nep-cna New Economics Papers
on China
Issue of 2007‒06‒11
eight papers chosen by
Zheng Fang
Ohio State University

  1. Institutional Development, Financial Deepening and Economic Growth: Evidence from China By Paul Wachtel; Iftekhar Hasan; Mingming Zhou
  2. FDI and Credit Constraints: Firm Level Evidence in China By Jerome Hericourt; Sandra Poncet
  3. A (Lack of) Progress Report on China's Exchange Rate Policies By Morris Goldstein
  4. China's Carbon Emissions 1971-2003 By Chunbo Ma; David I. Stern
  5. The economic impacts of a construction project, using SinoTERM, a multi-regional CGE model of China By Mark Horridge; Glyn Wittwer
  6. Wal-Mart as Catalyst to U.S.-China Trade By Emek Basker; Pham Hoang Van
  7. Globe: Asian Growth and Trade Poles: India, China, and East and Southeast Asia By Karen Thierfelder; Scott McDonald; Sherman Robinson
  8. GenerAsians Learn Chinese: The Asian American Youth Generation and New Class Formations By Deborah Wong

  1. By: Paul Wachtel; Iftekhar Hasan; Mingming Zhou
    Date: 2007
  2. By: Jerome Hericourt; Sandra Poncet
    Abstract: In this paper, we assess the success of the ongoing financial system reforms in China through the investigation of the extent to which firms are financially constrained. We focus on the part played by Foreign Direct Investment (FDI) in funding Chinese corporate sector as we analyze whether incoming foreign investment in China plays an important role in alleviating domestic firms’ credit constraints. Using firm-level data on 2,200 domestic companies for the period 1999-2002 and splitting domestic firms into public and private firms, we find that public firms’ investment decisions are not sensitive to debt ratios or the cost of debt. Nor is there any evidence that public firms are affected by foreign firms presence. We interpret this as evidence in support of the notion of a soft budget constraint for public firms. In contrast, private domestic firms appear more credit constrained than state-owned firms but their financing constraints tend to ease in a context of abundant foreign investment. Our results confirm that the development of cross-border relationships with foreign firms helps private domestic firms to bypass both the financial and legal obstacles that they face at home(Huang, 2003).
    Keywords: Financial constraint; corporate finance; Foreign Direct Investment; China
    JEL: E22 E44 G31 O16
    Date: 2007–05
  3. By: Morris Goldstein (Peterson Institute for International Economics)
    Abstract: This working paper assesses the progress made in improving China’s exchange rate policies over the past five years (that is, since 2002). I first discuss four indicators of progress on China’s external imbalance and its exchange rate policies—namely, the change in (and level of) China’s global current account position, movements in the real effective exchange rate of the renminbi (RMB), the role of market forces in the determination of the RMB, and China’s compliance with its obligations on exchange rate policy as a member of the International Monetary Fund (IMF). I then discuss why the lack of progress in improving China’s exchange rate policies matters for the economies of the China and the United States and for the international monetary and trading system. I also argue that several popular arguments and excuses for why more cannot be accomplished on removing the large undervaluation of the RMB are unpersuasive. Finally, I consider what can and should be done by China, the United States, and the IMF to accelerate progress over the next year or two.
    Keywords: exchange rate, current account adjustment, China, IMF
    JEL: F31 F32 F41
    Date: 2007–06
  4. By: Chunbo Ma (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); David I. Stern (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)
    Abstract: A number of previous studies on China's carbon emissions have mainly focused on two facts: 1) the continuous growth in emissions up till the middle of the 1990s; 2) the recent stability of emissions from 1996 to 2001. Decomposition analysis has been widely used to explore the driving forces behind these phenomena. However, since 2002, China's carbon emissions have resumed their growth at an even greater rate. This paper investigates China's carbon emissions during 1971-2003, with particular focus on the role of biomass, and, the fall and resurgence in emissions since the mid-1990s. We use an extended Kaya identity and the well-established logarithmic mean Divisia index (LMDI I) method. Carbon emissions are decomposed into effects of various driving forces. We find that: (1) A shift from biomass to commercial energy increases carbon emissions by a magnitude comparable to that of the increase in emissions due to population growth; (2) The technological effect and scale effect due to per capita GDP growth are different in the pre-reform period versus the post-reform period; (3) The positive effect of population growth has been decreasing over the entire period; (4) The fall in emissions in the late 1990s and resurgence in the early 2000s may be overstated due to inaccurate statistics. The rapid growth since the early 2000s, therefore, may not indicate a "new trend"; (5) Carbon emissions exhibit a correlation of 0.99 with coal consumption, which points to explicit policy suggestions.
