[CEAMeS DP09] – “The Changing Patterns of Investment in the PRC Economy”

CEAMeS Discussion Paper No. 9 | 2017

Carsten Holz

The investment-intensive growth model of the People’s Republic of China (PRC) is often viewed as state-driven and ultimately unsustainable. But largely unnoticed, a shift has taken place. This paper examines the changes in investment patterns since 2003 and the potential impact of industrial policies on these patterns. The point of view is macroeconomic, based on economy-wide data with various breakdown. Significant shifts in investment patterns across sectors and ownership forms have occurred over time, supporting a new growth model with a reduced role of the state, and these shifts appear driven more by market factors than by government policies.

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[CEAMeS DP08] – “How severe will the growth slowdown in China caused by structural change be? – An evaluation based on experiences from Japan and South Korea”

CEAMeS Discussion Paper No 8 | 2017

Michael Murach and Helmut Wagner

preliminary version of an article published in: 
Journal of Chinese Economic and Business Studies 15 (3), pp. 269-287, on 12 Jul 2017.

China has been growing at high rates during the previous three decades. The current process of rebalancing from an investment- and manufacturing-led growth model towards a consumptionand service-led model is associated with decreasing growth rates. We show that China’s current state of structural change in terms of sectoral employment shares is similar to the historical
developments in Japan and South Korea. We derive plausible scenarios for future growth rates in China and (by isolating the allocation effect, i.e. the pure effect of structural change) look at the effects of tertiarization on economic growth in China for the period 2016 until 2030 by applying a simple simulation study.

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[CEAMeS DP07] – „Government Efficiency and Exports in China“

CEAMeS Discussion Paper No 7 | 2017

Antonia Reinecke & Hans-Jörg Schmerer

also published as: 
Forthcoming in Journal of Chinese Economic and Business Studies 15 (2017)

This paper investigates the role of local governments’ efficiency on exports in China. We argue that firms located in provinces characterized by high governmental efficiency export more due to a positive productivity effect that lowers transaction costs. The analysis builds on NBS firm-level data that covers a representative sample of Chinese establishments. We find a positive correlation between provincial governments efficiency and Chinese firm’s exports. Moreover, we are able to show that the positive link between firm size and exports is magnified by governmental efficiency. Larger firms export more and this relationship is much stronger in provinces with more efficient provincial governments.

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[CEAMeS DP06] – „On the (non-)sustainability of China’s development strategies“

CEAMeS Discussion Paper No 6 | 2017
forthcoming in: “Chinese Economy”, vol. 50 (2017)

Helmut Wagner

also published as: 
SSRN Paper No. 2946768, 2017

This paper summarizes the main characteristics of the two major Chinese growth strategies since 1978, namely the Deng strategy (named after Deng Xiaoping) between 1978 and 2011 and the Xi strategy (named after Xi Jinping) since 2012/13. After a brief description of both strategies, I analyze in depth whether the respective reforms of the two strategies have caused sustainable or unsustainable growth and economic development. Furthermore, I derive some implications concerning the danger of a Chinese middle-income trap and pro- pose some policy recommendations (also against the background of the Korean experience). I finally develop a growth-theoretic systematization of the arguments elaborated previously.

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[CEAMeS DP05] – “A Stylized Model of China’s Growth Since 1978”

CEAMeS Discussion Paper No 5 | 2017

Linda Glawe and Helmut Wagner

also published as: 
SSRN Paper No. 2917433, 

This paper develops a stylized multi-sector growth model of China’s economy. We choose a neoclassical modeling approach and focus on the reform process under Deng Xiaoping as China’s main growth driver since 1978. Following the literature, we distinguish between three major reform periods, namely the agricultural (1978–1984), the industrial (1984–1992) and the foreign-trade reform period (1992–present). Reflecting the neoclassical view, our model explains China’s growth process since 1978 as a sequence of transitory growth phases generated by the reforms. We discuss our model’s implications for China’s future growth and the middle-income trap as well as growth-stimulating policies in China.

