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2711. China: Toward a Consumption-Driven Growth Path

Author:
Nicholas R. Lardy
Publication Date:
10-2006
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In December 2004 China's top political leadership agreed to fundamentally alter the country's growth strategy. In place of investment and export-led development, they endorsed transitioning to a growth path that relied more on expanding domestic consumption. Since 2004, China's top leadership, most notably Premier Wen Jiaobao in his speech to the National People's Congress in the spring of 2006, has reiterated the goal of strengthening domestic consumption as a major source of economic growth. This policy brief examines the reasons underlying the leadership decision, the implications of this transition for the United States and the global economy, and the steps that have been taken to embark on the new growth path.
Topic:
International Relations, Development, and Economics
Political Geography:
United States, China, and Asia

2712. East of the Middle East: The Shanghai Cooperation Organization and U.S. security implications

Author:
Tim Murphy
Publication Date:
12-2006
Content Type:
Working Paper
Institution:
Center for Defense Information
Abstract:
The war in Afghanistan represented an eastward shift in the United States' international focus. Previously concentrated on the Middle East, the United States has reconfigured its foreign policy directives to include interests east of the Middle East. The shift was long overdue. Central Asia is a rising regional security concern, and Chinese and Russian actions therein have cultivated robust political ties. Resulting cooperatives and agreements promote Chinese and Russian regional objectives. The Shanghai Cooperation Organization (SCO) originally consisted of five Central Asian and Asian countries (the Shanghai Five), ostensibly to unify signatories on economic, social and political platforms. However, the SCO is often a proxy to advance Chinese and Russian interests.
Topic:
Security and Weapons of Mass Destruction
Political Geography:
Afghanistan, Russia, United States, China, Europe, Middle East, and Asia

2713. Fear of China is overplayed

Author:
Victoria Samson
Publication Date:
03-2006
Content Type:
Working Paper
Institution:
Center for Defense Information
Abstract:
WASHINGTON -China is rapidly becoming, to many U.S. conservatives, the primary menace to U.S. national security. In fact, the attitude seems to be that China is the new Soviet bear. This mentality would have you believe that any gains by China are directly at the expense of the United States. But this attitude is unsubstantiated and based largely on racism -- which it would behoove the United States to drop immediately.
Topic:
Security and Science and Technology
Political Geography:
United States, China, and Asia

2714. Struggle for the Future - The Poison of Populism and Democracy's Cure

Author:
Robert F. Noreiga
Publication Date:
12-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
While the world's attention is focused on a struggling Iraq and a rising China, a battle for the heart and soul of the Americas is being waged closer to home. A simplistic account might describe this confrontation as a tug of war between U.S. president George W. Bush's vision and that of his self-appointed nemesis, Venezuelan president Hugo Chávez. Equally misleading are characterizations that describe the showdown as one between left and right, rich and poor, north and south. But this is not a battle between two powerful leaders or between ideologies of the left and right. The contest being waged in the Western Hemisphere is about democracy itself: can it deliver the goods for impatient publics? On one side are leaders from the left and right who see democratic institutions and the rule of law as indispensable to prosperity and liberty. On the other are those who treat democracy as an inconvenience and see free markets as a threat.
Topic:
Democratization, Development, and Politics
Political Geography:
China and Asia

2715. China Needs to Float the Yuan--for China's Sake

Author:
John H. Makin
Publication Date:
05-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In their April 21 press release following their spring meeting in Washington, D.C., the G7 finance ministers and central bank governors added an important sentence to their usual bland statement that exchange rates should reflect economic fundamentals: Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur. In their April 21 press release following their spring meeting in Washington, D.C., the G7 finance ministers and central bank governors added an important sentence to their usual bland statement that exchange rates should reflect economic fundamentals: Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur. The G7, significantly, also called for an increased role for the International Monetary Fund (IMF) to help countries, including those in the G7 but also China and others in emerging Asia, meet the macroeconomic and financial policy challenge of globalization. Specifically, the G7 supported the strengthening of IMF surveillance, including through increased emphasis on the consistency of exchange rate policies with domestic policies and a market-based international monetary system and on the spillover effects of domestic policies on other countries. The G7s endorsement of greater exchange-rate flexibility and of an enhanced IMF role in implementing it is important. The IMF, having been founded after World War II to maintain stable exchange rates among major economies, has become an advocate on behalf of the major economies of global exchange-rate flexibility. The lesson regarding the need for G7 currency flexibility was learned after Americas August 1971 abandonment of fixed exchange rates, which was followed by a decade of adjustments to higher oil prices that would have wreaked havoc under fixed exchange rates. The lesson for needed currency flexibility in emerging markets was learned after the disastrous attempt, fostered in part by the IMF, to impose fixed exchange rates during the Asian and Russian crises of 1997 and 1998, which prolonged and exacerbated the market gyrations caused by the crises. Sadly, China response to the G7-IMF call for greater currency flexibility has been both negative and misguided. China's foolishly insouciant attitude, captured in a comment by Zhou Xiao-chuan, governor of the Peoples Bank of China, carries with it serious risks both for China and for the world economy. Zhous remark was quoted on April 24 in the Wall Street Journal: [T]he speed of moving forward (on yuan appreciation) is OK. Its good for China and welcomed by many other countries. China's currency has appreciated only 1.2 percent since its initial 2.1 percent revaluation last July 21. That is less than OK. The total 3.3 percent revaluation against the dollar really represents no adjustment at all in view of the 1 to 2 percent inflation differential (lower in China) that has persisted between the United States and China over the past two years. If China had allowed prices to rise instead of mandating caps on prices of important commodities like gasoline, there would be less pressure for the yuan to rise in value. Both the intervention to cap the yuans appreciation and the capping of domestic prices are building up potentially disruptive inflation pressure inside China, as we shall see below. The most dangerous aspect of China's increased efforts to prevent yuan appreciation, as measured by accelerating reserve accumulation over the past year, is the rising pool of liquidity inside China that has resulted. The level of excess reserves in Chinese banks is now larger, relative to GDP, than the level of excess reserves built up in Japan from 2001 to 2005 during the years of a prolonged, desperate struggle against deflation. China's currency undervaluation, coupled with the massive liquidity buildup in its banking system, has resulted in excessive investment in China's state enterprises that have close traditional ties with the liquidity-sodden banks. The usual Chinese response to excess reserves has been to boost reserve requirements for its banks. But to absorb the huge pool of excess reserves now in place, reserve requirements would have to be boosted by 5 percentage points to 12.5 per-cent, going far beyond previous moves of 0.5 to 1 percentage point, and far beyond what China's shaky, insolvent banks could endure. When the Peoples Bank of China boosted its one-year benchmark lending rate on April 26 by 27 basis points (to 5.85 percent), it took a tiny step that will do little to tighten China's monetary stance.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
United States, China, and Washington

