nep-cna New Economics Papers
on China
Issue of 2006‒10‒14
four papers chosen by
Zheng Fang
Ohio State University

  1. The impact of bank and non-bank financial institutions on local economic growth in China By Cheng,Xiaoqiang; Degryse,Hans
  2. Removing border protection on wheat and rice: effects on rural income and food securities in China By Yinhua Mai
  3. Are Currency Appreciations Contractionary in China� By Jianhuai Shi
  4. Firm ownership and FDI spillovers in China By Galina Hale; Cheryl Long

  1. By: Cheng,Xiaoqiang; Degryse,Hans (Tilburg University, Center for Economic Research)
    Abstract: This paper provides evidence on the relationship between finance and growth in a fast growing country, such as China. Employing data of 27 Chinese provinces over the period 1995-2003, we study whether the financial development of two different types of institutions - banks and non-bank financial institutions - have a (significantly different) impact on local economic growth. Our findings indicate that only banking development shows a statistically significant and economically relevant impact on local economic growth.
    Keywords: growth;financial development;Chinese provinces;banks
    JEL: E44 G21
    Date: 2006
  2. By: Yinhua Mai
    Abstract: In this paper, I use the Monash Multi-Country (MMC) model - a dynamic CGE model of China, Australia and the Rest of the World - to analyse the effects of removing border protection on wheat and rice in China. The analysis points to the possibility that removing border protection on wheat and rice may lead to an increase in rural income in China. This is due mainly to the following two factors. First, while removing border protection on wheat and rice leads to a contraction in agricultural activities, it also leads to an expansion in manufacturing and services activities. Second, on average, rural households in China obtain over half of their income from manufacturing and services activities.
    Keywords: China, Wheat and rice, CGE modelling, rural income
    JEL: C68 F14 Q17
    Date: 2006–05
  3. By: Jianhuai Shi
    Abstract: The Chinese economy has been in a state of external and internal imbalances for some years, which has something to do with the undervaluation of renminbi (RMB). But the Chinese Government hesitates to allow RMB to appreciate because of the worry that RMB appreciations are contractionary thus have negative impact on China's economic growth and employment. The purpose of this paper is to empirically assess the effects of RMB real exchange rate on China's output. The econometric results of the paper show that (1) even after source of spurious correlation is controlled for, RMB appreciation has led to a decline in China’s output, suggesting that RMB appreciations are contractionary, and that (2) once the international finance linkage of Chinese economy is accounted for, the effect of RMB real exchange rate shocks on China’s output and the power of the shocks in explaining the change of China’s output are diminished. The paper gives some possible explanations to those findings, and points out that the findings do not necessarily imply that China should continue maintaining the undervaluation of RMB.
    JEL: F31 F41 O53
    Date: 2006–10
  4. By: Galina Hale; Cheryl Long
    Abstract: Using firm-level data, we find that the presence of foreign firms in China is positively associated with the performance of private firms, but is negatively associated with the performance of state owned enterprises (SOEs). In particular: (1) the presence of foreign direct investment (FDI) is aggravating the differences in the wages and the quality of skilled workers between SOEs and private firms; (2) the total factor productivity (TFP) and market share tend to be lower in the presence of FDI for SOEs, but not for the private firms; (3) FDI presence is positively associated with private firms' sales, especially their sales to foreign firms and foreign consumers, but not with the sales of SOEs. We argue that these differences are due to the fact that private firms have more flexible wage and personnel policies, which allows them to attract talents that facilitate positive FDI spillovers. In addition, we find that regulatory environment has improved for private firms in the cities and industries with high FDI presence.
    Keywords: Investments, Foreign ; China
    Date: 2006

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