nep-cna New Economics Papers
on China
Issue of 2007‒04‒28
nine papers chosen by
Zheng Fang
Ohio State University

  1. Foreign Investment in Chinese Joint Stock Banks: 1996-2006 By Abotsi, Kodjo
  2. Does " good government " draw foreign capital ? Explaining China ' s exceptional foreign direct investment inflow By Yeung, Bernard; Lixin Colin Xu; Morck, Randall; Fan, Joseph P. H.
  3. Energy and emissions : local and global effects of the rise of China and India By Shalizi, Zmarak
  4. Formal finance and trade credit during China ' s transition By Tian Zhu; Lixin Colin Xu; Cull, Robert
  5. Assessing China’s Exchange Rate Regime By Frankel, Jeffrey A; Wei, Shang-Jin
  6. R&D and Export Intensities in Automotive Parts Firms in China, Malaysia, Philippines and Taiwan: Does Ownership Matter? By Rajah RASIAH
  7. Flying geese or sitting ducks: China’s impact on the trading fortunes of other Asian economies By Alan G. Ahearne; John G. Fernald; Prakash Loungani; John W. Schindler
  8. Absolute poverty measures for the developing world, 1981-2004 By Ravallion, Martin; Chen, Shaohua
  9. Local elections and consumption insurance : evidence from Chinese villages By Yang Yao; Lixin Colin Xu; Li Gan

