Effectiveness and Effects of China＇s Capital Controls

Reductions in barriers to global trade have not been accompanied by a widespread loosening of restrictions on international flows of capital, especially in China. This study shows that China has some of the most restrictive controls and uses them effectively to bias flows of cross-border capital heavily in favor of foreign direct investment (FDI) and limit flows of portfolio and bank assets and liabilities, as well as reducing capital flow volatility. China is now facing pressure to speed up its opening to all forms of cross border capital. But since China is still struggling to strengthen its domestic financial structure, capital account liberalization would expose it to considerable risks and potentially high costs.     

Viability and the Development of China’s Capital Markets

I. Some Facts about Chinas Capital MarketsThe official stock markets of Mainland China were set up in Shanghai and Shenzhen respectivelyin1990 and 1991. The original intent was to improve the reform of Chinas SOEs. Theoretically,it was held that absence of owner is the main problem of SOEs; after being listed, the smallshareholders who buy stocks with their own money will care about the value of their assets, sothey will actively supervise the listed enterprises managers and thus the gov…     

Viability and the Development of China＇s Capital Markets

The paper analyzes the abnormal phenomena in China‘s capital markets and provides a critical review of the existing hypotheses about the phenomena. The paper argues that thelack of “viability” among most of the listed SOEs is the primary cause of the problems in China‘s capital markets. The paper also applies a consistent framework to analyze the relationship among viability, SOEs and the capital markets, and makes some policy proposals for improving China‘s capital markets.     

How to Evaluate and Enhance the Effectiveness of Capital Control in China?

China's accession to the World Trade Organizationwill make it more difficult for the country to re-strict the flow of international capital.However,it doesnot necessarily mean China will lose its effectivenessin maintaining capital control.In this paper,we pro-pose a framework to evaluate the effectiveness ofChina's efforts in that endeavor.     

Comparative Analysis of Capital Productivity in China’s High-Tech Industries

I. IntroductionFrom the perspective of economic theory, it is interesting to study high-tech industrybecause of the importance of technological change for growth performance. In the pastdecades, there have been some significant changes in theorizing economic growth. Thetraditional neoclassical model and its treatment of technological change as exogenoushave gradually given way to more realistic approaches emphasizing innovation, scaleeconomiesand market power. Thischangeofperspectivewas antic…     

China＇s Pension Reform and Capital Market Development

The paper analyzes the interaction between the pension system and capital market development, especially the case of China. A funded pension system is most likely to boost the capital market, but in the absence of a supportive financial infrastructure and effective financial regulation, a funded system will not be successful. China‘s determination to establish a partially funded system is afirst step in the right direction, but without the separation of individual accounts from the social pooling and their replenishment, the working out of the implicit pension debt, and improvements in pension fund management and regulation, the pension system will not be sustainable. The key to capital market development in the process of the pension reform is to enact laws to protect the interests of pensioners, to contract out pension fund management to professional asset managers, and to accelerate the financial opening.     

Employment Effectiveness of China＇s Economic Stimulus Package

Using an input--output method, this paper simulates the impacts of the global financial crisis and the decline of exports on China＇s economy and employment. With shrinking external demand, boosting domestic demand becomes crucial for maintaining economic growth and promoting employment. Our simulated results indicate that an investment scenario with employment as a priority can achieve the objective of employment maximization without significantly reducing growth. Public investment should focus on employment, education, health, housing and social security to rebalance China＇s economy so that it can realize sustained and stable economic growth.     

Effectiveness of China＇s Monetary Policy and Reform of Its Foreign Exchange System

I. Introduction The background of this research is related to continued disputes between China and its trading partners, and to the resulting international pressure on China’s foreign exchange (Forex) system. As the fastest growing economy in the world, China’s foreign trade has expanded at a fantastic pace and its trade surplus with the rest of the world is huge and rising. This remarkable success has encountered increasing criticism, whether correct or not, from the countries that feel t…     

Market Opening and Transformation of China’s Car Industry

I.IntroductionThere are two different points of view on the protection of infant industries in developing countries.One,represented by neo-classicaleconomists,arguesthatgovernmentprotectionwould contributelittleto thegrowthof indigenousenterprises,and maylead to lowefficiencyand waste in resources.Enterprises need to fully realize tradeand investment liberalization(Grossman and Horn,1988;Krueger and Tuncer,1982).Theotherviewpoint,which comesfrom structuralism(or evolutionary economics),ho…     

China’s Corporate Governance and Reforms

I. IntroductionSince 1978, China’s economic reforms have called for an incentive mechanism to beincorporated in the state-owned enterprises (SOEs), while the reforms have demonstratedconsiderable success. In the early 1990s, the Chinese government took further steps andbegan to list SOEs on stock exchanges to raise external capital and improve their efficiency.Corporate governance still remains an important issue in China as shown by the largenumber of corporate failures and scandals in r…     

Comparative Analysis of Capital Productivity in China＇s High-Tech Industries

While labor productivity is a topic of constant debate and has been studied extensively, far less attention has been devoted to the question of capital productivity. Productive use of physical capital is an important source of economic growth and investment return. This paper presents a comparative study of capital productivity in China‘s high-tech industry. Using a version of the perpetual inventory method (PIM), new estimates have been made of the physical capital stock by sector. Capital productivity in China‘s high-tech industry is higher than in total manufacturing, but the gap between them has been shrinking. Comparison with high-tech industries in the US., highlights that China‘s high-tech industries could play a more important role in the growth of manufacturing and the whole economy.     

