Putting the Cart before the Horse？ Capital Account Liberalization and Exchange Rate Flexibility in China

I. Introduction and OverviewLike their counterparts in many other emerging market economies, Chinese policymakersare facing a complex set of questions related to the desirability and appropriate mode ofimplementing exchange rate flexibility and capital account liberalization. The Chineseauthorities have stated publicly that both exchange rate flexibility and capital accountconvertibility are their medium-term objectives, but they have resisted recent calls from theinternational community for …     

The U.S. proposed carbon tariffs, WTO scrutiny and China’s responses

With governments from around the world trying to hammer out a post-2012 climate change agreement, no one would disagree that a U.S. commitment to cut greenhouse gas emissions is essential to such a global pact. However, despite U.S. president Obama’s announcement to push for a commitment to cut U.S. greenhouse gas emissions by 17% by 2020, in reality it is questionable whether U.S. Congress will agree to specific emissions cuts, although they are not ambitious at all from the perspectives of both the EU and developing countries, without the imposition of carbon tariffs on Chinese products to the U.S. market, even given China’s own announcement to voluntarily seek to reduce its carbon intensity by 40–45% over the same period. This dilemma is partly attributed to flaws in current international climate negotiations, which have been focused on commitments on the two targeted dates of 2020 and 2050. However, if the international climate change negotiations continue on their current course without extending the commitment period to 2030, which would really open the possibility for the U.S. and China to make the commitments that each wants from the other, the inclusion of border carbon adjustment measures seems essential to secure passage of any U.S. legislation capping its own greenhouse gas emissions. Moreover, the joint WTO-UNEP report indicates that border carbon adjustment measures might be allowed under the existing WTO rules, depending on their specific design features and the specific conditions for implementing them. Against this background, this paper argues that, on the U.S. side, there is a need to minimize the potential conflicts with WTO provisions in designing such border carbon adjustment measures. The U.S. also needs to explore, with its trading partners, ccooperative sectoral approaches to advancing low-carbon technologies and/or concerted mitigation efforts in a given sector at the international level. Moreover, to increase the prospects for a successful WTO defence of the Waxman-Markey type of border adjustment provision, there should be: 1) a period of good faith efforts to reach agreements among the countries concerned before imposing such trade measures; 2) consideration of alternatives to trade provisions that could reasonably be expected to fulfill the same function but are not inconsistent or less inconsistent with the relevant WTO provisions; and 3) trade provisions that should allow importers to submit equivalent emission reduction units that are recognized by international treaties to cover the carbon contents of imported products. Meanwhile, being targeted by such border carbon adjustment measures, China needs to, at the right time, indicate a serious commitment to address climate change issues to challenge the legitimacy of the U.S. imposing carbon tariffs by signaling well ahead that it will take on binding absolute emission caps around the year 2030, and needs the three transitional periods of increasing climate obligations before taking on absolute emissions caps. This paper argues that there is a clear need within a climate regime to define comparable efforts towards climate mitigation and adaptation to discipline the use of unilateral trade measures at the international level. As exemplified by export tariffs that China applied on its own during 2006–08, the paper shows that defining the comparability of climate efforts can be to China’s advantage. Furthermore, given the fact that, in volume terms, energy-intensive manufacturing in China values 7 to 8 times that of India, and thus carbon tariffs have a greater impact on China than on India, the paper questions whether China should hold the same stance on this issue as India as it does now, although the two largest developing countries should continue to take a common position on other key issues in international climate change negotiations.     

U.S.–Japan and U.S.–China trade conflict: Export growth,reciprocity, and the international trading system

First Japan and more recently China have pursued export-oriented growth strategies. While other Asian countries have done likewise, Japan and China are of particular interest because their economies are so large and the size of the associated bilateral trade imbalances with the United States so conspicuous. In this paper we focus on U.S. efforts to restore the reciprocal GATT/WTO market-access bargain in the face of such large imbalances and the significant spillovers to the international trading system. The paper highlights similarities and differences in the two cases. We describe U.S. attempts to reduce the bilateral imbalances through targeted trade policies intended to slow growth of U.S. imports from these countries or increase growth of U.S. exports to them. We then examine how these trade policy responses, as well as U.S. efforts to address what were perceived as underlying causes of the imbalances, influenced the evolution of the international trading system. Finally, we compare the macroeconomic conditions associated with the bilateral trade imbalances and their implications for the conclusions of the two episodes.     

