China＇s Changing Economic Structure and Implications for Regional Patterns of Trade, Production and Integration

I. Introduction There is a strong momentum for regional economic integration within East Asia.1 But few countries in the region harbor any illusion of realizing a region-wide economic union any time soon. A crucial ingredient in any successful East Asia-wide economic integration effort is China. China could be a major catalyst in the integration process if it chooses to.But it would do so only if such a move is in line with the overall objectives of its foreign economic policy. More import…     

Human capital accumulation in emerging Asia, 1970–2030

Emerging Asian economies have made strong progress in improving educational capital in the past 40 years. High educational attainment, especially at the secondary level, has significantly improved emerging Asia's educational achievement. Regressions show that better parental education and income, lower income inequality, declining fertility, and higher public educational expenditures account for higher educational enrollment. But Asia's average years of schooling are forecast to increase to 7.6 years by 2030, from 7.0, significantly slower than the increase of 4.1 years from 1970 to 2010. That would put emerging Asia's educational capital in 2030 at only the 1970 level of the advanced countries, or still 3.5 years behind the level of advanced countries in 2010. For sustained human development, Asian economies must invest in improving educational quality and raising enrollment rates at the secondary and tertiary levels.     

Technology spillovers,absorptive capacity and economic growth

By establishing an endogenous growth model with knowledge-driven R&D, this paper aims to investigate the relationship between international technology spillovers, the host country's absorptive capability and endogenous economic growth. The solution to the competitive equilibrium problem shows that long-run growth arises from improvements in absorptive capability and higher human capital stocks, while the relationships between openness, the technology gap and the steady-state growth rate are uncertain. Econometric estimates of China's economic growth are obtained using province level data covering the period 1996–2002. The estimates indicate that technology spillovers depend on the host country's human capital investment and degree of openness, and that FDI is a more significant spillover channel than imports.     

Human capital quality and the regional economic growth: Evidence from China

China's economic development has advanced from a high-speed to a high-quality growth stage in recent years. The optimization and upgrading of the economic structure require high-quality human capital to support an innovation-driven economy. In this paper, a general equilibrium model of human capital (Xiang & Yeaple, 2018) is applied to estimate the cognitive and non-cognitive productivities based on Chinese provincial-level macro-data and individual labor's micro-data from 2008 to 2017. The weighted power mean of cognitive and non-cognitive productivities helps calculate the provincial-level human capital quality index (HCQI), which provides a realistic estimate of human capital quality. We find that the improvement of the HCQI leads to convergence in economic growth in China's provinces. HCQI can help explain the differences in economic growth levels in different regions of China. Our study provides a constructive step in understanding cognitive and non-cognitive abilities and HCQI in China, which could help guide education investment policy in China and its provinces.     

The Surge of Asian NIC Investment into Indonesia 1

Since 1987 a dramatic increase in both domestic and foreign investment in Indonesia, most of it in export-oriented activities, has occurred in response to improvements in a previously unattractive investment climate and in the country's trade regime. Most striking has been the rise in investment by Asia's four ‘newly-industrialising countries’ (NICs): Korea, Taiwan, Hong Kong and Singapore. This paper analyses the factors contributing to this increase and the investment patterns of the four countries. It then focuses on investment in the manufacturing sector, where most of the NIC investments have taken place. The relative importance of each country as a source of investment in individual sectors and industries is examined. The paper concludes that this recent investment surge may yield net social benefits for Indonesia, provided the country continues to adhere to sound macroeconomic and export-promoting policies.     

Foreign direct investment in China: Policy,recent trend and impact 1

One of the most important elements of China's economic reform has been the promotion of foreign direct investment (FDI) inflow. Government polices on FDI have gone through different stages in their main objectives since the late‐1970s, from gradually opening to foreign investors, to actively encouraging inward investment, directing FDI in accordance with domestic industrial restructuring, and complying with China's World Trade Organization (WTO) obligations. FDI in China has experienced rapid growth especially since the mid‐1990s, as well as structural change. Most of the earlier investments were small scale, labor‐intensive and export‐oriented. In recent years, more investment has been large scale and more capital and technology intensive, aiming at both domestic and export markets. Moreover, increasingly more investment has come from the industrial world, and has located along the eastern coastal regions, in additional to the two southeastern provinces. FDI has played a crucial role in China's rapid growth, economic transition, and, mostly importantly, integration with the world. China's recent accession to the WTO provides more incentives to foreign investors. At the same time, it will also result in more intense competition for domestic firms.     

