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271. China and the United States

Author:
John H. Makin
Publication Date:
12-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
A new truth of geopolitics has emerged during 2009. It is that the complex and rapidly evolving Sino-American relationship has become the most important bilateral relationship either country has. To this observation, made recently by William C. McCahill Jr. in the November 13 special issue of The China Report, must be added another claim: the course of the Sino-American relationship in both the economic and the political spheres will play a growing role in determining the levels of global economic and geopolitical stability. Trips like President Barack Obama's three-day visit to Shanghai and Beijing November 15–17 will probably be made with increasing frequency in coming years.
Topic:
International Relations, Foreign Policy, Diplomacy, International Political Economy, International Trade and Finance, and Bilateral Relations
Political Geography:
United States, China, America, Shanghai, and Beijing

272. Inflation Scare: Crazy but Real

Author:
John H. Makin
Publication Date:
07-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The recent steps by the Federal Reserve to preempt deflation have—ironically and unexpectedly— prompted a surge in inflation fears both inside the United States and abroad, especially in China. Specifically, the Fed's measures to go beyond the stimulus inherent in a zero percent federal funds rate by purchasing Treasury and mortgage securities has conjured visions—especially in the eyes of major buyers of Treasury securities, China foremost— of massive money printing to underwrite trillions of dollars of additional government borrowing at low interest rates. As markets have shown, if that were the Fed's intention—which it decidedly is not—the effort would fail because excessive money printing—creating a money supply larger than the quantity of money demanded— would push up interest rates as inflation expectations rose.
Topic:
Economics, International Political Economy, International Trade and Finance, and Monetary Policy
Political Geography:
United States and China

273. Three Lessons from the Financial Crisis

Author:
John H. Makin
Publication Date:
09-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
More than two years have passed since the U.S. housing bubble burst. That event ushered in a financial crisis that was not only intense but also stunning. So stunning in fact, that in August of last year, just a month before the collapse of Lehman Brothers, the global economy was close to a crisis worthy of comparison with the Great Depression, yet neither the markets nor the Federal Reserve had much of an inkling of what was to come. The Standard and Poor's (S) 500 Index had come down to about 1,300 from its October 2007 high of 1,576. Positive growth had just been reported for the U.S. economy during the second quarter of 2008 at an annual rate of 2.8 percent (later revised down to 1.5 percent). Almost one percentage point of that growth came from U.S. consumption, and government spending also contributed. The wave of relief after the Bear Stearns scare in March 2008 had provided a nice boost to the economy and to markets. That boost was further enhanced by the substantial contribution to growth from net exports (2.9 percentage points) thanks to what was, then, continuing strength in the global economy, especially in China, which had reported blistering 10.1 percent year-over-year growth in the second quarter of 2008. These and other positive components more than offset a drag from inventories and residential investment. In short, the real economy had not shown much evidence of damage emanating from the chaos that was churning in the financial sector.
Topic:
Economics, International Political Economy, International Trade and Finance, Markets, Monetary Policy, and Financial Crisis
Political Geography:
United States and China

274. China and the Global Environment: Learning from the Past, Anticipating the Future

Author:
Katherine Morton
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Lowy Institute for International Policy
Abstract:
One of the greatest dilemmas of the early 21st century is how to satisfy the demands of densely populated states in the context of a global environmental crisis. As the world's biggest polluter and prominent emerging world power, China is at the centre of the global debate. Worsening pollution trends, increasing resource scarcity, and widespread ecological degradation have serious implications for China's ongoing modernisation drive. The spillover effects across borders also pose a challenge to its relations with the outside world. Although China's per capita CO2 emissions are low relative to the United States and Australia, they already exceed the world average. In 2007, China overtook the United States to become the world's largest aggregate emitter.
Topic:
Environment, Government, International Trade and Finance, and Reform
Political Geography:
China, Asia, and Australia

275. China Rising: Peace, Power, and Order in East Asia

Author:
David C. Kang
Publication Date:
12-2009
Content Type:
Book
Institution:
Columbia University Press
Abstract:
Throughout the past three decades East Asia has seen more peace and stability than at any time since the Opium Wars of 1839-1841. During this period China has rapidly emerged as a major regional power, averaging over nine percent economic growth per year since the introduction of its market reforms in 1978. Foreign businesses have flocked to invest in China, and Chinese exports have begun to flood the world. China is modernizing its military, has joined numerous regional and international institutions, and plays an increasingly visible role in international politics. In response to this growth, other states in East Asia have moved to strengthen their military, economic, and diplomatic relations with China. But why have these countries accommodated rather than balanced China's rise? David C. Kang believes certain preferences and beliefs are responsible for maintaining stability in East Asia. Kang's research shows how East Asian states have grown closer to China, with little evidence that the region is rupturing. Rising powers present opportunities as well as threats, and the economic benefits and military threat China poses for its regional neighbors are both potentially huge; however, East Asian states see substantially more advantage than danger in China's rise, making the region more stable, not less. Furthermore, although East Asian states do not unequivocally welcome China in all areas, they are willing to defer judgment regarding what China wants and what its role in East Asia will become. They believe that a strong China stabilizes East Asia, while a weak China tempts other states to try to control the region. Many scholars downplay the role of ideas and suggest that a rising China will be a destabilizing force in the region, but Kang's provocative argument reveals the flaws in contemporary views of China and the international relations of East Asia and offers a new understanding of the importance of sound U.S. policy in the region.
Topic:
Conflict Prevention, Arms Control and Proliferation, International Trade and Finance, Political Economy, and Power Politics
Political Geography:
China and East Asia
Publication Identifier:
9780231141888
Publication Identifier Type:
ISBN