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[CEAMeS DP04] – „China in the Middle-Income Trap?“

CEAMeS Discussion Paper No 4 | 2016

Linda Glawe and Helmut Wagner

also published as: 
SSRN Paper No. 2830439, August 2016

Over the last decade, a growing body of literature dealing with the phenomenon of the “middle-income trap” (MIT) has emerged. The term MIT usually refers to countries that have experienced rapid growth and thus reached the status of a middle-income country (MIC) in a considerably short amount of time, but have not been able to further catch up to the group of high-income economies. Especially, since the beginning growth slowdown of the Chinese economy in 2011, there has been rising concern that China is or will also be confronted with such a trap. This paper analyzes the Chinese MIT situation taking into account both the (absolute and relative) empirical MIT definitions and MIT triggering factors identified in the literature. We not only survey the recent literature, but also make our own MIT forecasts and analyze under which conditions China could be caught in an MIT.

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[CEAMeS DP03] – “The Building Up of New Imbalances in China: The Dilemma with Rebalancing”

CEAMeS Discussion Paper No 3 | 2016

Helmut Wagner

also published as: 
SSRN Paper No. 2779510, May 2016

and in:
International Economics and Economic Policy, vol. 14 (2017)
(already published online Sept. 2016: in IEEP; DOI 10.1007/s10368-016-0360-4)

This paper offers a theoretical basis for the concept of rebalancing and applies it to China, where it is  currently a topical issue. Rebalancing here means the correction of economic and social imbalances  built up during industrialization. This correction is accompanied by a structural transformation to‐ wards a more inward‐ and consumption‐driven growth path, associated with growth slowdown. At‐ tempts to mitigate this growth slowdown by either retarding this structural reform process or by us‐ ing expansionary stimulus programmes as done over the past decade in China create new imbalances  that have to be corrected (rebalanced) again. Managing these multiple rebalancing tasks together is  a tremendous undertaking, as this paper shows.

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[CEAMeS DP02] – “The Middle-Income Trap – Definitions, Theories and Countries Concerned: A Literature Survey”

CEAMeS Discussion Paper No 2 | 2016

Linda Glawe and Helmut Wagner

also published as: 
SSRN Paper No. 2777521, May 2016

and in:
Comparative Economic Studies, vol 58 (2016), pp. 507 – 538.

In recent years, a growing body of economic literature has focused on the phenomenon of the so-called middle-income trap (MIT). The term usually refers to countries that have experienced rapid growth and thus quickly reached middle-income status, but then failed to overcome that income range to further catch up to the developed countries. This paper surveys the MIT literature. It begins by laying out different approaches to defining the MIT (with a focus on the distinction between absolute and relative approaches) and by presenting as well as classifying the most important empirical studies. After a short overview of the currently identified MIT countries, the article summarizes the main explanatory approaches, taking into account both the theoretical foundations and the empirically identified triggering factors.

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[CEAMeS DP01] – „The effects of external shocks on the business cycle in China: A structural change perspective“

CEAMeS Discussion Paper No 1 | 2016

Michael Murach and Helmut Wagner

also published as: 
SSRN Paper No. 2741579, March 2016. 

We study the effects of external shocks on the business cycle in China and its sectors (agriculture, industry, and services) in terms of real GDP growth using several small dimensional VAR models with Cholesky identification for the period 1996 – 2014. We show that China – in particular its industrial sector – is susceptible to shocks, which can be related to a trade channel, a financial channel, and a confidence channel of business cycle transmission from major trading partner countries to the Chinese economy. If interpreted from the perspective of ongoing structural change and rebalancing in China, our findings can be interpreted as the result of a still very dominant industrial sector, and a previously export- and investment-driven growth model. Tertiarization in China could be one way of increasing the economy’s future resilience to external shocks. However, the future structure of both the industrial and service sectors may be very decisive.

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