Asia's contribution to global rebalancing

Developing Asia remains at the core of global payment imbalances. While the geographical concentration of current account imbalances is significant—with the People's Republic of China accounting for the lion's share of the region's current account surplus—how Asia contributes to global rebalancing also depends critically on the newly industrialising economies and larger Association of Southeast Asian Nations economies. Given the region's huge diversity, the necessary national macroeconomic and structural policies will vary significantly across Asia's emerging economies. Whereas near‐term rebalancing efforts will be driven primarily by macroeconomic and exchange rate policies, structural reforms are essential for boosting domestic and regional demand as sources of economic growth over medium to long‐term. We argue that regional rebalancing will depend critically on the adoption of deeper and more comprehensive structural reforms and further trade liberalisation to unlock the potential of strong domestic and regional spending—thus reducing Asia's high dependence on extra‐regional demand. Priority policies should include infrastructure spending, competition, trade, financial development, investment, immigration, and other social policies to reduce national savings.     

How would Capital Account Liberalization Affect China＇s Capital Flows and the Renminbi Real Exchange Rates？

In this paper we study the determinants of gross capital flows, project the size of China's international investment position in 2020, and analyze the implications for the renminbi real exchange rate if China liberalizes the capital account. We assume in this exercise that the renminbi will have largely achieved capital account convertibility by the end of the current decade, a timetable consistent with recent proposals by the People's Bank of China. Our analysis shows that if the capital account were liberalized, China's gross international investment position would grow significantly, and inflows and outflows would become much more balanced. The private sector would turn its net liability position into a balanced position, and the official sector would reduce its net asset position significantly, relative to the country's GDP. Because of the increasing importance of private sector foreign claims and the decreasing importance of official foreign reserves, China would be able to earn higher net investment income from abroad. Overall, China would continue to be a net creditor, with the net foreign asset position as a share of GDP remaining largely stable through this decade. These findings suggest that the renminbi real exchange rate would not be particularly sensitive to capital account liberalization as capital flows are expected to be two‐sided. The renminbi real exchange rate would likely be on a path of moderate appreciation as China is expected to maintain a sizeable growth differential with its trading partners.     

SOUTH AFRICA'S POST‐LIBERALISED CAPITAL FLOWS AND BUSINESS CYCLE FLUCTUATIONS

This study used Christiano and Fitzgerald filtered correlation analysis to investigate the cyclical relationships between South Africa's post‐liberalised capital flows and domestic business cycle fluctuations. The results show that foreign direct investment inflows are counter‐cyclical and proactive, while the “hot” inflows are acyclical. Thus, South Africa's post‐liberalisation “hot” inflows have not been significantly associated with domestic business cycle fluctuations. In contrast, the capital outflows are found to be consistently procyclical and proactive, suggesting that the outflows are more significantly associated with domestic business cycle fluctuations than the capital inflows. In addition, it is found that the cyclical relationships between the capital inflows and the business cycle components of exports, household consumption and gross fixed investment are generally procyclical, except for portfolio inflows, which have a counter‐cyclical relationship with fixed investment. In contrast, the capital outflows are counter‐cyclically associated with exports and household consumption, and procyclically associated with fixed investment.     

Is the Export-led Growth Hypothesis Enough to Account for China＇s Growth？

One of the missing pieces preventing us from understanding recent Chinese economic development is the role played by openness and capital accumulation in this process. The question is whether the sharp economic＇ growth that the Chinese economy has experienced is another case of export-led growth due to the open-door policy or whether, on the contrary, this growth has been caused by high domestic savings and investment rates （and the consequent capital accumulation）. To answer this question, we employed an empirical framework of the cointegrated vector autoregressive model. The empirical results show that both investment （in physieal capital and R＆D） and exports, as well as the exchange rate policy, are relevant factors in explaining China＇s long-run economic growth over the past 4 decades.     

