„Government Efficiency and Exports in China“

Antonia Reinecke & Hans-Jörg Schmerer

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.

“The People’s Republic of China in the middle-income trap?”

Linda Glawe & Helmut Wagner

ADBI Working Paper No. 749, 2017


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 in a very short period, but have not been able to further catch up with the group of high-income economies. In particular, since the beginning of the growth slowdown of the economy of the People’s Republic of China (PRC) in 2011, there has been rising concern that the PRC is, or will also be, confronted with such a trap. We analyze the PRC’s MIT situation, considering both the (absolute and relative) empirical MIT definitions and MIT triggering factors identified in the literature. We survey the recent literature, make our own MIT forecasts, and analyze under which conditions the PRC could be caught in an MIT.


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

Michael Murach & Helmut Wagner

in: Journal of Chinese Economic and Business Studies, Vol. 15 (3), July 2017, pp. 269-287


China’s economy has been growing at a high rate for the past three decades. However, the current process of rebalancing from an investment- and manufacturing-led growth model toward a consumption- and service-led model is associated with decreasing growth rates. We show that China’s current state of structural change in terms of sectoral employment share 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 2014−2030 by applying a simple simulation study.

“China’s Rebalancing-Dilemma”

Helmut Wagner

in: One Belt and One Road - China and the World, forthcoming, Proceedings of the International Conference held in 2016 at Frankfurt University, Konfuzius-Institut Frankfurt (2017).

Rebalancing means the correction of imbalances built up in the past. After having experienced a great growth success story over the past three decades, China recently announced a rebalancing of its development process. The term “rebalancing” was explicitly used by the Chinese government in its 12th five-year plan (in 2011) and repeated and confirmed in the 13th five-year plan (in 2016). There it was understood as a necessary shift of the Chinese economy from an investment- and export-driven towards a more consumption- and inward-driven growth path. This is a typical development or restructuring process in middle-income countries where the marginal profitability of industrial sector productions starts to decline (against the background of increasing wages in manufacturing and increasing social, economic and ecological side-costs or imbalances of industrialization; see Wagner 2013). Hence there is then a need to initiate the process of de-industrialization or tertiarization (see, ibid). The mentioned side-costs or imbalances in China were already early (in the mid-00s) denounced in country reports of the IMF and other international organizations associated with the call on China to rebalance its economy.

I shall argue that China currently is hit by multiple rebalancing challenges. First, it has to correct old imbalances built up during the past decades during the industrialization process which obviously has been “overdone”. Second, in the process of correcting the old imbalances, “wrong” political decisions (decisions which appeared to be less costly in the short run) have been made that produced new imbalances which have eventually driven the country into a dangerous vicious circle of always producing new needs for rebalancing.

“China’s growth model and potential risks for world trade”

Antonia Reinecke and Hans-Jörg Schmerer

in: Reinecke, Antonia, Hans-Jörg Schmerer, Carsten A. Holz, Frederik Kunze, Torsten Windels, Horst Löchel and Markus Taube,
"China’s Growth Model in Trouble: How Great is the Risk for the World Economy?", ifo Schnelldienst 69 (07), 2016, pp. 5-20.

The year began with a glut of bad news about economic developments in China. What are the implications for Germany and Europe? In view of the overcapacity that has accumulated, Antonia Reinecke and Hans-Jörg Schmerer, FernUniversität Hagen, see a shift away from China’s established growth strategy as inevitable. The world economy‘s dependence on China, however, should not be overestimated.

“Structural Change and Mid-Income Trap – Under which conditions can China succeed in moving towards higher income status”

Helmut Wagner

in: European Journal of Comparative Economics, Vol. 12, No. 2, Dec. 2015, pp. 165 – 188. [pdf]

After two decades of very high economic growth rates, China has now reached the so-called mid-income range or ‘trap’, i.e. a development level where it has to expect slower economic growth rates (a ‘New Normal’) for the future. Associated with that is a structural change towards tertiarization which requires some fundamental rebalancing of China’s economy. Overcoming this mid-income trap and further catching up to the most advanced countries in the world is a very demanding task. In order to succeed China has to efficiently manage the mentioned rebalancing (structural change) process towards tertiarization and to undertake many fundamental structural reforms.

“Firm performance and trade with low-income countries Evidence from China”

Hans-Jörg Schmerer and Luhang Wang (University of Xiamen)

in: CESIFO Working Paper No. 4934; Category 8: Trade Policy; August 2014

Do firms in developing countries shift trade towards developed economies as a result of high economic growth? The matched customs-manufacturing firm data used in this study confronts this hypothesized link with empirical evidence. Our analysis reveals a rising low-income country trade share around and after China’s accession to the World Trade Organization. Based on this stylized fact, we analyze the link between firm characteristics and trade with low-income countries. We find evidence for sequential sorting into different export-modes according to firm productivity: i) only the most productive firms export to low-income countries, ii) exporting to low-income countries is mostly coupled to exporting to high-income countries, and iii) firms that switch to export to markets with higher potential are younger than firms that switch to export to both high-and low-income markets. Moreover, we find that firms tend to start exporting through specialization on high-income markets before diversifying to both types of markets

“Challenges to China’s Policy: Structural Change”

Helmut Wagner

in: Comparative Economic Studies, Vol. 55, 2013, pp. 721-736.

This paper focuses on the challenges China is confronted with in the context of structural change. It first shows that the service sector in China is ‘relatively small’ compared with other developed and developing countries in their historical context of structural change. Then it discusses – against the background of the experiences of former emerging economies that have, in the meantime, progressed towards ‘developed’ economies – why the service sector in China has to change. Afterwards it analyzes the challenges that China is confronted with in relation to ongoing structural change. Finally it draws some policy implications and then concludes.