276. Are Chinese Exports Sensitive to Changes in the Exchange Rate?

Author:
Shaghil Ahmed
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper builds a model of two types of Chinese exports, those processed and assembled laregely from imported inputs ("processed" exports) and "non- processed" exports. Based on this model, the sensitivity of Chinese exports to exchange rate changes is empirically examined. Unlike previous work, the estimation period includes the net real appreciation of the renminbi that has occurredoverthepastthreeyears. Theresultsshowthatgreaterexchangerate appreciation dampens export growth, both for non-processed and processed ex- ports, with the estimated cumulative price elasticity being substantially greater thanunity. WhenthesourceoftheincreaseintheChineserealexchangerateis appreciations against the currencies of other emerging Asian trading partners, the e§ect on processing exports is positive but insignÖcant, while the e§ect on non-processing exports is signiÖcantly negative. By contrast, when the source of the increase in the Chinese real exchange rate is appreciation against Chinaís advanced-economy trading partners, the e§ects on both types of exports are negative. These results are consistent with the predictions of the theoretical model. Counterfactualsimulationsbasedontheestimatedmodelstronglysug- gest that if the trade-weighted real renminbi had appreciated at an annual rate of 10 percent per quarter since mid-2005, Chinese real exports would have been roughly 30 percent lower today. Thus greater exchange rate áexibility could contribute to lowering Chinaís huge trade surplus through restraining growth of exports.
Topic:
Economics, International Trade and Finance, Exchange Rate Policy, and Exports
Political Geography:
China and Asia

277. China's Economic Rise -- Fact and Fiction

Author:
Albert Keidel
Publication Date:
07-2008
Content Type:
Policy Brief
Institution:
Carnegie Endowment for International Peace
Abstract:
China's economy will surpass that of the United States by 2035 and be twice its size by midcentury, a new report by Albert Keidel concludes. China's rapid growth is driven by domestic demand—not exports—and will sustain high single-digit growth rates well into this century. In China's Economic Rise—Fact and Fiction, Keidel examines China's likely economic trajectory and its implications for global commercial, institutional, and military leadership.
Topic:
Economics, Globalization, and International Trade and Finance
Political Geography:
United States, China, and Asia

278. Export Productivity, Finance, and Economic Growth: Are the Southern Engines of Growth Different?

Author:
Alessandra Guariglia and Amelia U. Santos-Paulino
Publication Date:
03-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Using a panel of 139 countries over the period 1992-2003, we analyse the links between export productivity, economic growth and financial development indicators. We then investigate whether the links observed in China, India and Brazil systematically differ from those observed in other countries in the sample. We find that both GDP per capita and investment generally exert a positive and significant effect on export productivity. Except for Brazil, financial development is not an important determinant of export productivity. Moreover, except for Brazil, export productivity plays a positive effect on growth, and so does financial development for both China and Brazil, but not for India. Finally, in both India and Brazil, FDI is negatively associated with growth.
Topic:
International Trade and Finance
Political Geography:
China, India, Asia, Brazil, and South America

279. Export Productivity and Specialization in China, Brazil, India and South Africa

Author:
Amelia U. Santos-Paulino
Publication Date:
03-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper analyses the patterns of export productivity and trade specialization profiles in the China, Brazil, India and South Africa, and in other regional groupings. In doing so, the investigation calculates a time varying export productivity measure using highly disaggregated product categories. The findings indicate that export productivity is mainly determined by real income and human capital endowments. Importantly, the study reveals significant differences in the export productivity and specialization patterns of countries with comparable per capita income levels. For instance, China's export productivity and implied export sophistication is in line with that of countries with higher per capita incomes, including some OECD industrial economies.
Topic:
Economics and International Trade and Finance
Political Geography:
Africa, China, India, Asia, South Africa, Brazil, and South America

280. Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis

Author:
Sumei Tang, E. A. Selvanathan, and S. Selvanathan
Publication Date:
02-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In this paper, we investigate the causal link between foreign direct investment (FDI), domestic investment and economic growth in China for the period 1988-2003. Towards this purpose, a multivariate VAR system with error correction model (ECM) and the innovation accounting (variance decomposition and impulse response function analysis) techniques are used. The results show that while there is a bi-directional causality between domestic investment and economic growth, there is only a single-directional causality from FDI to domestic investment and to economic growth. Rather than crowding out domestic investment, FDI is found to be complementary with domestic investment. Thus, FDI has not only assisted in overcoming shortage of capital, it has also stimulated economic growth through complementing domestic investment in China.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
China