nep-cna New Economics Papers
on China
Issue of 2009‒09‒26
four papers chosen by
Zheng Fang
Ohio State University

  1. Model Structure and the Combined Welfare and Trade Effects of China's Trade Related Policies By Yan Dong; John Whalley
  2. Saving-Investment Relationship and Capital Mobility:Evidence from Chinese Provincial Data, 1980—2007 By Yoshihiro, Hashiguchi; Shigeyuki, Hamori
  3. The evolution of an industrial cluster in China: By Fleisher, Belton; Hu, Dinghuan; McGuire, William; Zhang, Xiaobo
  4. The Technology Gap and the Growth of the Firm: A Case Study of China’s Mobile-phone Handset Industry By Kimura, Koichiro

  1. By: Yan Dong; John Whalley
    Abstract: Because China's economic structure is different from that in OECD countries, using conventional neo-classical competitive trade models to analyze the welfare and trade impacts of trade related policy change can be misleading. In particular, both the exchange rate regime and output and pricing policies of state owned enterprises (SOE's) will have effects on trade and welfare which differ from a classical competitive model. This paper present a numerical model that captures the combined and interactive effects of three policy elements in prototype form of tariffs, policy towards SOEs in the industrial sector, and an exchange rate regime supporting large trade surpluses and additions to foreign reserves. The model has non neutral monetary features, endogenous trade imbalances and average product pricing of labor in goods. We do not claim it to be fully representative of modern China, but it does go some way beyond simple competitive models used elsewhere and points to different conclusions of policy impact. We calibrate our model to 2006 data, and then evaluate the impacts both singly and in combination of: tariff liberalization, a move to more freely floating exchange rates, and SOE enterprise reform. Results show that large differences in policy impacts relative to a classical competitive model. SOE reform and a freely floating Chinese exchange rate have more impact on China's welfare than tariff liberalization. Policies of RMB appreciation and increasing China's money stock reduce China's trade surplus. In the traditional competitive model, trade liberalization impacts both imports and exports, while in our central case model, with endogenously determined trade surplus, trade liberalization has little effect on exports. Most of the policy impact is on imports and the trade surplus. SOE reform of China's manufacturing sector significantly decreases production of China's manufacturing sector and increases production in China's other sectors.
    JEL: F1
    Date: 2009–09
  2. By: Yoshihiro, Hashiguchi; Shigeyuki, Hamori
    Abstract: Panel data for individual Chinese provinces from 1980 to 2007 was used to estimate the saving-investment model used by Feldstein and Horioka (1980), shed light on changes to China's domestic capital mobility since the adoption of the Open Door Policy, and determine whether there has been any increase in mobility since 2000. High capital mobility was observed through the first half of the 1980s followed by low capital mobility during the 1990s. Capital mobility began to gradually increase again around 1996, reaching levels similar to those of other leading industrialized countries in the 2000s.
    Keywords: Saving-Investment Relationship; Capital Mobility; Chinese Provincial Data; Feldstein-Horioka puzzle
    JEL: O11 F41
    Date: 2009–09
  3. By: Fleisher, Belton; Hu, Dinghuan; McGuire, William; Zhang, Xiaobo
    Abstract: "We use two rounds of surveys, taken in 2000 and 2008 in the Zhili Township children's garment cluster in Zhejiang Province, to examine in depth the evolution of this industrial cluster. Firm size has grown on average in terms of output and employment, and increasing divergence in firm sizes has been associated with a significant rise in specialization and outsourcing among firms in the cluster. Although the investment amount needed to start a business has more than tripled, this amount remains low enough that formal bank loans remain an insignificant source of finance. Because of low entry barriers, the number of firms in the cluster has risen, driving down profits and bidding up wages, particularly since the year 2000. Facing severe competition, more firms have begun to upgrade their product quality. By the year 2007, nearly half of the sampled firms had established registered trademarks and nearly 20 percent had become International Office of Standardization (ISO) certified." from authors' abstract
    Keywords: Cluster, Industrialization, Growth, Development strategies,
    Date: 2009
  4. By: Kimura, Koichiro
    Abstract: We have examined the way in which local Chinese firms confronted with a technology gap have achieved growth, using the Chinese handset industry as a case study. Chinese local firms have lacked technology, and have therefore turned to outside firms for development, design, and manufacturing, while they themselves have focused on sales and marketing, using their advantage of familiarity with the Chinese market. Consequently, by establishing a growth condition in which their selection of boundaries counterbalances the technology gap they have been able to expand their market share in comparison with foreign firms.
    Keywords: Technology gap, Boundaries of the firm, Mobile-phone handset industry, China, Telephone
    JEL: D23 F23 O12
    Date: 2009–08

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