CONTENTS
Factor Analysis and Prospects of China's Economic Growth
······Qiu Xiaohua, Zheng Jingping, Wan Donghua, Feng Chunping, Ba Wei & Yan Yulong (4)
Nonrepayment of Debts and Its Macroeconomic Impacts
········································ Jin Bei (13)
The Consequences of Currency Appreciation：
A Theoretical Model Based on Chinese Stylized Facts
···································Zhang Bin & He Fan (20)
Purchasing Power Parity of RMB vs USD：
Cointegration Analysis of 1997—2005 Data
······································Qiu Dongyang (31)
Continuous Time Evolutionary Financial Model and Globally Asymptotically Evolutionary Stable Strategies
································Yang Zhaojun & Qin Guowen (41)
Evolvement of Marketization and Improvement of Capital Allocation Efficiency
······································Fang Junxiong (50)
Does Independence of the Board Affect Firm Performance?
··························Wang Yuetang, Zhao Ziye & Wei Xiaoyan (62)
State Stockholder, Excessive Employment and Labor Cost
······························Zeng Qingsheng & Chen Xinyuan (74)
Empirical Study on the Effects of Transparency in Chinese Stock Market
··································Dong Feng & Han Liyan (87)
Intellectual Property Rights Protection in the Cumulative Innovation: An Auction Model
·······························Dong Xuebing & Shi Jinchuan (97)
Skillbiased Technical Progress, Northsouth Trade and Wage Inequality
································Yin Desheng & Tang Haiyan (106)
Power Sector Development in PRC:Impact of Tariff Increase and Blackout
·······································Lin Boqiang (115)
Factor Analysis and Prospects of China's Economic Growth
Qiu Xiaohua， Zheng Jingping， Wan Donghua， Feng Chunping， Ba Wei and Yan Yulong
（National Bureau of Statistics of China）
Abstract: China's economy has experienced high rate of growth over last 26 years. What are the main driving forces? and is it likely to be sustainable in the coming 10—20 years? This paper gets the following research results by using production model of integrated factors: the growth of capital investment is the key factor of economic growth, moreover, technical progress, including upgrade of economic structure, improvement of human capital efficiency and institutional transition, contribute much as well, contribution from input of labour force is not significant, largely due to the relative labour surplus and lower marginal labour efficiency. In the next 16 years, an appropriate rapid economic growth will be maintained, but the growth will be slowdown gradually because of constrains of energy, land and water supply. Changing the pattern of economic growth will be a basic and necessary solution.
Key Words:
China's Economic Growth; Factor Analysis; Prospects of Growth
JEL Classification:
O110, E220, C220
Non\|repayment of Debts and Its Macroeconomic Impacts
Jin Bei
（Institute of Industrial Economics, CASS）
Abstract: Within China's current economic life, arrears of debt have already developed into a kind of universal “compulsive credit” phenomenon and a distasteful competitive tool, as well as exerting a significant influence upon the social economy and macro economic control As a result of some Chinese industries having formed a high level of dependence upon the nonrepayment of debts, debt has actually been turned into an abhorrent “replacement” for currency and legitimate credit Moreover, now that failure to pay debts has become a “conventional weapon" of sorts in the competitive market, most enterprises have no choice but to regard “mindful nonrepayment" (being in possession of the money yet not settling the debt on time) as a conventional business tactic. This then causes the entire economy to move into a rather crooked state. Therefore, elimination or deduction of the arrears phenomenon must be carried out and comprehensively governed.
Key Words:
Arrears of Debt; Business Credit; Macro Economic Control; Business Behavior
JEL Classification:E600,L140
Goldstein, Morris, 2004, “Adjusting China's Exchange Rate Policies”, HighLevel Seminar, Dalian, China, May 26—27.