China’s new lost generation: the casualty of China’s economic transformation

China’s surge into global middle-income status over the space of three decades has been spectacular. However, a potentially large and burdensome cost has been imposed on a generation of adolescents and young adults who abandoned the countryside, and with it access to basic education, in order to seek the anticipated advantages of jobs in the country’s burgeoning urban-industrial sector. This large swath of off-farm migrants transformed China. It propelled China to the status of the ‘world’s factory’ and created the scale and accumulated learning-by-doing enabling China’s transition to a ‘knowledge economy’ that no longer depends on the labor of China’s new ‘Lost Generation.’ As the Lost Generation and its left-behind children, who suffer from a chronic lack of schooling, thicken the lower tail of China’s income distribution, it may be the rising, prosperous urban middle class that ultimately incurs the social, economic, and political challenges associated with China’s generation of off-farm migrant households once essential for launching China’s economic ascent.     

Analysis of China’s Foreign Trade Growth and Discussion of Related Policies

I. Analysis of Factors in the Growth of Import and Export TradeAccording to Customsstatistics,China’s import and export tradereached US$620.8 billionin 2002,growing by 21.8 percent, with imports growing by 21.2 percentand exports by 22.4 percent. Such growth reached as high as 37.1 percent in 2003, with the total volumereachingUS$851.2 billion,withimportsgrowingby39.9percentandexportsby 34.6percent.In the firstthree quartersof 2004, the total value of import and export tradehit US$828.5…     

Fiscal and Welfare Effects of Balanced-budget Reforms of Korea’s National Pension System

This paper evaluates the fiscal sustainability of the benchmark pension system in Korea, which will come into effect in 2028 following the 2007 pension reforms, and the welfare effects of pension reforms aimed at a balanced budget over the life cycle. To this end, we measure the lifetime pension deficit, i.e. the difference between total pension benefits and total pension contributions in an individual’s lifetime. We find that the benchmark pension system is expected to run an average lifetime deficit of 22.36 million won (approximately $22,360), and the current pension fund is unlikely to finance the sum of future deficits. The optimal pension reform for the zero average lifetime deficit reduces social welfare by as much as a 2.06% fall in consumption and is characterised with the contribution rate of 20.3% and an average replacement rate of 66.4%. These values are much higher than the respective benchmark values, 9% and 40%, because the increase in pension benefits, combined with the increase in pension contributions, can reduce the income inequality due to the progressivity of pension benefits and the proportionality of pension contributions.     

Race: China’s Question and Problem

Race poses a challenge to the ruling Communist Party of China. Contemporary news reports about China’s relationship with various African states warn of a reestablishment of 19th century colonial relations, with China standing in the shoes of England or France. When indictments of neo-colonialism are promoted, China recalls a historical brotherhood with African states under the banner of Third World solidarity. This paper attempts to shed light on both sides of this argument, demonstrating that for China, the issue of race in foreign relations poses both a question of motives and a problem of national identity.     

Renminbi internationalisation and China’s financial development

There is a widespread view that China’s currency can be used in international markets only after the liberalisation of China’s domestic financial markets and the opening of its capital account. Yet evidently the renminbi’s internationalisation is preceding these so-called preconditions. This article assesses the tensions inherent in renminbi internationalisation starting at a transitional period in China’s financial development. For now, effective capital controls allow the Chinese authorities to retain regulated deposit and lending rates, quantitative credit guidance and bond market rationing. Relaxation of the capital controls would put these policies at risk. Reserve requirements can be extended to bank inflows from the offshore market but only at a price.     

China’s Growth,Stability, and Use of International Reserves

Since the onset of the global financial crisis, China and the U.S. have reduced their current-account imbalances as a share of GDP to less than half their pre-crisis levels. For China, the reduction in its current-account surplus post-crisis suggests a structural change. Panel regressions for a sample of almost 100 countries over 1983–2013 confirm that the relationship between current-account balances and economic variables changed in important ways after the financial crisis. China’s rebalancing has been accompanied by a decline in its reserves-to-GDP ratio and greater outward FDI that, in turn, has mitigated reserve hoarding.