China＇s Exchange Rate and Financial Repression： The Conflicted Emergence of the RMB as an International Currency

Instability in the worm dollar standard, as most recently manifested in the US Federal Reserve＇s near-zero interest rate policy, has caused consternation in emerging markets with naturally higher interest rates. China has been provoked into speeding RMB ＂internationalization ＂; that is, opening up domestic financial markets to reduce its dependence on the US dollar for invoicing trade and making international payments. However, despite rapid percentage growth in offshore financial markets in RMB, the Chinese authorities are essentially trapped into maintaining exchange controls （reinforced by financial repression in domestic interest rates） to avoid an avalanche of foreign capital inflows that would threaten inflation and asset price bubbles by driving nominal interest rates on RMB assets down further. Because a floating （appreciating） exchange rate could attract even more hot money inflows, the People＇s Bank of China should focus on keeping the yuan/dollar rate stable so as to encourage naturally high wage increases to help balance China ＂s international competitiveness. However, further internationalization of the RMB, as with the proposed Shanghai pilot free trade zone, is best deferred until world interest rates rise to more normal levels.     

International spillovers of U.S. monetary uncertainty and equity market volatility to China’s stock markets

Due to the global economy that is currently being increasingly integrated and liberalized, the cross-country transmission of U.S. monetary policy surprises has become a critical issue attracting scholarly attention. This research thus extends the existing literature by assessing the causal linkages among U.S. monetary policy uncertainty (USMPU), equity market volatility, and China’s stock price index over the period from January 1994 to August 2021. We apply Granger causality in quantile analysis to explore the relationships in each quantile of the distribution in a comprehensible manner. The results indicate that equity market volatility and China’s stock price dynamics play little role in affecting USMPU. We also find that only greater changes in both positive monetary policy uncertainty and stock prices lead to changes in equity market volatility. Furthermore, fluctuations in monetary policy uncertainty and equity market volatility in the United States Granger-cause China’s stock prices. Knowing such causality results could prevent market participants from adopting a one-size-fits-all strategy.     

The visible hand: the role of government in China’s long-awaited industrial revolution

China is undergoing its long-awaited industrial revolution. There is no shortage of commentary and opinion on this dramatic period, but few have attempted to provide a coherent, in-depth, political-economic framework that explains the fundamental mechanisms behind China’s rapid industrialization. This article reviews the Embryonic Economic Development theory put forth by Wen (2016a). This article reviews the Embryonic Economic Development theory put forth by Wen . It illuminates the critical sequence of developmental stages since the reforms enacted by Deng Xiaoping in 1978: namely, small-scale commercialized agricultural production, proto-industrialization in the countryside, a formal industrial revolution based on mass production of labor-intensive light consumer goods, a sustainable ‘industrial trinity’ boom in energy/motive power/infrastructure, and a second industrial revolution involving the mass production of heavy industrial goods. This developmental sequence follows essentially the same pattern as Great Britain’s Industrial Revolution, despite sharp differences in political and institutional conditions. One of the key conclusions exemplified by China’s economic rise is that the extent of industrialization is limited by the extent of the market. One of the key strategies behind the creation and nurturing of a continually growing market in China is based on this premise: The free market is a public good that is very costly for nations to create and support. Market creation requires a powerful ‘mercantilist’ state and the correct sequence of developmental stages; China has been successfully accomplishing its industrialization through these stages, backed by measured, targeted reforms and direct participation from its central and local governments.     

China’s macroeconomic trends in downward pressures: the ‘micro stimulus’ effects and steady growth

This study reports China’s macroeconomic trends in downward pressures and discusses the effects of the ‘micro stimulus’ on the growth performance of Chinese economy. It appears that economic growth rebounds significantly in the short term every time ‘micro stimulus’ is applied, but the economy slows down again once the stimulus dwindles. China’s economic growth thus exhibits a pattern of significant ‘stimulus-dependence’. When facing economic downturn, China has only resorted to stimulus policy to sustain growth. Not surprisingly, our findings indicate that ‘micro stimulus’ cannot realize the strategic intent of growth stabilization and structural adjustment, and may even lead to more structural chaos. One problem that can be attributed to the near-sighted strategy is the worsening productivity performance since the financial crisis of 2008. Therefore both improvement in social security systems and social programs designed for maintaining long run growth are needed in order to improve productivity performance on the one hand and to facilitate structural adjustments on the other.     

Language,knowledge transfer and firm’s strategic assets: the strategic role of language in knowledge transfer to China

This article is intended to examine the exact role of language in intra-firm cross-country knowledge transfer from the perspective of developing firm’s strategic assets. We find that inadequate language ability can lead to communication failures and cultural misunderstanding, and has the potential to destroy the process of knowledge transfer. Hence, language is not an operational issue but of strategic importance to the transfer of knowledge within multinational enterprises. As language ability is uniquely related to the specific technical, managerial and cultural aspects of a firm, hard to substitute and imitate, it should be regarded as one of the firm’s strategic assets and be dealt at strategic level.     

