large state enterprise groups and holding companies (and experiments in other forms of ‘state asset management’) have become the main form of restructuring. Today, China's SOEs still account for more than one‐quarter of national production, two‐thirds of total assets, more than half of urban employment and almost three‐quarters of investment. While direct budgetary subsidies have declined, explicit and implicit subsidies are still making their way to prop up loss‐making SOEs through the financial system and other routes. At the same time, SOEs are still producing non‐marketable products, resulting in a sizeable inventory overhang. These inefficiencies and distortions represent a drain on the country's resources and thus present a challenge to the Chinese leadership for reform. This paper sheds light on these challenges by analysing the incentives and constraints on China's SOE reform programme. Four critical aspects of the reforms are highlighted and evaluated against the backdrop of international experience: clarification of property rights; establishment of large group/holding companies and other new organisational structures; improved corporate governance incentives; and implementation of international financial accounting and auditing practices. The paper concludes with policy recommendations.     

Can a Fast-Expanding Market Sustain with Supply-Side Government Aid? An Investigation into the Chinese Solar Photovoltaics Industry

The solar photovoltaics (PV) industry is a policy-driven business, in that political decisions considerably influence potential market takeoff or decline. This is particularly true for China. Between 2006 and 2010, the annual growth rate of solar panel output approached or exceeded 100%, with suppliers receiving financial aid from the government. Despite the prevalence of supply-side aid, its actual impact on the development of this fast-expanding market is debatable. We focus on 249 observations of 75 solar PV companies from 2005 to 2012, and investigate how government aid received in the form of bank loans and direct subsidies by these companies influenced their performance. Our empirical results show that supply-side government aid in China helps improve scale efficiency to a certain extent, but has a limited impact on technology efficiency. We find that supply-side aid leads to diseconomies of scale in the long run and, thus, to low efficiency and profitability. © 2015 Wiley Periodicals, Inc.     

WTO subsidy rules and tariff liberalization: evidence from accession of China

Countries increasingly rely on subsidies to assist their producers leading to concerns about their potential misuse. The WTO regulates its members’ subsidies by defining subsidies that are permissible, as well as by providing means to retaliate against subsidies of partner countries if these subsidies hurt one's interest. However, these subsidy rules might have an unintended effect. As both subsidies and tariffs are substitute instruments of protection, tighter subsidy rules might lead to a decrease in the pace of tariff liberalization. In this paper, we present first empirical evidence in support of this prediction. Using China's accession to the WTO in 2001 as a case study, we show that China's accession to the WTO was associated with a relative increase in its tariffs for products that faced a higher threat of retaliation against subsidies. More importantly, we also show that increases in tariff were larger in products with higher potential costs imposed by retaliation. Finally, we include several robustness tests as well as conduct two counterfactual exercises to verify that the results we obtain are indeed due to perceived threat of retaliation against subsidies.     

Galloping,creeping, or receding internationalization

Using a simple two-period linear durability choice trade model, we examine strategic trade policy in terms of taxes or subsidies levied on duopolistic firms in sales markets. In contrast to earlier parametric durability studies we show that the optimal export policy is not necessarily a tax when product durability is endogenously determined. Our analysis indicates that with endogenous adjustment of durability either a tax, subsidy, or laissez-faire policy (zero subsidy) may be optimal. In addition, we find that any trade policy (tax or subsidy) has the unforeseen effect of changing the firms' product durability. For example, future expected subsidies tend to decrease the domestic firm's product durability while increasing the foreign firm's chosen durability.     

Privatization in the Czech Republic

Inexorably, privatization is rolling through Central and Eastern Europe, generally following two paths: a slow, deliberate pace or a rapid transformation. Each method has its advantages and advocates. But one nation, the Czech Republic, has taken a modified path that combines both approaches. Sacks examines the Czech privatization process through the government's policy goals, its successes, and the problems it has encountered in its privatization push.     

我国专业化创业服务体系的研究与思考

创新驱动正成为我国经济高质量发展的关键，创业服务平台作为我国中小微企业创新创业的重要载体，服务模式和服务质量对助力创新经济具有重要意义。通过梳理国内众创空间、大学科技园、科技企业孵化器等多层面的创业服务平台运营现状，分析创业服务体系对科技创新和产业发展的显著作用，提出专业化服务能力建设对于推动战略性新兴产业的快速发展，支撑我国产业创新发展和“双创”升级具有重要价值并提出相应的推进策略。     

The Rise of China and East Asian Export Performance: Is the Crowding‐Out Fear Warranted?