  1. By: Abotsi, Kodjo
    Abstract: This article reviews the foreign investment in China joint stock banks and analyze the motivations behind these investments. We will start by reviewing the comparative advantage of local joint stock banks as foreign investment recipients, as compared to larger state-owned commercial banks or smaller cities banks; we will then study the effects on efficiency and overall performance of minority foreign investment in joint stock banks in China. Finally, we will try to identify the opportunities that will beneficiate joint stock banks in China after liberalization in 2007, and how foreign banks can make the most of it.
    Keywords: china banking; china finance; investment in china; foreign banks in china; joint stock banks in china
    JEL: G0 F3
    Date: 2007–03
  2. By: Yeung, Bernard; Lixin Colin Xu; Morck, Randall; Fan, Joseph P. H.
    Abstract: China is now the world ' s largest destination of foreign direct investment (FDI), despite assessments highlighting its institutional deficiencies. But this FDI inflow corresponds closely to predicted FDI flows into China from a model that predicts FDI inflow based on government quality indicators and controls and is estimated across a sample of other weak-institution countr ies. The only real discrepancy is that, if government quality is measured by constraints on executive power, China receives somewhat more FDI than the model predicts. This might reflect an underestimation of the strength of these constraints in China, a unique institutional setting for FDI operations, FDI based on expected future institutional improvements, or a unique Chinese model of development. The authors conclude that Ockham ' s razor disfavors the last. They also note that FDI may be elevated because Chinese institutions protect foreign firms better than domestic ones.
    Keywords: Foreign Direct Investment,Economic Theory & Research,Legal Products,Investment and Investment Climate,Parliamentary Government
    Date: 2007–04–01
  3. By: Shalizi, Zmarak
    Abstract: Part 1 of the paper reviews recent trends in fossil fuel use and associated externalities. It also argues that the recent run-up in international oil prices reflects growing concerns about supply constraints associated with declining spare capacity in OPEC, refining bottlenecks, and geopoli tical uncertainties rather than growing incremental use of oil by China and India. Part 2 compares two business as usual scenarios with a set of alternate scenarios based on policy interventions on the demand for or supply of energy and different assumptions about rigidities in domestic and international energy markets. The results suggest that energy externalities are likely to worsen significantly if there is no shift in China ' s and India ' s energy strategies. High energy demand from China and India could constrain some developing countries ' growth through higher prices on international energy markets, but for others the " growth retarding " effects of higher energy prices are partially or fully offset by the " growth stimulating " effects of the larger markets in China and India. Given that there are many inefficiencies in the energy system in both China and India, there is an opportunity to reduce energy growth without adversely affecting GDP growth. The cost of a decarbonizing energy strategy will be higher for China and India than a fossil fuel-based strategy, but the net present value of delaying the shift will be higher than acting now. The less fossil fuel dependent alternative strategies provide additional dividends in terms of energy security.
    Keywords: Energy Production and Transportation,Environment and Energy Efficiency,Energy and Environment,Energy Demand,Transport Economics Policy & Planning
    Date: 2007–04–01
  4. By: Tian Zhu; Lixin Colin Xu; Cull, Robert
    Abstract: Using a large panel dataset of Chinese industrial firms, the authors examine the determinants of access to loans from formal financial intermediaries and extension of trade credit. Poorly performing state-owned enterprises were more likely to redistribute credit to firms with less privileged access to loans through trade credit, a pattern consistent with some of the extension of trade credit being involuntary. By contrast, profitable private domestic firms were more likely to extend trade credit than unprofitable ones. Trade credit likely provided a substitute for loans for these private firms ' customers that were shut out of formal credit markets. As biases in lending became less severe, the amount of trade credit extended by private firms declined.
    Keywords: Investment and Investment Climate,Economic Theory & Research,Banks & Banking Reform,Financial Crisis Management & Restructuring,Financial Intermediation
    Date: 2007–04–01
  5. By: Frankel, Jeffrey A; Wei, Shang-Jin
    Abstract: This paper examines two related issues: (a) the implicit methodology used by the U.S. Treasury in determining whether China and its other trading partners manipulate their exchange rates, and (b) the nature of the Chinese exchange rate regime since July 2005. On the first issue, we investigate the roles of both economic variables consistent with the IMF definition of manipulation - the partners' overall current account/GDP, its reserve changes, and the real overvaluation of its currency - and variables suggestive of American domestic political considerations -- the bilateral trade balance, US unemployment, and an election year dummy. The econometric results suggest that the Treasury verdicts are driven heavily by the US bilateral deficit, though other variables also turn out to be quite important. On the issue of China's de facto exchange rate regime, we apply the technique introduced by Frankel and Wei (1994) to estimate implicit basket weights and add several refinements. Within 2005, the de facto regime remained a peg to the dollar. However, there was a modest but steady increase in flexibility subsequently. We test whether US pressure has promoted RMB flexibility. We also test whether the recent appreciation against the dollar is due to a trend appreciation against the reference basket or a declining weight on the dollar in the reference basket, and argue that they have different policy implications.
    Keywords: Chinese economy; implicit currency weights; renminbi
    JEL: F3 F5 O1
    Date: 2007–04
  6. By: Rajah RASIAH
    Abstract: This paper seeks to examine the importance of ownership in R&D intensities and export ownership in the automotive parts firms in China, Indonesia, Malaysia, Philippines and Taiwan. Consistent with the portfolio and ownership, location and internationalization theories of foreign direct investment about asset specific advantages, the pooled regressions show higher R&D intensities in local firms than in foreign firms. Export-orientation was only highly correlated with R&D intensities in the local samples. The results also show foreign ownership to be highly correlated with export-orientation in the pooled regressions but not in the individual country regressions.
    Date: 2007–04
  7. By: Alan G. Ahearne; John G. Fernald; Prakash Loungani; John W. Schindler
    Abstract: This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange rates matter for export performance, the income growth of trading partners matters far more. This suggests the potential for exports of all Asian economies to grow in harmony as long as global growth is strong. We also examine changes in export shares of Asian economies to the U.S. market and find evidence that dramatic changes in shares are taking place. Many of these changes are consistent with a 'flying geese' pattern in which China moves into the product space vacated by the Asian NIEs or with greater integration of trade across Asia in the production of final goods. Nevertheless, China’s dramatic gains in recent years do increase the pressure on Asian economies, particularly in ASEAN and South Asia, to seek areas of comparative advantage.
    Date: 2006
  8. By: Ravallion, Martin; Chen, Shaohua
    Abstract: The authors report new estimates of measures of absolute poverty for the developing world over 1981-2004. A clear trend decline in the percentage of people who are absolutely poor is evident, although with uneven progress across regions. They find more mixed success in reducing the total number of poor. Indeed, the developing world outside China has seen little or no sustained progress in reducing the number of poor, with rising poverty counts in some regions, notably Sub-Saharan Africa. Ther e are encouraging signs of progress in reducing the incidence of poverty in all regions after 2000, although it is too early to say if this is a new trend.
    Keywords: Rural Poverty Reduction,Population Policies,Pro-Poor Growth and Inequality,Services & Transfers to Poor
    Date: 2007–04–01
  9. By: Yang Yao; Lixin Colin Xu; Li Gan
    Abstract: While the literature on consumption insurance is growing fast, little research has been conducted on how rural consumption insurance is affected by democracy. In this paper the authors examine how consumption insurance of Chinese rural residents is affected if the local leader is democratically elected. Exploring a unique panel data set of 1,400 households from 1987 to 2002, they find that consumption insurance is more complete when the households are in villages with elected village leaders. Furthermore, democracy improves consumption insurance only for the poor and middle-income farmers, but not for the rich. These findings underline the imp ortance of democratic governance for ensuring better rural consumption insurance and poverty reduction.
    Keywords: Rural Poverty Reduction,Consumption,Inequality,Services & Transfers to Poor,Economic Theory & Research
    Date: 2007–04–01

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