The role of U.S. naval power in the Asia‐pacific region: From regional protector to regional balancer

For more than four decades, U.S. engagement in the Asia‐Pacific was centered on two premises: a Cold War commitment to Asian security and the remarkable economic power of the U.S. The U.S. Navy provided a symbol of the United States’ commitment to protect its interests and those of its major Asian‐pacific allies. Despite the end of the Cold War, the security environment of the Asia‐Pacific region is still less changed and even a new threat of a regional naval arms race emerged in the 1990s. In this context, although forward deployments of U.S. military power in the Western Pacific have been scaled down, it is certain that the U.S. naval force will continue to play an important role as a key “regional balancer.” Amid the collapse of the Soviet Union and in the post‐Cold War era, the U.S. has still emphasized the maintenance of a U.S. forward‐deployed presence and strong defense alliances with U.S. allies in order to prevent the emergence of regional hegemonic powers and to contribute to regional stability as well as improve U.S. economic interests. Moreover, in the face of a multitude of threats from state and non‐state actors, the U.S. Navy is increasingly focused on and driven by the demands of peacetime and crisis forward presence.     

Yeats’s Historical Prophecy in His Two Poems——On “The Second Coming” and “Leda and the Swan”

As one of the greatest poets of the 20th century,William Butler Yeats wrote many brilliant poems in his life and he spent years crafting an elaborate,mystical theory of the uni-verse and created great works on human history and philosophy. The most typical ones to elaborate on such theory are "The Second Coming " and " Leda and the Swan ",both of which are related to the historical prophecy and reflect Yeats’s idea about history.     

Monetary Policy in Austria–Hungary, 1876–1913: An Econometric Analysis of the Determinants of the Central Bank’s Discount Rate and the Liquidity Ratio

This paper presents a model to explain the official discount rate of the Central Bank of Austria–Hungary from 1876 to 1913. The discount rate is assumed to depend on the liquidity ratio of the Bank, defined as the ratio of its stock of metals to banknotes issued, and on changes in foreign discount rates. The paper also presents an equation explaining the liquidity ratio. We use “not equally spaced chronologically ordered data” referring to the 50 discount rate changes enacted. The regressions confirm that the liquidity ratio was the main determinant of the discount rate and that Germany (and not Great Britain) played a significant role in determining the Austro–Hungarian discount rate and the liquidity ratios, supporting the view that the classical gold standard was a decentralized multipolar system rather than a system fully dominated by London as suggested by Keynes. The regressions also suggest that, although Austria–Hungary had an inconvertible paper currency (1879–1892) and fluctuating exchange rates (1876–1895) and formally joined the gold standard only in 1902, it “shadowed” the behaviour of gold standard Central Banks with such consistency that the stability of the estimated regressions was relatively unaffected by the frequent institutional changes.

Resource conflict in Kenya’s titanium mining industry: Ethno-ecology and the redefinition of ownership,control, and compensation

The literature on community-mining enterprise conflict is currently dominated by discourses on equity, compensation, land ownership, and environmental degradation. While much debate has dwelled on whether mining is a curse or a blessing, little attention has been given to highlight the meanings that communities attach to the assets being fought over, and the need therefore to review existing laws on mining, and practices to reflect these realities.

The displacement of over 3000 residents in Kwale, Kenya to make way for the mining of titanium has raised serious concerns over indigenous resource ownership and control in Kenya’s mining industry, calling for a fresh look at the Kenyan mining law. Using an ethno-ecological approach, this article explains how a community’s loss of land assets can induce a sense of vulnerability which can prefigure conflict. The conflict demonstrates the need for a more sensitive approach to community resource ownership and indigenous mineral control.     

The rise of the middle class: the income gap between salaried employees and workers in Sweden,ca. 1830–1940

ABSTRACT

We present the first comprehensive, long run salary information on Swedish middle-class employees before the twentieth century. Our data include, for instance, school teachers, professors, clerks, policemen and janitors in Stockholm and Sweden, ca. 1830–1940. We use the new data to compare the annual earnings of these middle-class employees with the annual earnings of farm workers, unskilled construction workers and manufacturing workers. The results show that the income gap between the middle class and the working class widen drastically from the mid-nineteenth century to a historically high level during the 1880s and 1890s. The differentials then decreased during the first four decades of the twentieth century. The bulging earnings advantage of middle-class employees vis-à-vis unskilled workers chimes with Kocka’s depiction of the latter half of the nineteenth century as the era of the bourgeoisie.     

The quest for publicness: political conflict about the organisation of tramways and telecommunication in Sweden,c. 1900–1920

This article explores political conflicts about the organisation of public services in Sweden c. 1900–1920. The authors argue that political decisions play a vital role in shaping the political economy of public services. The case studies analysed are the political debates about the communalisation of the tramway system in Stockholm, and the nationalisation of Sweden’s last private telephone company. In both cases, the transfer of the service to public organisation was a lengthy process, ending in the late 1910s. This is explained using the concept of publicness. Drawing on three discursive chains, the argument is that the political development was affected by the politicians conception of the political community, the form of organisation and by perceptions of values such as equal access and modernity. In the case of the tramways, public organisation was seen as the best option to defend the public against corruption and self-interest. In the case of the telephones, free market competition was seen as a guarantee for an efficient and cost-effective service. The reason for this difference, is argued, was that the debate on the tramways articulated a clearer notion of publicness, where equal access and public opinion carried larger weight.