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An introduction is presented in which the editor discusses various articles within the issue on topics including the role of tourism towards China's economic growth; liberalization of Chinese financial markets; and papers Contemporary monetary policy in China: An empirical assesment'.

The relationship between financial development and economic growth has become a hot topic in recent years and for China, which is undergoing financial liberalisation and policy reform, the efficiency of the use of digital finance and the deepening of the balance between quality and quantity in financial development are particularly important for economic growth. This paper investigates the utility of digital finance and financial development on total factor productivity in China using interprovincial panel data decomposing financial development into financial scale and financial efficiency; an interprovincial panel data model is used to explore the utility of digital finance on total factor productivity. This involves the collection and preprocessing of financial data, including feature engineering, and the development of an optimised predictive model. We preprocess the original dataset to remove anomalous information and improve data quality. This work uses feature engineering to select relevant features for fitting and training the model. In this process, the random forest algorithm is used to effectively avoid overfitting problems and to facilitate the dimensionality reduction of the relevant features. In determining the model to be used, the random forest regression model was chosen for training. The empirical results show that digital finance has contributed to productivity growth but is not efficiently utilised; China should give high priority to improving financial efficiency while promoting financial expansion; rapid expansion of finance without a focus on financial efficiency will not be conducive to productivity growth. [ABSTRACT FROM AUTHOR]

During China's reform era, dominant narratives described a transition away from centralised planning in favour of mutually reinforcing processes of liberalisation and decentralisation. Under Xi Jinping, the talk has increasingly been of the recentralisation of authoritarian-state powers and party discipline. Questioning both reform-era transition narratives and equally simplifying claims about their recent reversal, the paper argues for an enriched treatment of party–state spatiality, understood as a polymorphic and multi-scalar process, rather than simply a more complex one. In the emergent Greater Bay Area megaregion, 'new era' zoning strategies are being repurposed as drivers of pathfinding reforms animated by the party–state, in contrast to received readings of zones as single-purpose instruments of liberalisation. [ABSTRACT FROM AUTHOR]

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The paper focuses on China's onshore bond market and the drivers of non-resident net portfolio flows into Chinese debt securities. Building on a theoretical model of push and pull factors as a foundation for the empirical analysis on drivers of bond flows into China, static and time-varying models are estimated to explain the importance of various push and pull factors in the context of China's bond market development. While China-specific pull factors, such as domestic economic growth prospects and asset returns, are important drivers of bond flows, the results reveal that global push factors, such as US interest rates and investor risk aversion, have recently gained significance as drivers of flows into China. This shift goes hand in hand with China's gradual bond market liberalization measures. The findings confirm China's continued bond market deepening and integration with the rest of the world. [ABSTRACT FROM AUTHOR]

Purpose – This paper aims to investigate the determinants of foreign direct investment (FDI) by Chinese multinational enterprises (MNEs) over the period 1985-2011. Design/methodology/approach – This paper estimates a single equation model which uses long-run co-integration analysis and short-run analysis (error correction mechanism). This paper depends on annual data collected from the World Bank and the General Authority for Investment & Free zones Information & Decision Support Division for the period 1985-2011. Findings – This paper found a conventional result for market size. The author infers from the significant role played by Egyptian natural resource endowments that the institutional environment has strongly shaped Chinese FDI, leading to significant natural resources-seeking FDI. The author also finds that policy liberalisation in China has had a positive influence in stimulating Chinese FDI in Egypt. Originality/value – Despite this model being used to estimate the determinants of FDI by Chinese MNEs in several countries, this is the first time it is being used in Egypt using a time-series analysis. Moreover, this model which has been used in this paper uses both long-run and short-run analyses. [ABSTRACT FROM AUTHOR]

Humanistic factors have been playing increasingly significant roles in international trade. Recently, the Belt and Road Initiative (BRI) proposed by China has drawn worldwide attention. This paper examines the roles of humanistic factors in international trade networks across the BRI countries. Firstly, we analyzed the structural characteristics of the import trade network across the 61 BRI countries and subsequently adopted the cross-sectional exponential random graph model (ERGM) and temporal ERGM to analyze the role of different humanistic factors in the evolution of import trade network from the static and dynamic perspectives, respectively. The results show the following: (I) the network scale of the import trade across the BRI countries has been expanding, the network density of the trade has been increasing gradually, and the "small-world" characteristics of import network are gradually revealed; (II) all of the factors such as a common (official or spoken) language, a common legal origin, a common religious belief, and ever sibling relationship help the BRI countries establish closer import trade ties; and (III) the differences of trade liberalization and financial liberalization, gross domestic product (GDP), and population in different countries also contribute to the evolution of import trade network among the BRI countries, and the countries with relatively higher GDP and greater population are more active in the import trade network. [ABSTRACT FROM AUTHOR]

