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on China |
| By: | Eric Wong (Research Department, Hong Kong Monetary Authority); Jim Wong (Research Department, Hong Kong Monetary Authority); Phyllis Leung (Research Department, Hong Kong Monetary Authority) |
| Abstract: | Using the Capital Market Approach and equity-price data of 14 listed Chinese banks, this empirical study finds that there is a positive relationship between bank size and foreign-exchange exposure, which may reflect larger foreign-exchange operations and trading positions of larger Chinese banks, and their significant indirect foreign-exchange exposure arising from impacts of the renminbi exchange-rate movements on their customers. Empirical evidence also suggests that the average foreign-exchange exposures of state-owned and joint-stock commercial banks in China are higher than those of banks in Hong Kong, notwithstanding that their participation in international banking businesses is still limited compared with their Hong Kong counterparts. It is also found that negative foreign-exchange exposure is prevalent for larger Chinese banks, suggesting that an appreciation of the renminbi tends to reduce their equity values, and is therefore likely to hamper the banking sector¡¦s performance. Together with the fact that decreases in equity values generally imply higher default risk, how Chinese banks would be affected under different scenarios of renminbi appreciation should be closely monitored. |
| Keywords: | Foreign exchange exposure, banking, China |
| JEL: | E58 F31 G21 G28 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:hkg:wpaper:0807&r=cna |
| By: | Rod Tyers |
| Abstract: | China’s industrial reforms have left many key industries dominated by single or small numbers of firms, most of which remain state owned. Until recently, these firms have not been required to pay dividends to the state and the recent surge in China’s growth has made them very profitable, with their economic profits adding 20% of GDP to corporate saving. This bolsters the overall saving-investment gap and hence China’s controversial current account surplus. In other countries, oligopolistic industries tend to be taxed more heavily and they are commonly subjected to price regulation. This study offers an economy-wide analysis of approaches to oligopoly rents in China. The results suggest that, while policy changes targeting national saving, including increased corporate taxation, expansionary fiscal policy and SOE privatisation all help to control the external imbalance, they tend also to turn demand inward, inducing higher oligopoly rents and slower growth. Competition policy, embodying both price cap regulation and free entry, proves more effective both in controlling the external imbalance and in fostering continued growth. |
| JEL: | D43 D58 F32 L13 L43 L51 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2008-21&r=cna |
| By: | Song, Lina (University of Nottingham); Appleton, Simon (University of Nottingham) |
| Abstract: | Job-related welfare entitlements are common in China. Migrants who do not hold urban registration are, in principle, not entitled to job-related welfare even if they are employees in the State sector. The official explanation is that rural-urban migrants are allocated access to farm land in their rural origins, and hence their welfare rights and security are covered by this entitlement to the use of land. In this paper, we look at whether migrants still benefited from these opportunities. Second, we investigate whether it is the poor, the unentitled and the vulnerable that are excluded from public protection programs. Chinese official social protection programs are, like in most western countries, officially designated as being for poverty alleviation. However would such programs still be targeted in ways that limit their coverage, curtail the range of basic needs provided for and allocate benefits very unequally? Thirdly, we explore whether households with favourable productive characteristics are more likely to get into social protection programs. Here, the ongoing debate concerning equality of opportunity and equality of outcomes has some relevance. Finally, we examine the roles social networks or Guanxi (the Chinese term for social connections) may play in dealing with economic shocks. |
| Keywords: | migration, social protection, entitlement, China |
| JEL: | H41 H42 D63 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3594&r=cna |
| By: | Wolf Schäfer |
| Abstract: | This paper deals with the present undervaluation policy in China in the light of the German experiences with the undervaluation of the Deutschmark under Bretton Woods conditions. In Germany, there was a 20 years lasting academic and public debate on the needs for appreciation because of the high costs of having an undervalued currency. These costs referred, i. a., to inflation import, overheating the economy, and distortion of the internal production structure of the country – this seeming to be a similar situation in present China. From the German experience it is argued that flexible nominal exchange rates for large economies like China could better reduce the costs of the adjustment needs of real exchange rates than adjustments via internal inflation. Furthermore, if China as a new Global Player fulfills some necessary conditions for sound economic performance the RMB could possibly change the international monetary order towards a 3-polar monetary system. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:phu:wpaper:013&r=cna |
| By: | Dong He (Research Department, Hong Kong Monetary Authority); Laurent Pauwels (Research Department, Hong Kong Monetary Authority) |
| Abstract: | In this paper, we model the policy stance of the People¡¦s Bank of China (PBoC) as a latent variable, and the discrete changes in the reserve requirement ratio, policy interest rates, and the scale of open market operations are taken as signals of movement of this latent variable. We run a discrete choice regression that relates these observed indicators of policy stance to major trends of macroeconomic and financial developments, which are represented by common factors extracted from a large number of variables. The predicted value of the estimated model can then be interpreted as the implicit policy stance of the PBoC. In a second step, we estimate how much of the variation in the PBoC's implicit stance can be explained by measures of its policy objectives on inflation, growth and financial stability. We find that deviations of CPI inflation from an implicit target and deviations of broad money growth from the announced targets figured significantly in PBoC's policy changes, but not output gaps. |
| Keywords: | Monetary policy, People's Bank of China, qualitative response models, large factor models |
| JEL: | E52 E58 C25 C32 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:hkg:wpaper:0806&r=cna |
| By: | Nobuaki Hamaguchi (Research Institute for Economics and Business Administration, Kobe University); Yoshihiro Kameyama (The International Centre for the Study of East Asian Development (ICSEAD)) |
| Abstract: | We examine the impact of research partnerships on a firm's own R&D capability along with the context of the importance of geographical proximity using original survey data obtained from small and medium-sized firms in Zhongguancun Science Park (ZSP). This study develops an analytical framework related to the impact of research partnerships on a firm's R&D capability. Results show that research cooperation with universities and research institutes and small and medium-sized firms enhances the R&D capability of individual firms when the partners are located nearby, although distance has no significant effect on cooperation with large firms. |
| Keywords: | research cooperation, spillovers, R&D capability |
| JEL: | O32 R12 R39 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:225&r=cna |