“China’s Current Account: External Rebalancing or Capital Flight?”
FRB International Finance Discussion Paper No. 1208, June 2017
With China’s current account surplus falling from about 10 percent of GDP in 2007 to below 1.5 % of GDP in 2013, the days of colossal current account surpluses appear to be a distant memory. In this paper Anna Wong provides evidence that suggests that China’s official current account balance in recent years has been distorted to some extent by large financial outflows disguised as service trade transactions. To do so she uses two empirical approaches. On the one hand the so called mirror approach and on the other hand one that relies on econometric models.
Carsten A. Holz & Sun Yue
CESifo Working Paper No. 6472 (May 2017)
Capital estimates are widely used in economic growth and productivity studies, for profitability considerations and wealth accounting exercises. Yet the calculation of “capital” frequently receives only cursory attention, despite the challenges posed by conceptual difficulties, the complexity of calculations, and the extensive data requirements. This paper (i) calculates long-run provincial (and national) physical capital series for China, (ii) distinguishes between capital services and wealth capital stock, and (iii) applies the most recent methodology advanced by the OECD, the U.S. Bureau of Labor Statistics, and the Australian Bureau of Statistics. The complete set of data is available online and is expected to be updated on an annual basis in the future.
[You find the paper here]
“Foreign Acquisitions and Target Firms’ Performance in China”
Qing Liu, Ruosi Lu, Larry D. Qiu
In: The World Economy (2017), Vol. 40, No. 1, 2-20
How foreign acquisitions affect the economy of the target country and the performance of the target firms is a question of particular interest, especially for developing countries. Lie et al. examine in their paper the effects of foreign acquisitions in China. They notice the special situation in China’s economy and answer the question whether the effects of foreign acquisitions in China are similar to those in developed countries or developing countries, or if they are unique.
“The impacts of political uncertainty on asset prices: Evidence from the Bo scandal in China”
Laura Xiaolei Liu, Haibing Shu and K.C. John Wei
in: Journal of Financial Economics (2017)
In this paper Liu et al. investigate the impact of political uncertainty on asset prices. They identify an unexpected political event that occurred in China as an exogenous shock to political stability – the Bo Xilai Scandal on March, 14, 2012. Because this shock was unforeseen and increased political uncertainty immediately following its occurrence, it serves as an ideal setting to test the causal link between political instability and asset prices. For a better understanding of the situation Bo’s political scandal is described briefly within the paper.
“How did China’s WTO entry benefit U.S. consumers?”
Mary Amiti, Mi Dai, Robert C. Feenstra and John Romalis
NBER Working Paper No. 23487
During the last 20 years China has emerged as the world’s largest exporter, especially due to its rapid export growth following its World Trade Organization (WTO) entry in 2001. Surprisingly little analysis has been made of the potential gains to consumers in the rest of the world, who could benefit from access to cheaper Chinese imports and more important varieties. In this paper Amiti et al. identify that China’s WTO entry reduced U.S. price indexes. Furthermore they quantify how much U.S. consumer welfare improved due to China’s WTO entry.
“China’s Lost Generation: Changes in beliefs and their intergenerational transmission”
Gerard Roland and David Y. Yang
NBER Working Paper No. 23441
China’s Cultural Revolution suspended regular higher education for an entire decade (1966-1976), creating the so-called Lost or Delayed Generation. Growing up during that period the Delayed Generation was deprived of higher education opportunities at an age when youths would typically consider attending college. This shock allows Roland and Yang to examine if differences in the opportunity cost of attending university persistently shaped citizens’ beliefs on whether efforts pay off in determining success. Moreover, they investigate to what extent the changed beliefs may affect citizens’ behavior, particularly their decisions to invest in their children’s education and to transmit such beliefs to the next generation.
„A Real Estate Boom With Chinese Characteristics”
Edward Glaeser, Wei Huang, Yueran Ma, and Andrei Shleifer
In: Journal of Economic Perspectives Vol. 31, No. 1, 93-116
Is the Chinese real estate boom a bubble? This question takes the center stage in the paper of Glaeser et al. They approach it by analyzing the determinants of demand and supply of housing in China. Further they use the great housing boom in the United States as a benchmark to put the Chinese boom into perspective and highlight its unique features. Finally they conclude, that a housing crash isn’t inevitable, but that the outcome depends largely on the decisions that will be made by the Chinese government.
„Human Capital and China’s Future Growth”
Hongbin Li, Prashant Loyalka, Scott Rozelle, and Binzhen Wu
In: Journal of Economic Perspectives Vol. 31, No. 1, 25-48
Li et al. consider the sources and prospects for economic growth in China with a focus on human capital. They present a short overview about the Chinese hukou-policy and its development. By using an ordinary least square regression model, the typical relationship between human capital and output in different economies around the world is shown. In the end they present some policy suggestions of what China can do today to further raise its human capital up on to the standard of high-income countries.
„From ‚Made in China‘ to ‚Innovated in China’?: Necessity, Prospect and Challenges”
Shang-Jin Wei, Zhuan Xie, and Xiaobo Zhang
In: Journal of Economic Perspectives Vol. 31, No. 1, 49–70
The Chinese economy is at a crossroad. Structural factors in the form of less-favorable demographics and a higher cost of labor imply a lower potential growth rate. To achieve robust future growth structural reforms are a must. Therefore Wei et al. study three questions. First, how strong is the Chinese’s national investment in research and development (R&D). Second, what is the growth of innovation by Chinese firms. Third, are there significant resource misallocations in the innovation space. They find that Chinese firms have demonstrated the capacity to become more innovative in response to wage pressure and global opportunities. Further they show that government subsidies tend to favor state-owned firms, and yet both domestic private sector firms and foreign-invested firms are more effective in converting investment in R&D to innovation outcomes as measured by patents.
“Tariffs and the organization of trade in China”
Loren Brandt, Peter M. Morrow
in: Journal of International Economics Vol. 104, 85-103
Beginning in the mid-1990s, China started a program of tariff liberalization that saw average tariffs fall from over 40 percent in 1995 to less than 10 percent in 2001. This paper examines the impact of China’s falling import tariffs on the organization of its exports between ordinary and processing trade.
“The Great Housing Boom of China”
Kaiji Chen, Yi Wen
in: American Economic Journal: Macroeconomics, Vol. 9, No. 2, 73-114
Real housing prices outpacing income, a high vacancy rate, and a high rate of return to capital: this describes the current and puzzling situation on the Chinese real estate market. Chen and Wen present a model that interprets China’s housing boom as a rational bubble and fits with many salient features of the Chinese economy.
“China’s GDP Growth May Be Understated”
Hunter Clark, Maxim Pinkovskiy. Xavier Sala-i-Martin
NBER Working Paper No. 23323
Clark et al. discuss the concerns about the quality of China’s official GDP statistics and whether Chinese growth is under- or overstated by those statistics. Therefore they exploit nighttime lights to compute the optimal weights for various economic indicators to a best unbiased predictor of Chinese growth rates.
“Industrial Policies for Avoiding the Middle-income Trap: A New Structural Economics Perspective”
Justin Yifu Lin
in: Journal of Chinese Economic and Business Studies Vol. 15, No. 1, 5-18
In this paper Lin presents a manual how middle-income countries can avoid the middle-income trap by using limited resources to facilitate technological innovation and industrial upgrading. Thus, these economies can overcome coordinating issues and inherent externalities during the process of structural transformation.