International effects of China's rise and transition: Neoclassical and Keynesian perspectives

Opinion over the global implications of China's rise is divided between critics and proponents. Critics see it as having developed at the expense of both investment and employment in the US, Europe and Japan. Proponents emphasise improvements in the terms of trade and reductions to the cost of financing that stem from China's supply of light manufactures, its demand for Western capital and luxury goods and its high saving. The criticism implies Keynesian assumptions while proponents take a neoclassical perspective. In this paper, both are embodied in a global macro-model that emphasises bilateral linkages via trade and investment, with monetary spill-overs represented by globally integrated bond markets. Net gains are suggested for the US and Europe from China's successful export-oriented growth, though there are partially offsetting Keynesian effects. China's recent slower, more consumption focussed, growth appears also to be beneficial in those regions and in Japan notwithstanding terms of trade losses.     

China's emergence and the reorganisation of trade flows in Asia

The emergence of China has intensified the international segmentation of production processes within Asia, but has not created an autonomous engine for the region's trade, as Asia still depends on outside markets for its final goods exports. The reorganisation of production has weakened the position of the advanced economies in Asia's trade, but up to now has not severely affected the position of the emerging Asian economies. However, the deterioration of China's terms of trade raises the question of the sustainability of its recent growth strategy.     

Ties Binding Asia,Europe and the USA

We investigate changes in Asia's regional and global trade linkages and their influence on macroeconomic relationships among Asia, Europe and the USA. We first document changes in tripartite trade patterns and discuss stylized facts about East Asia's trade structure, with particular focus on the role of China. China plays a critical role in the rapidly expanding intra‐Asian trade as an assembly and production center that supplies final goods for the advanced economies. However, China's trade shares in final goods with East Asia and in parts and components with Europe and the USA are rising, suggesting that the region's production chains are becoming increasingly integrated into the global business network. Empirical results from a panel vector autoregression model generally confirm increasingly mutual macroeconomic interdependence among East Asia, Europe and the USA. The findings suggest a future role for Asia as an important trade partner and balancing power in the world economy.     

China's Overinvestment and International Trade Conflicts

For a long time, China's impressive growth performance has been driven by investment and high productivity gains. Based on a discussion of possible overcapacities and overinvestment in China, this paper investigates the sustainability of China's investment and export‐driven growth model. Since the turn of the millennium, buoyant capital inflows and low interest rates have been at the root of overinvestment and misallocation of capital, which necessitated export subsidies to clear markets. The overinvestment boom is argued to have ended around 2014. Since then, the overcapacities have weakened China's bargaining position in the US–Chinese trade conflict and have tempted Chinese authorities to postpone the restructuring of the Chinese economy by providing low‐interest credit. The gradual reemergence of quasi‐soft budget constraints is seen to undermine China's long‐term growth potential.     

Openness,human capital and total factor productivity: evidence from China

This paper examines the drivers behind China's economic growth. In particular, it focuses on the channels of knowledge spillovers: human capital and openness to trade and foreign direct investment. The specific features of the study include using the most recent comprehensive panel data consisting of 29 provinces during the period 1994–2006 and performing unit root and cointegration tests in the panel data framework. The paper finds that human capital, trade and FDI are the significant determinants of total factor productivity, but their importance varies with technological levels of provinces. These findings have important policy implications.     

Vanishing of China's Twin Surpluses and Its Policy Implications

This paper argues that the twin surpluses in China's balance of payments will disappear in the future as a result of external and internal structural changes. China's current account surplus will diminish as a result of the decline in the goods trade surplus, the expanding service trade deficit and negative investment income. China's capital account might shift from surplus to deficit as a result of shrinking net direct investment inflows and more volatile short‐term capital flows. When the twin surpluses no longer exist, the normalization of the US treasury bond yields will be sped up, terminating the one‐way appreciation of the RMB exchange rate; the People's Bank of China's pressure to sterilize inflows will be alleviated, and new problems for the People's Bank of China's monetary operation will emerge; new financial vulnerabilities for the Chinese economy will arise. Finally, the present paper provides some policy suggestions for the Chinese Government to deal with the declining twin surpluses.     

