A Bridge on Economic Issues between China and the World
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The Price of Growing Like China: Higher Income Risks and Less Consumption Insurance
Raül Santaeulàlia-Llopis, Yu Zheng, Jun 20, 2018Widening income inequality in China has prompted President Xi Jinping to shift focus and to emphasize the fostering of balanced, high-quality development. But how exactly did income inequality evolve over China’s growth process and what was its impact on consumption and welfare? Using a long panel of income and consumption data from thousands of rural and urban households, we document that the increasing income inequality in China mainly reflects increasing permanent income risk, against which it became harder and harder to insure consumption, over the period of rapid income growth from 1989 to 2009. In other words, as household income grew, so did income fluctuations. These income fluctuations had an increasingly direct impact on consumption. For rural households, the welfare cost from increasing income risk and increasing exposure of consumption to income risk can almost cancel out the welfare gain from accelerated income growth over those twenty years.
Centralization or Decentralization? The Evolution of State-Ownership in China
Franklin Allen, Junhui Cai, Xian Gu, Jun Qian, Linda Zhao, Wu Zhu, Apr 05, 2023We developed an SOE index for all 40 million firms in China from 1990 to 2017 based on the dynamic EquiNet. This quantitative index is solely based on equity investments and thus clears up the mysteries of other self-report measures.
China Needs Tighter Macro-Prudential Regulations to Loosen Capital Controls
Ambrogio Cesa-Bianchi, Andrea Ferrero, Alessandro Rebucci, Nov 29, 2017China is on a path to capital account liberalization. If the renminbi is to become an international reserve currency (e.g. Prasad, 2016), as it has started to and one day will be, China must have an open capital account. But once the capital account is open, the economy will be exposed to gyrations of the global financial cycle (Rey, 2014). This column argues that international credit supply shocks have powerful effects on real and financial variables of the receiving countries, but not all economies are affected similarly, and those that have lower loan-to-value ratios (LTVs) and limits on foreign currency borrowing (FXLs) are less vulnerable. As China lowers controls on capital flows (e.g., Benigno et al., 2016) it should consider tightening domestic macro-prudential policy regulations (e.g., Cesa-Bianchi and Rebucci (2017) to avoid excessive volatility.
How the Internet Changed Chinese Exports before Ali Baba Came
Ana M. Fernandes, Aaditya Mattoo, Huy Nguyen, Marc Schiffbauer, May 16, 2018The roll-out of the internet in China boosted firms’ exports and overall performance even before the rise of broadband and major e-commerce platforms. This finding is relevant for the many developing countries trying to strike a balance between widening access to basic internet services and deepening it through the creation of broadband networks and connections to major e-commerce platforms.
The Unintended Consequences of Regulation: Evidence from China’s Interbank Market
Xian Gu, Lu Yun, Jun 12, 2019Financial regulation can have unanticipated consequences in the financial system. The evidence from China’s interbank market shows that banks tend to use newly introduced and lightly regulated financial instruments to get around regulation during their search for funds. Banks facing greater competition or higher liquidity shortages have more incentives to engage in such activities. Such interbank activities are closely associated with banks’ proprietary trading, suggesting the potential risk of financial contagion.