China has experienced significant economic growth over the past few decades, becoming a major global economic force. Its real GDP has grown at an average rate of 9.1% since the late 1970s, contributing about 30% of global economic growth. However, recent challenges such as weakening growth drivers, population aging, and a downturn in the property sector have emerged. China is now focused on transitioning to a more sustainable and innovation-driven growth model, prioritizing technological advancements, environmental protection, and social well-being. This includes efforts to reduce carbon emissions, develop renewable energy sources, and promote electric vehicles. While there are domestic and international challenges to overcome, understanding these developments is crucial for both China and the global economy. The Journal of Chinese Economic and Foreign Trade Studies aims to contribute to this understanding through research on various economic topics. [Extracted from the article]

This paper sheds light on the international spillovers of China's reforms in upgrading industrial capabilities, liberalizing capital account, internationalizing the renminbi, and transition to flexible exchange rates. Drawing on two-country New Keynesian model of endogenous entry and portfolio adjustment, we find that China's industrial upgrading that peddles on yuan appreciation lifts all boats through global production network irrespective of capital account convertibility, degree of renminbi internationalization, and exchange rate reform. Feasibility of appreciation-driven upgrading is called into question, however, when renminbi reform and capital account liberalization go in parallel. We also show that international spillovers disappear once renminbi internationalization is associated with liberalized capital account and flexible renminbi exchange rates. [ABSTRACT FROM PUBLISHER]

China’s interest rate liberalization process has yet to be completed. Despite removal of deposit interest rate ceilings on 23 October 2015, controls like window guidance are still imposed to prevent commercial banks from setting interest rates freely. This paper estimates implicit interest rates in China (i.e., the additional yield to official interest rates that banks must pay to attract deposits) using headquarter-level data of 88 commercial banks from Bank Scope and branch-level data of 317 branches in 90 counties and 14 provinces for the period 2005–13. The econometric methods allow for both heterogeneity and spatial correlation in banks’ behavior to better capture the characteristics of the Chinese banking industry. Three main findings emerge from this study. First, the estimated mean implicit interest rate is between 70 percent and 78 percent of the explicit interest rate—ignoring implicit interest rates results in underestimation of funding costs. Second, a 1 percent increase in deposit interest rates is estimated to decrease implicit interest rates by 0.44 percent, implying that the cost of interest rate liberalization will be smaller than the increase in deposit interest rates. Third, small share-holding banks, city commercial banks and rural commercial banks pay higher implicit interest rates than large state-owned banks. To promote efficient resource allocation, therefore, interest rate liberalization needs to be firmly pursued but its impact on different types of banks needs to be closely monitored to minimize disruptions to the real economy. [ABSTRACT FROM AUTHOR]

The RMB's internationalization developed very quickly from 2010 to 2015H1, but it slowed down significantly since 2015H2. This paper argues that cross-border arbitraging activities played a significant role in both the boom and the bust of the RMB's internationalization. A slower pace of the RMB's internationalization based more on real demand might become a new norm in the future. To pursue a more sustainable RMB internationalization in the next decade, the Chinese government should maintain a relatively high economic growth rate, avoid the burst of systemic financial crisis, continue to liberalize the capital account in a gradual and cautious way, accelerate the reform and opening up of the domestic financial market, and integrate the RMB's internationalization with Asian monetary cooperation. [ABSTRACT FROM AUTHOR]

Purpose This paper aims to review the effects of home regulatory institutions on outward foreign direct investment (OFDI) in the context of China and discuss the extent to which they can be extended to other emerging markets. The authors especially compare these empirical studies with theoretical discussions in each category, identify research gaps and suggest future research ideas. Practical implications are discussed.Design/methodology/approach It focuses specifically on three categories of regulatory institutions, including overall institutional development, liberalization of OFDI policies and state ownership (and its closely approximate forms). Using a systematic review, this paper has reviewed 26 empirical studies (23 quantitative and 3 qualitative studies) published in peer-reviewed journals.Findings These studies suggest that overall institutional development toward a market economy in general leads to increased OFDI, but this effect is contingent on the stage of such development and the capabilities of Chinese multinationals. Liberalized and supportive OFDI policies also facilitate OFDI activities but only into selective areas. Findings on state ownership have been mixed.Originality/value This review offers a full picture of empirical evidence on how multiple levels of regulatory institutions affect OFDI from China. In this way, the authors can identify the research gaps between theoretical discussions on home institutions and OFDI and empirical evidence. Thus, they make suggestions for future directions of studies. [ABSTRACT FROM AUTHOR]