AN ANALYSIS OF ECONOMIC INFRASTRUCTURE INVESTMENT IN SOUTH AFRICA

This paper analyses long‐term trends in the development of South Africa's economic infrastructure and discusses their relationship with the country's long‐term economic growth. A database covering national accounts data, railways, roads, ports, air travel, phone lines and electricity was established for this purpose, and may facilitate further quantitative research. PSS (Pesaran, Shin and Smith, 1996, 2001) F‐tests are used to identify directions of association between economic infrastructure and economic growth. These indicate long‐run forcing relationships from public‐sector economic infrastructure investment and fixed capital stock to gross domestic product (GDP), from roads to GDP, and from GDP to a range of other types of infrastructure. There is also evidence of potential simultaneity between specific types of infrastructure and GDP. The evidence suggests three main findings. Firstly, the relationship between economic infrastructure and economic growth appears to run in both directions. Inadequate investment in infrastructure could create bottlenecks, and opportunities for promoting economic growth could be missed. Secondly, South Africa's stock of economic infrastructure has developed in phases. Policymakers should focus on choosing or encouraging the right type of infrastructure at the right time. Thirdly, the need for investment in economic infrastructure never goes away. The maintenance and expansion of infrastructure are important dimensions of supporting economic activity in a growing economy, provided that individual projects are chosen on the basis of appropriate cost‐benefit analyses.     

内部控制、法制水平与实体企业金融化——基于2011—2020年沪深A股制造业上市公司经验数据

近年来，随着资本市场的逐步审慎开放，中国金融业得到了快速发展，而实体经济则随着中国经济转向高质量发展阶段而增速放缓，实体企业基于“蓄水池”效应和“投资替代”效应而不断扩大金融投资，使得企业金融化现象成为学术界关注的焦点问题。系统研究内外部治理对实体企业金融化的作用有利于实体企业“脱虚向实”。基于2011—2020年沪深A股制造业上市公司财务数据，将其金融资产占比连续3年及以上增加界定为金融化，从内外部治理视角探究其对实体企业金融化的影响，最终发现，内部控制质量对实体企业金融化有抑制作用，并且法制水平增强了内部控制质量对实体企业金融化的抑制作用。最后提出抑制企业金融化的建议。     

Institutions,Capital, and Growth

The international development community has encouraged investment in physical and human capital as a precursor to economic progress. Recent evidence shows, however, that increases in capital do not always lead to increases in output. We develop a growth model where the allocation and productivity of capital depends on a country's institutions. We find that increases in physical and human capital lead to output growth only in countries with good institutions. In countries with bad institutions, increases in capital lead to negative growth rates because additions to the capital stock tend to be employed in rent‐seeking and other socially unproductive activities.     

Does the productivity J-curve exist in Japan?-Empirical studies based on the multiple q theory

Brynjolfsson, Rock, and Syverson (2021) argued that the standard TFP growth is low during an investment boom for new technology such as the IT revolution. As the new capital is operated and productivity improves, the shape of the movements in the standard productivity growth resembles a J-curve. However, when costs associated with investment for new technology are recognized as intangible investment - which is not counted in the conventional value added –, the revised TFP growth including these unmeasured intangibles show different movements from the standard TFP growth. Following Brynjolfsson, Rock, and Syverson (2021), we examine the gap between the standard TFP growth and the revised TFP growth. According to their theory, unmeasured intangibles are estimated by the gap between the shadow value and the price of investment goods. We obtain this shadow value of investment through an estimated parameter in each asset using listed firm-level data and revise the standard TFP growth rate. In the case of all industries, the standard TFP growth is overestimated in most years in the late 1990s and the 2000s, because the growth in intangible investment associated with measured investment is lower than measured capital accumulation rate. When we focus on the IT-intensive industries, we find the productivity J-curve in the late 1990s, at the early stage of the IT revolution, as indicated by Brynjolfsson, Rock and Syverson (2021).