2716. Chinese-Saudi Cooperation: Oil but also Missiles

Author:
Simon Henderson
Publication Date:
04-2006
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
On April 22, two days after a reportedly unproductive meeting with President George W. Bush in Washington, President Hu Jintao of China will arrive in Saudi Arabia. Relations between the two countries are an increasingly important part of world diplomacy. In energy, China is the leading customer of Saudi Arabia, the world's largest oil exporter. On the military front, the kingdom bought now-obsolete ballistic missiles with a 1,500-mile range from China in the 1980s; the Saudis are reportedly interested in replacing them with more modern Chinese-designed missiles, perhaps with Pakistani nuclear warheads. Unlike his American visit, Hu's trip to the kingdom will unambiguously be given the status of a state visit. It is especially significant because King Abdullah of Saudi Arabia visited China as recently as January this year, the first visit by a Saudi monarch since diplomatic relations were established in 1990 and Abdullah's first trip outside the Middle East since becoming monarch last August. During the January meeting, five agreements covering economic cooperation trade and double taxation as well as an energy pact were signed. Energy is expected to be central to the latest talks, though a Chinese Foreign Ministry spokesman noted it was “not the only domain” of cooperation.
Topic:
Diplomacy and Weapons of Mass Destruction
Political Geography:
Pakistan, China, America, Middle East, and Saudi Arabia

2717. Poverty, Pro-Poor Growth and Mobility: A Decomposition Framework with Application to China

Author:
Guanghua Wan and Yin Zhang
Publication Date:
12-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper proposes a framework for incorporating longitudinal distributional changes into poverty decomposition. It is shown that changes in the Sen-Shorrocks-Thon index over time can be decomposed into two components—one component reflects the progressivity of income growth among the original poor, the other measures the extent of downward mobility experienced by the incumbent poor. The decomposition is applied to appraising poverty trends in China between 1988 and 1996. The results indicate that the proposed decomposition can complement the widely-used growthdistribution decomposition in providing insights into poverty dynamics.
Topic:
Development and Poverty
Political Geography:
China and Asia

2718. China's Regional Inequality in Innovation Capability, 1995-2004

Author:
Guanghua Wan and Peilei Fan
Publication Date:
12-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Relying on a recently developed decomposition framework, this paper explores spatial distribution of innovation capability in China. It is found that at the regional level, China's inequality in innovation capability increased from 1995 to 2004. At the provincial level, the inequality decreased from1995 to 2000, but increased from 2000 to 2004. Location, industrialization and urbanization, human capital, and openness (foreign direct investment) are significant contributors to the inequality in innovation capability. Unbalanced development in high-tech parks exerts a growing explanatory power in driving innovation disparity, which implies that institutional factor plays a direct role.
Topic:
Civil Society and Demographics
Political Geography:
China and Asia

2719. Poverty Reduction in China: Trends and Causes

Author:
Guanghua Wan and Yin Zhang
Publication Date:
12-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Applying the Shapley decomposition to unit-record household survey data, this paper investigates the trends and causes of poverty in China in the 1990s. The changes in poverty trends are attributed to two proximate causes; income growth and shifts in relative income distribution. The Foster-Greer-Thorbecke measures are computed and decomposed, with different datasets and alternative assumptions about poverty lines and equivalence. Among the robust results are: (i) both income growth and favourable distributional changes can explain China's remarkable achievement in combating poverty in rural areas in the first half of the 1990s; (2) in the second half of the 1990s, both rural and urban China suffered from rapidly rising inequality and stagnant income growth, leading to a slow-down in poverty reduction, even reversal of poverty trend.
Topic:
Development, Economics, and Poverty
Political Geography:
China and Asia

2720. Gender Wage Differentials in China's Urban Labour Market

Author:
Fang Cai and Meiyan Wang
Publication Date:
11-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper describes and decomposes wage differences between female and male workers. The results indicate that females receive low wages because of unequal pay within sectors, and that the wage gap caused by the difference in sectoral attainment is small. The results also reveal that a lion's share of the wage differential between females and males is attributable to discrimination rather than to the human capital difference between the genders. Eliminating discriminations against females with a focus on intra-sectoral inequality is crucial for reducing female/male wage differentials.
Topic:
International Relations, Development, and Political Economy
Political Geography:
China and Asia