This paper employs a structural innovation model to study the process of indigenous innovation in China and the role of industry relatedness. To better take into account China's transitioning economy context, it further tests to what extent the relationship between relatedness and firms' innovation process is influenced by the relaxation of foreign ownership controls, an arguably exogenous shock. Controlling for selection, simultaneity and unobserved heterogeneity, the results show that firm research and development (R&D) boosts innovation output, which in turn enhances firm productivity. Relatedness economies are positively related to each phase of innovation, although the size of the effects depends on the type of firm and the stage of innovation. Foreign direct investment (FDI) liberalization encourages firms to rely more on relatedness economies: (1) to complement R&D spending that is required to adapt foreign technologies to local applications; (2) to recombine knowledge from related industries in order to bring forth new proprietary ideas, processes or concepts; and (3) to help solve process or organizational problems faced in related industries. [ABSTRACT FROM AUTHOR]

The article presents views on the paper published on the Interest Liberalization and the Estimation of Implicit Interest Rates in China's Banking Sector and mentions results presents the actual effect of liberalization on banks' behavior and liberalization makes competition more transparent. He also suggests improvements in the paper including evaluation for the year 2013 rather than the year 2012 and interest payments results.

China has defied the declining trend in domestic content in exports in many countries. This paper studies China's rising domestic content in exports using firm- and customs transaction-level data. The approach embraces firm heterogeneity and hence reduces aggregation bias. The study finds that the substitution of domestic for imported materials by individual processing exporters caused China's domestic content in exports to increase from 65 to 70 percent in the period 2000-2007. Such substitution was induced by the country's trade and investment liberalization, which deepened its engagement in global value chains and led to a greater variety of domestic materials becoming available at lower prices. (JEL F13, F14, L14, O19, O24, P31, P33) [ABSTRACT FROM AUTHOR]

In large and heterogenous countries, cross-regional inequality often fuels political conflict over redistributive demands. Standard economic theory holds that initial inequality in incomes across subnational regions of a country should eventually give way to convergence. However, economic liberalization in Russia and China has not produced crossregional convergence. The paper demonstrates that interregional inequality remains high in both countries and grounds explanation for this finding in their communist institutional legacies. Their common institutional history complements country-specific explanations for the observed trends in cross-regional inequality. [ABSTRACT FROM AUTHOR]

In recent years, the authorities in the People’s Republic of China (PRC) have made great efforts to internationalize its currency. Will Renminbi (RMB) finally become a reserve currency? This paper addresses the above question from an institutional analytical framework. We find that if only economic fundamentals are used in the prediction, the expected share of the RMB in global currency reserves could reach 10% at the end of 2011. However, if institutional variables are included, the predicted share comes down to around 2%, which is a more realistic prediction. The work then proposes reform actions in developing China’s institutional environment so as to facilitate the RMB to realize the 10% potential. In general, we believe that the RMB’s international role should increase in the coming years, but it will take a relatively long period before it plays the role of a global reserve currency. [ABSTRACT FROM AUTHOR]

The article discusses the banking sector of China and the estimation of implicit interest rates and the interest liberalization within the industry of the country. It also discusses the micro aspects of the financial sector and the requirement on the part of the Chinese government to know about it for the sake of transformation of the deregulated financial system of the country.

This paper tracks the energy use and changes to China's energy-efficiency regulatory framework governing the iron and steel industry for the last thirty years. The detailed institutional analysis identifies both abating and augmenting effects of the regulatory framework changes on the energy intensity changes. The paper then assesses the impacts of various other factors on the energy intensity of China's iron and steel industry by using time-series data on the sector level. The quantitative analysis shows that technology progress, specifically the production process transition from high-energy intensive open-hearth furnace (OHF) to more energy efficient basic-oxygen furnace (BOF), is the biggest contributor to energy intensity reductions in China's iron and steel industry in the last thirty years, even after controlling for regulatory change and policy incentives. The ownership reform resulting from changes in the regulatory framework change contributed to energy intensity reductions in China's iron and steel industry, while fast market expansion resulting from market liberalization and regulation decentralization served as a principal barrier for energy efficiency improvements. Government policies, represented by financial subsidies from governments, correspond with energy intensity reductions in key large and medium sized enterprises, but interestingly, seem to be ineffective at producing energy intensity reductions for the industry as a whole. As other research indicated, rising coal prices also contributed to energy intensity reductions in China's iron and steel industry. Finally, the paper concludes that, to further incentivize energy intensity reductions, the Chinese government should consider correcting the negative impacts of the regulatory framework change, as well as transferring production processes to the highly energy efficient electric-arc furnace (EAF) and extending policy regulations to wider enterprise groups. [ABSTRACT FROM AUTHOR]