This paper examines how China's emergence as a major trading nation is affecting export performance of its East Asian neighbours. Following a stage‐setting overview of trends and patterns of China's export performance, it probes China competition in third country markets and emerging patterns of imports. The East Asian export experience is examined in a wider global context against the backdrop of the ongoing process of global production sharing. The findings indicate that the ‘China threat’ has been vastly exaggerated in the contemporary policy debate. China's rapid market penetration in traditional labour‐intensive manufactured goods has occurred mostly at the expense of the high‐wage East Asian countries, without crowding‐out the export opportunities of low‐wage countries in the region. More importantly, China's rapid integration into global production networks as a major assembly centre has created new opportunities for the other East Asian countries to engage in various segments of the value chain in line with their comparative advantage.     

Rapid rise of China's semiconductor industry: What are the implications for Singapore?

Lately, there has been a rush of foreign investment commitments in China's semiconductor industry, giving rise to predictions of a semiconductor revolution in the world's most populous country. Pull factors include China's entry into the World Trade Organization (WTO), which would clarify trading and investment rules, government incentives, and, of course, burgeoning domestic demand. For the moment, because of U.S. export restrictions, China's chip industry will be kept behind the technology curve by around five years. However, its ample supply of engineers and low labor costs will aid in the development of the assembly & test and design sectors, which are labor‐intensive. But given strong government commitment, the industry is likely to continue to progress upward, gaining from the diffusion of high‐tech know‐how through its alliances with multinational corporations and tier‐one foundries. In the industry's value chain, there is potential for Taiwan and China to complement each other in both domestic and global markets, across both high‐ and low‐end technology segments, and across the entire chain of activities. To meet the challenges, Singapore needs to further leverage on its competencies in infrastructure and logistics, as well as the well‐established ASEAN production network for greater economies of scale. For Singapore's semiconductor industry to remain competitive, there is a need to strengthen the full value chain, from integrated circuit (IC) design to wafer fabrication to packaging & test, by attracting and building up companies specializing in different competencies. Singapore semiconductor manufacturers should continuously strive to stay at the technology forefront and provide competitive customer services. © 2004 Wiley Periodicals, Inc.     

Distributive Policies and Economic Growth: An Optimal Taxation Approach

In an infinite‐horizon endogenous growth model a capital income cum investment subsidy tax is considered to investigate if distribution of income towards the non‐accumulated factor of production (labour) retards growth and if capital income taxes are bad instruments to finance investment subsidies. The paper identifies conditions under which the tax scheme is better for growth than other distorting tax schemes. In the model a pro‐labour government acts growth maximizing and distributing income towards labour raises growth. A pro‐capital government's preferred policy is not growth maximizing under the tax scheme, but may generate higher growth than its optimal policy under other tax schemes.     

Globalization and Hong Kong's labour market: the deregulation paradox

The globalization of business has affected Hong Kong, giving rise to important changes in its labour market and with impacts on workers and labour organizations. This has been felt in the migration of manufacturing plants to China in combination with labour market deregulation via the government's guest worker policy. We examine the institutional implications of liberalizing the previous ban on the admission of guest workers. While this seeming reversal was tantamount to deregulation, it also produced regulation via a new body of norms and rules governing guest labour which were, paradoxically, restrictive and disabling for the affected parties.     

Learning to export from neighbors

This paper studies how learning from neighboring firms affects new exporters' performance. We develop a statistical decision model in which a firm updates its prior belief about demand in a foreign market based on several factors, including the number of neighbors currently selling there, the level and heterogeneity of their export sales, and the firm's own prior knowledge about the market. A positive signal about demand inferred from neighbors' export performance raises the firm's probability of entry and initial sales in the market but, conditional on survival, lowers its post-entry growth. These learning effects are stronger when there are more neighbors to learn from or when the firm is less familiar with the market. We find supporting evidence for the main predictions of the model from transaction-level data for all Chinese exporters over the 2000-2006 period. Our findings are robust to controlling for firms' supply shocks, countries' demand shocks, and city-country fixed effects.     

Managing China's energy sector: between the market and the state

As China has now become the largest energy consumer in the world, its energy sector has understandably huge domestic and global implications. In this Special Issue, which is an interdisciplinary one, comprising a set of eight in-depth empirical studies by leading international experts in the field, we set out to examine the management of the transformation of China's conventional and renewable energy sectors, with special attention to state–business relations and their link to the market.