The Consequences of Currency Appreciation：
A Theoretical Model Based on Chinese Stylized Facts
Zhang Bin and He Fan
(Institute of World Economics and Politics, CASS)
Abstract: We develop a tradablenontradable model in which real exchange rate is exogenous and tradable sector is experiencing faster TFP growth that that of nontradable sector. The model suggest that under the policy combination of fixed nominal exchange rate and low inflation target, the relative high growth of TFP in tradable sector bring about not only economic growth, but also (1) distorted economic structure; (2) enlarging trade surplus; (3) wage depression and slowdown of transferring labor force from rural area to urban area; (4) worsening of income distribution. Currency appreciation and faster TFP growth in nontradable sector is the key to solve above distortions.
Key Words:
Real Exchange Rate; Industrial Structure; Trade Surplus
JEL Classification:F310，F140，F160
Purchasing Power Parity of RMB vs USD: Cointegration Analysis of 1997—2005 Data
Qiu Dongyang
(Chongqing Institute of Technology)
Abstract:
We review the empirical evidence of Purchasing Power Parity (PPP) in China and overseas markets, followed by the employment of a threefactor model to test for PPP using exchange rates (RMB vs USD) and the Producer Price Index (PPI) for China & USA. We used the monthly data set from January 1997 to July 2005, a relatively stable regime. In comparison with previous researches on a similar subject, this paper mainly contributes to the following: 1. PPP is valid when testing employs the latest PPI although RMB is pegged against USD. 2. PPP is valid when employing unrestricted co\|integration tests on the threefactor model. However, PPP is weak when using restricted co\|integration tests. 3. We employ Vector Error Correction Model, Impulse Response and Variance Decomposition techniques to analyse further the real exchange rate of RMB. The volatility of RMB is not influenced by the single price index but by the high degree of co\|integration between RMB, Chinese PPI and the US PPI.
Key Words:
Purchasing Power Parity； Cointegration； Vector Error Correction Model； RMB Exchange Rate JEL Classification：C120，C320，F310，P210
Continuous Time Evolutionary Financial Model and Globally
Asymptotically Evolutionary Stable Strategies
Yang Zhaojun
(School of Economics and Trade, Hu'nan University)
Qin Guowen
(Hu'nan Academy of Social Sciences; School of Economics and Trade, Hu'nan University)
Abstract:
This paper analyses dynamics and general equilibrium problem of continuous trading market selection by means of Darwin evolutionary ideas. In this setting there are lots of assets, each of which generates relative dividend exogenously and independently on present amount of wealth. Expected relative dividends are constant all the time and the asset prices are endogenously determined by supply and demand. There exist only two kinds of investors who invest according to fixmix strategies. This paper shows that an asset gains profit if and only if its relative dividend is more than its relative price. The fixmit in accord with expected relative dividends is globally asymptotically evolutionary stable and asset prices equal to expected relative dividends in a equilibrium. It is financial innovation that makes markets effective. Without financial innovation, the asset prices can be twisted into anything available. These conclusions contribute to natural selection hypothesis believed by Alchian(1950), Friedman(1953) and Fama(1965) and provide a rigorous analysis to the hypothesis as well.
Key Words:
Evolutionary Finance； Market Selection； Globally Asymptotically Evolutionary Stable Strategies； Financial Innovation； Asset Pricing JEL Classification:G11, D52, D81
Evolvement of Marketization and Improvement of Capital Allocation Efficiency
Fang Junxiong
（Accounting Department, Management School, Fudan University）
Abstract:
Since the reform and opening\|up, China's economy has become more and more market orientated. We concern what effect the marketization has brought to our economic development, and whether it improved the capital allocation efficiency and facilitated economic development. This article studied the influence of marketization on capital allocation efficiency based on Wurgler（2000）model. And we found that Chinese capital allocation efficiency has improved with the deepness of marketization.
Key Words:Marketization; Capital Allocation Efficiency; Transitional Economy
JEL Classification:L330, P200
Does Independence of the Board Affect Firm Performance?