This paper analyses how trade liberalisation affects the markups of Chinese firms based on firm-level production data, highly disaggregated transaction-level product trade data and tariff data at the eight-digit Harmonised System (HS) level. Our results show that there is a pro-competition effect of output tariff reduction, that is decreasing output tariffs relate to a lower markup, and that there is a cost-reduction effect of input tariff reduction, that is decreasing input tariffs relate to a higher markup. Interestingly, there are heterogeneous effects of trade liberalisation on firm-level markups. The cost-reduction effect of input tariff reduction is partially offset by the competition effect of new firm entry in more-concentrated industries. Furthermore, there is a weaker effect of trade liberalisation on processing trade firms and state-owned enterprises. Finally, our results are robust to the use of an instrumental variable approach to control for the endogeneity of tariffs and sample selection. [ABSTRACT FROM AUTHOR]

The paper empirically examines the effects of trade liberalisation on income inequality in China and the South Asian Association for Regional Cooperation countries. Panel data analysis is conducted for the period of 1973 to 2012. The results show that liberal trade policies have increased income inequality in these countries. These results are robust to alternative liberalisation measures. The control variables used have differing effects on income distribution. Per capita income has an increasing effect on income inequality, while education, financial development, financial openness, democracy, and government size are shown to reduce income inequality. These outcomes can be expected to have important policy implications for the use of trade liberalisation in these countries. [ABSTRACT FROM AUTHOR]

In recent years, China has introduced a series of trade and financial liberalization policies and taken a crucial step towards the internationalization of RMB. These new developments bring about one question: how has openness affected the RMB real exchange rate volatility? Our empirical results reveal that in the long term, both trade and financial openness reduce exchange rate volatility; in the short term, the effect of financial openness varies across the three financial sub-accounts. Financial development can magnify (mitigate) the impact of trade openness on volatility in the short (long) term, but its role in affecting the impact of financial openness depends on the financial sub-account involved. Economic policy uncertainty (EPU) weakens the impact of openness on exchange rate volatility. In addition, financial openness absorbs more external shocks than trade openness. Foreign exchange reserves, while offsetting financial crisis shocks, cannot adequately absorb current account balance shocks. [ABSTRACT FROM AUTHOR]

This introduction traces the disappearance of Chinese family businesses from 1949 to 1978, their revival since then, and their future challenges. It then summarizes the three papers included in this Special Issue and proposes an agenda for family business studies in China. The article first focuses on the nonmarket social and political network strategies that these family-centered business organizations have had to adopt in order to overcome the difficulties they faced in accessing opportunities and resources as a result of Chinese culture's traditional low esteem for merchants and the government's continuing preference for a state-dominated economy. Family firms have so far been able to grow disproportionately rapidly in China's economy because, by leveraging the shared interests and dedication of immediate and extended family members, they have been able to achieve lower cost and higher efficiency, respond quickly to market changes, and expand social and political networks. These nonmarket strategies, however, also have a dark side. Furthermore, as the liberalization of China's economy deepens, competition must rely critically on market strategies such as innovation, alliances, and internationalization. The proposed research agenda addresses these future challenges as well as some research questions unique to Chinese family businesses. [ABSTRACT FROM AUTHOR]

Economic cooperation between Hong Kong and Mainland China, especially Guangdong province, has flourished since the establishment of the Hong Kong Special Administrative Region in 1997. The landmark is the conclusion of the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Mainland in 2003. CEPA covers liberalisation of trade in goods, liberalisation of trade in services, mutual recognition of professional qualifications, and other trade facilitation measures. This paper uses the collaborative governance regime framework to analyse the economic cooperation between Hong Kong and Mainland China under CEPA. This case shows that if there are environmental conditions generating incentives for both parties to cooperate, a committed leadership on both sides to drive the regime, and institutional arrangements that could facilitate the collaborative dynamics, effective collaboration between players from different political and institutional backgrounds can still be achieved. [ABSTRACT FROM PUBLISHER]