    JEL: Q43 Q25
    Date: 2007–06
  5. By: Mark Horridge; Glyn Wittwer
    Abstract: The paper outlines the theory and database preparation of SinoTERM, a "bottom-up" computable general equilibrium model of the Chinese economy. The methodology by which we construct the multi-regional model allows us to present the economy of China in an unprecedented amount of detail. SinoTERM covers all 31 provinces and municipalities. The database of the model extends the published national input-output table for 2002 to 137 sectors. The single crops sector in the published national input-output table is split into 11 and the single livestock sector into 3. The multi-regional CGE model provides a framework that we could modify to apply to many different policy applications. We can use SinoTERM to analyse the regional economic impacts of region-specific shocks. Such shocks could major construction projects or investments in health and education sectors, in an effort to accelerate economic growth in the lagging inland provinces. We use a 63 sector, 10 region aggregation of the SinoTERM master database to model the regional economic impacts of the proposed Chongqing-Lichuan rail link construction project.
    Keywords: CGE modelling, regional modelling, construction projects
    JEL: C68 R13 L74
    Date: 2007–06
  6. By: Emek Basker (Department of Economics, University of Missouri-Columbia); Pham Hoang Van
    Abstract: Retail chains and the volume of imports of consumer goods from developing countries have grown sharply over the past 25 years. Wal-Marts sales, which currently account for 15% of U.S. imports of consumer goods from China, grew 90-fold over this period, while U.S. imports from China increased 30-fold. We relate these trends using a model in which scale economies in retail interact with scale economies in the import process. Combined, these scale economies amplify the effects of technological change and trade liberalization, creating a two-way relationship between the chains size and its sourcing choice. Falling trade bar- riers increase imports not only through direct reduction of input costs but also through an expanded chain and higher investment in technology. Calculations based on our model suggest that the existence of the chain more than doubles the sensitivity of imports to tariff reductions. Technological innovations account for approximately 60% of Wal-Marts growth from 19842004 and reductions in input cost, due to tariff reductions and changes in sourcing, account for 40% of this growth.
    Keywords: Wal-Mart, Trade, Economies of Scale, China, Technological Change, Retail Chain
    JEL: L11 L81 F12
    Date: 2007–05–15
  7. By: Karen Thierfelder (United States Naval Academy); Scott McDonald (The University of Sheffield); Sherman Robinson (University of Sussex)
    Abstract: Using a global general equilibrium trade model, this study analyzes the impact on developing countries, of (1) the dramatic expansion of trade by India, China, and an integrated East and Southeast (E&SE) Asia trade bloc and (2) productivity growth in the region. China is an integral member of the E&SE Asia bloc, with strong links through value chains and trade in intermediate inputs, while India is not part of any trade bloc. The analyses consider the importance of their different degrees of integration into regional and global economies, focusing on potential complementarities and competition with other developing countries.
    Date: 2007–06
  8. By: Deborah Wong (University of California, Riverside)
    Abstract: Why is Jin telling us that we should learn Chinese? Is there an Asian American youth culture? How does immigration and relative generation define it? This essay addresses Americans of Asian descent1 who are roughly 18 to 25 years old: I focus on the mass-mediated popular cultures that they consume and create. My central question is how young Americans of Asian descent are in some ways moving away from the ‘Asian American’ cultural and political project created in the 1960s-70s that has driven Asian American Studies to date. This youth generation is no more homogeneous than any other, and my purpose here is to think about its identifications because I believe minoritarian politics are still essential to American democratic potential. Further, the relationship between immigration, transnational movement, and class-defined democracy is the challenge of this historical moment. My interest in two contrasting Asian American youth cultures is thus embedded in these broader questions, and for me have a certain urgency. I argue that this youth generation responds to the conditions of their moment in ways that
    Date: 2006–06

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