Following market liberalization, the vehicle population in China has increased dramatically over the past few decades. This paper examines the causal impact of the opening of a heavily used high speed rail line connecting two megacities in China in 2015, Chengdu and Chongqing, on air pollution. We use high-frequency and high spatial resolution data to track pollution along major highways linking the two cities. Our approach involves the use of a novel augmented regression discontinuity in time approach that incorporates machine learning to inform our specification choice in the first stage. Our estimates show that CO is reduced by 6.4% and PM 2.5 by 7.1% along the main affected highway. These findings are supported using a difference-in-differences approach. [ABSTRACT FROM AUTHOR]

China's markets gained 3.86% around December 4, 2012, when the Party announced anticorruption reforms. State-owned enterprises (SOEs) with higher past entertainment and travel costs (ETC) gained more. NonSOEs gained in more liberalized provinces, especially those with high past ETC, productivity, growth opportunities, and external financing. NonSOEs lost in the least liberalized provinces, especially those with high past ETC. These findings support investors' expect reduced official corruption to create value overall, reduce SOE waste, lower bureaucratic barriers to efficient resource allocation where markets function, and impede business in unliberalized provinces, where "getting things done" still requires investment in greasing bureaucratic gears. [ABSTRACT FROM AUTHOR]

This paper analyzes the impact of relaxing fertility controls and expanding social security in China. We develop an overlapping generations model in which fertility decisions and capital accumulation are endogenously determined in the presence of social security. In our model, children are an alternative savings technology-as they transfer resources to their retired parents. Important feedback links arise between fertility and social security variables: an expansion of social security benefits reduces fertility-partially offsetting the effects of relaxing the one-child policy. The feedback loop between social security variables and fertility suggests that abandoning fertility restrictions may not be as effective in helping to finance China's intended pension reform, especially if children are an important source of old-age support. The sustainability of the pension system is particularly at risk in the event of a growth slowdown. The objective of pension reforms may also be incongruent with other reforms, such as financial liberalization and financial integration. [ABSTRACT FROM AUTHOR]

Neomercantilism is commonly portrayed as a central mechanism of China's global agribusiness engagement. It implies reordering the international food regime by moving away from financial and trade liberalization and securing stable import supplies and price controls under state support. However, this article raises an alternative interpretation through an empirical‐rich investigation of the prominence of the state‐owned China Oil and Foodstuffs Corporation (COFCO) in the soybean commodity chain. The article draws upon analyses of the Chinese state and international food regime to demonstrate that recent changes in state‐capital relations during the Xi Jinping administration propelled forms of capital accumulation based on financial speculation and shareholder values. I conclude that state‐driven internationalization has placed Chinese agribusiness in an advantageous position within global finance rather than challenging it through agrarian neomercantilist strategies. [ABSTRACT FROM AUTHOR]

In the US, the negative consequences of increased trade with China, and of globalisation in general, have been associated with a turn towards populism and ultimately the election of Donald Trump as president in November 2016. [ABSTRACT FROM AUTHOR]

Based on the implementation of Shanghai-Hong Kong Stock Connect in China, this paper examines the effects of financial liberalization on stock market comovement using both multifractal detrended fluctuation analysis (MF-DFA) and multifractal detrended cross-correlation analysis (MF-DCCA) methods. Results based on MF-DFA confirm the multifractality of Shanghai and Hong Kong stock markets, and the market efficiency of Shanghai stock market increased after the implementation of this connect program. Besides, analysis based on MF-DCCA has verified the existence of persistent cross-correlation between Shanghai and Hong Kong stock markets, and the cross-correlation gets stronger after the launch of this liberalization program. Finally, we find that fat-tail distribution is the main source of multifractality in the cross-correlations before the stock connect program, while long-range correlation contributes to the multifractality after this program. [ABSTRACT FROM AUTHOR]

In this paper we investigate the trend and composition of India-China trade in global and bilateral market. Applying Balassa RCA index, we find that there is a significant growth in products with respect to comparative advantage in the export basket of India and China. We also find a meaningful change in export structure of China from labour intensive to capital intensive products where India is lagging. In case of China the growth and changes in export structure became visible after accession to WTO while it has been observed post liberalisation in the case of India. The nature of change is found to be disruptive in China while gradual in India. India and China engage significantly more in inter-industry trade than intra-industry as lesser number of comparative advantage products are overlapping in their export baskets. The big gap between India's export and import with China has become a challenge. Therefore, India needs to focus on high comparative advantageous products and convert it into bilateral market in order to reduce the trade gap without hurting bilateral trade growth. [ABSTRACT FROM AUTHOR]

In much of the 20th century, the welfare state was regarded as the fundamental means for Western countries to embrace economic liberalization through domestic social contracts, whereas the developmental state was credited for East Asian economies' growth with equality. However, economic globalization and technological changes have posed serious challenges for both models with respect to containing increasing inequality and achieving inclusive growth. China's performance in inclusive growth has demonstrated distinct features that differ from the approaches of Western welfare states and East Asian developmental states. China has relied less on conventional means of redistribution, such as taxes and transfers. Instead, it has combined growth-oriented industrial policies, public infrastructure investment, and state-mediated poverty alleviation programs. China's development strategy reflects a "third way" perspective on inclusive growth that might be instructive for latecomer economies. [ABSTRACT FROM AUTHOR]

Financial constraint is a major obstacle for firm growth in emerging economies. Using a World Business Environment Survey (WEBS) dataset, we find that formal financing constraint hampers firm growth. Small firms suffer more than large ones from financial constraint, whereas there is no significant difference between state-owned enterprises (SOEs) and non-SOEs. Our results are robust when we use collateral constraint as an instrumental variable for formal financial constraint. We provide supporting evidence for the promulgation of financial liberalization, which can help alleviate financial constraint, enhance firm growth, and therefore improve economic resilience and prevent financial risks in an emerging economy such as China. [ABSTRACT FROM AUTHOR]

Financial support (capital) and technological improvement are the crucial factors in any industry, and they are also the major factors of marine economics. However, the government has supplied a great deal of capital and the marine economy has been deeply explored and researched using advanced technology. The marine industry is still not the mainstay industry in Chinese industry. Considering this, the issues of how to address financial support, technical improvement and marine economics are common foci within the government and society, especially regarding the economic growth of China. It is necessary to develop the marine economy. However, many scholars only pay attention to the aspects of marine financial support, marine technology and marine economic development separately, and no scholars have studied the relationship between the three at present. Therefore, this article establishes a model to conduct empirical tests regarding the relationship between financial support, technological improvement and marine economic development using panel data from 11 coastal regions in China. The results show that financial support has a negative impact on technological improvement, but it has a positive impact on marine economic efficiency. Technological improvement has a positive impact on financial support and marine economic efficiency. However, marine economic efficiency has a negative impact on financial support, and it has a positive impact on technological improvement. Through impulse response analysis, there is a significant correlation between them. This article calculates marine economic efficiency with the SBM-DEA model and analyzes relationships with the BVAR model, which is proposed to improve the development and efficiency of the marine economy. Financial support should be used in the rather important parts of the marine economy so that the marine economy can achieve returns in the short-term and attract more circulating funds to enter the marine economy, which impacts the long-term stable and sustainable growth of the marine economy. Moreover, financial support, financial liberalization, technological research and technological creation in the progress of marine economic construction should focus on effectively using circulating funds, which provides geo-advantages and aids in building a new marine economic ecological circle. [ABSTRACT FROM AUTHOR]

China is in the process of undertaking financial reform in many directions-introducing small private banks in the banking sector, promoting bond and equity finance, increasing exchange rate and capital account liberalization, enhancing financial regulation, and promoting the efficiency and scope of finance. While some foreign analysts have focused on the importance of liberalizing the exchange rate and capital account, we believe these aspects of reform take second priority to traditional banking reform, even though the ongoing process in practice is to slowly implement reforms in all areas at once. [ABSTRACT FROM AUTHOR]

This paper examines China's considerations in reaching the 2004 and 2007 Air Service Agreement Protocols with the United States (US) and the impacts of such policy on the China–US market from the perspective of China. Analysis shows that the 2004 and 2007 protocols have profound impacts on the China–US market. The two protocols have been associated with phenomenal traffic growth and intensified competition. Passengers also benefit from much more choice in terms of both airlines and routing. Over time, Chinese carriers' operating performance and financial performance have gradually improved after the liberalization expressed in the protocols. However, the industry's hub-building initiatives are still seriously challenged by competing hubs in Seoul and Tokyo which have diverted substantial number of passengers moving between the China and US markets. Such issues have to be addressed in order to create a win–win outcome for both countries. [ABSTRACT FROM AUTHOR]

The paper sheds light on the interplay between monetary policy, the commercial banking sector and the shadow banking sector in mainland China by means of a nonlinear stochastic general equilibrium (DSGE) model with occasionally binding constraints. In particular, we analyze the impacts of interest rate liberalization on monetary policy transmission as well as the dynamics of the parallel shadow banking sector. Comparison of various interest rate liberalization scenarios reveals that monetary policy results in increased feed-through to the lending and investment under complete liberalization. Furthermore, tighter regulation of interest rates in the commercial banking sector in China leads to an increase in loans provided by the shadow banking sector. [ABSTRACT FROM AUTHOR]

This paper analyses the financial distortions - growth nexus in China using a tractable general equilibrium modelling approach in which heterogeneous private and state-owned firms interact. The focal points of the model are financial frictions and reallocations of factors of production across firms. The calibrated version of the model elicits the important message that the adoption of a comprehensive financial market reform package abolishing financial distortions will lead to substantial output gains. Thus, structural policies leading to more efficient allocation of factors of production will remain a key policy challenge in China in the years to come. [ABSTRACT FROM AUTHOR]

Summary Public–private partnership (PPP) has gained popularity during the market-oriented reforms in China’s urban infrastructure sectors. This paper explores how city characteristics, spatial pressures, and other institutional forces condition the extent of liberalization reforms in local infrastructure markets. The findings advance the policy diffusion literature by suggesting that the different diffusion mechanisms not only function independently, but also moderate each other’s effects under certain conditions. Specifically, this research finds that the effects of peer pressure undermine the effects of spatial exposure, and the influence of provincial government reduces the effectiveness of peer pressure and epistemic influences. [ABSTRACT FROM AUTHOR]

Summary This paper examines how industrial policy – specifically tariff liberalization and tax subsidies – affects the magnitude and direction of FDI spillovers. We examine these spillover effects across the diverse ownership structure of China’s manufacturing sector for 1998 through 2007. We find that tariff reforms, particularly tariff reductions associated with China’s WTO ascension, increased the productivity impacts of FDI’s backward spillovers. Tax policy – both corporate income and VAT subsidies – has seemingly drawn FDI into strategic industries that spawn significant vertical spillovers. We conclude that liberalization measures during the critical 1998–2007 period on balance served to enhance productivity growth in Chinese industry. [ABSTRACT FROM AUTHOR]

China has enjoyed high saving and high investment ratios by international standards. However, mainstream economists argue that China suffers from inefficient investment due to excessive state interventions. The mainstream argument is in conflict with the observed high output-capital ratios and rates of return on capital in China before 2008. China's investment efficiency has deteriorated since 2008 despite the progress of financial liberalization. In this essay, we used provincial-level panel data from 1993 to 2017 and the technique of General Method of Moments to examine how China's saving and investment respond to output-capital ratio, gross profit share, and real interest rate. We find that output-capital ratio has positive effects on saving and investment in all three periods (1993–2000, 2001–2008, 2009–2017); gross profit share has positive effects on saving; but gross profit share has negative and significant impact on investment for the period 2009–2017. We find that real interest rate has significant and negative impact on China's saving for the period 1993–2000, a result that is inconsistent with the neoclassical theory of saving. On the other hand, real interest rate has a significant and negative impact on investment and a significant and positive impact on saving for the period 2009–2017, consistent with what should happen in a liberalized financial market according to neoclassical economics. These findings suggest that China's financial market may have become sufficiently liberalized to induce the "correct" behavior from businesses and households but the "correct" behavior has not yet led to improvement in China's investment efficiency. [ABSTRACT FROM AUTHOR]

This article investigates how political connection shapes firm owner preference on economic openness and international competition in China, a topic that is getting increasingly relevant today amid China's trade disputes with its trading partners over the nature of the country's business-government relations. Politically connected entrepreneurs and their enterprises usually exploit and benefit from their political resources, but this can lead to both supporting and opposing views on expanding trade liberalization. To solve this puzzle, this article proposes a theory that focuses on (1) a selection effect of political connection on firm productivity and (2) trade-related institutional development in China. With survey data on China joining the world trade organization, I develop a modified Bayesian item response theory model to measure political connection and find that Chinese politically connected entrepreneurs held a less supportive view before joining the world trade organization than their less connected counterparts. This suggests an anticipation that the imminent opening would neutralize the privileges of politically connected entrepreneurs. By looking at trade liberalization, this article offers a firm level analysis that political opposition to sustained economic reform may derive from the short-term winners, instead of the losers, in transitional societies. [ABSTRACT FROM AUTHOR]

We utilize an unprecedented liberalization episode in China, namely its World Trade Organization accession, to estimate the impact of trade liberalization on firm markup and markup distribution. Using a panel data quantile regression, we show that the impact of tariff reduction on markup can be heterogeneous to different firms, resulting in an unevenly distributed markup change across firms. In particular, reduction in output tariff reduces markup and markup dispersion, while reduction in input tariff increases markup and markup dispersion. [ABSTRACT FROM AUTHOR]

This study examines China's influence in the Asia–Pacific stock markets by focusing on spillover effects and market integration and employs how the financial crises and financial liberalization affect the relationship among these markets. Based on the series of studies of Diebold and Yilmaz (2009, 2012, 2015), this study employs the generalized vector autoregressive framework to examine the spillover effects among the main Asia–Pacific stock markets. The multifactor R-squared measure proposed by Pukthuanthong and Roll (2009) is employed to examine the market integration of Chinese stock market. The results indicate that spillover effects and market integration tend to increase, indicating that China stock market is playing a more important role in the Asia–Pacific stock markets. This study provides more evidence that financial crises and financial liberalization can strengthen spillover effects and market integration. [ABSTRACT FROM AUTHOR]

Currently, the world system is in a state of complex crisis and transformation. The overall influence of its US-led centre has weakened, and most of the global periphery is in either chaos or misery. The mechanisms of the global accumulation of capital prevent new global leaders from emerging. Until now, China's economic ascent has been based on managed market forces and sovereign monetary policy. However, if the liberalisation of capital flows in China continues, the country's financial independence might be lost. This article explains how the nodal crisis of global capitalism has evolved, how far the marketisation and financial liberalisation of the Chinese economy has gone and the largest obstacles to China further strengthening its influence on the world order. The author concludes that China could play a positive role as a new superpower in constructing a world beyond capitalism, if it does not give up the socialist project, keeps market forces under control, maintains accumulation without dispossession, preserves its financial independence and makes alliances with other nations on the global (semi-)periphery. The latter is particularly important, as the present hegemonic centre will not give up its position peacefully. [ABSTRACT FROM AUTHOR]

We examine the short-term effects of the liberalization of the Chinese stock market on returns. We find a positive and significant abnormal return associated with the announcement of the liberalization of the Shanghai Stock Exchange. Exploiting  features of the reform, we are able to compare stocks directly and indirectly affected by the liberalization. We find that all stock prices reflect this announcement premium equally, suggesting that the premium does not reflect an increase in expected liquidity. We further find that observed liquidity, as measured by volume and price impact, did not increase following the liberalization. We conclude that the observed premium reflects a diversification benefit for Chinese investors. [ABSTRACT FROM AUTHOR]

Despite the diversity of China's financial system and the reforms that have already occurred, the system is heavily bank-dominated, and the Big Four extend almost half of all loans in China. These banks often extend loans to state-owned enterprises and in recent years have had the largest proportion of nonperforming loans (NPLs). These large, state-owned banks have been shown to be less efficient than other types of banks (such as joint-stock or city-owned banks) in China. Although interest rate liberalization has marked a major step toward financial marketization, implicit government guarantees, inaccurate credit ratings, and segmented markets have prevented the free movement of interest rates in unleashing market forces. It is argued that deteriorating economic indicators forces the government to focus on ensuring sufficient liquidity in the economy. Hitting China's ever-present growth target appears to be a priority that supersedes reform objectives in the financial sector. [ABSTRACT FROM AUTHOR]

In this article, we investigate the effect of removing the bank lending rate floor in 2013 on the market for loans in China. Given the backdrop of gradual liberalization of financial markets, we analyze data from 2008 to 2018 to gauge whether the interest rate on securities of different maturities have been materially affected by this act of partial liberalization. We find that this action has affected short-term repo (repurchase agreements) interest rates but not long-term interest rates. There is also evidence that the efficiency of lending markets has improved, but the health of the banking sector overall seems to have deteriorated, with lower capital but higher nonperforming loans. [ABSTRACT FROM AUTHOR]

The article focuses on fiscal implications of population aging and social sector expenditure in China. Topics include a new social benefit regime is now taking shape, including expanded healthcare coverage for both the rural and urban population, and many of those efforts are to address the social ills which emerged in China's economic liberalization, such as rising inequality.

Abstract: I propose in this article a new interpretation of the evolution of post‐communist systems by comparing the evolutions in Central and Eastern Europe and in China. Transition is reinterpreted as the result of a collapse of communist state structures in Central and Eastern Europe and, in China, in contrast, as the result of the will to prevent such an outcome. This reconceptualization helps us to better understand the emergence of bad institutions and corruption in Eastern Europe under the market economy as well as the absence of political liberalization in China and the strengthening of the power of the Communist Party in recent years. [ABSTRACT FROM AUTHOR]