Wang Yuetang, Zhao Ziye and Wei Xiaoyan
(Business School of Nanjing University)
Abstract: This paper follows the controversy between the agency theory and the stewardship theory in frameworks of boards of directors and corporate performance. Proponents of the agency theory argue that independent directors may impair agency cost and improve firm performance. Oppositely, independent directors will reduce board's efficiency and alleviate companies' financial achievements in views of the stewardship theory. We systematically examine the link between board's independence and firm performance. We find that proportion of independent directors to all directors is positively related to companies' financial performance in both OLS and 2SLS regressions, furthermore, this relation is weaker in companies with poor shareholders' balance and checks than those of normal firms. The results indicate that agency theory is suitable for China's capital market. We also find that reputation of independent directors is benefit to corporate profits. However, we are unable to detect any relationship between performance and independent directors' other characters, such as industrial expertise, political connection and economics and management career.
Key Words:
Boards' Independence； Endogenous； Firm Performance
JEL Classification:G300, G390, M120
State Stockholder, Excessive Employment and Labor Cost
Zeng Qingsheng(Shanghai Jiaotong University) Chen Xinyuan(Shanghai University of Finance & Economics)
Abstract： Different from many papers which directly testing the relationship between ownership and corporate value, this paper studies whether ultimate ownership nature of the largest shareholder affected the corporate social burdens with a proxy of corporate employment. We find that mainly resulting from excess employment at IPO time, statecontrolled firms employed significantly more labor than the others did during our observed windows, and excess employment and high wage rate together made statecontrolled firms assumed greater labor costs than the others did. We also find that among state controlled companies, government agency controlled companies employed most labors and assumed highest labor cost, and compared to others, their excess employments may be expanding after IPOs. The findings imply that the largest shareholders ownership nature and the manners of government control are important to China listed companies, and property diversification reforms and avoidance of direct statecontrolling are meaningful to improve corporate governance.
Key Words：
State Stockholer; Excessive Employment; Labor Cost
JEL Classification：G340, G320
Empirical Study on the Effects of Transparency in Chinese Stock Market
Dong Feng and Han Liyan
(School of Economics and Management, Beihang University)
Abstract： Transparency is very important in the design of stock market mechanism. A reasonable transparency can optimize the information diffusing and improve the information structure so that leads to more reasonable stocks prices and a better market quality. On Dec 8th, 2003, the rules of information disclosure of Chinese stock market were changed, and the transparency was largely increased. In this paper, a comprehensive empirical study is given to analyze the effects of transparency on the market quality of Shenzhen A share market. The results show that after the increase of transparency, there is an obvious increase of market liquidity and decrease of transaction cost as well as market volatility. At the same time, the informational efficiency increases to some extent. A conclusion is drawn that the increase of transparency can improve the market quality largely.
Key Words：
Transparency; Market Quality; Information Disclosure JEL Classification：C120, G100, G140
Intellectual Property Rights Protection in the Cumulative Innovation:An Auction Model
Dong Xuebing and Shi Jinchuan
（College of Economics, Zhejiang University）
Abstract: This paper probes into the welfare effect of intellectual property rights and compares the efficiency of various concrete institutions,and also discusses the application in certain special industries by developing an auction model in the cumulative innovation. We study firms' innovation race in cumulative innovation with leader firm, and then obtain the social welfare function of three strategies and optimal intellectual property rights protection. Ultimately we draw the conclusion that industries such as biology technology, electronic and pharmacy are suitable for the strict institution,e.g.the patent; industries such as computer software, music, book and journal are suitable for the broad institution,e.g.the copyright.
Key Words:
Cumulative Innovation；Intellectual Property Rights；Auction Model
JEL Classification:K110，L100，O340
Skillbiased Technical Progress, Northsouth Trade and Wage Inequality
Yin Desheng
(Business School, East China Normal University)
Tang Haiyan
(Shanghai Lixin College of Accounting)
Abstract: This paper tries to incorporate skillbiased technological change and northsouth trade into one comprehensive framework and analyze the principle governing the change in relative wage of the skilled labor factor. Intraindustry trade is a potentially important explanation for the increase in the wage inequality in the developed countries through the product quality upgrading. For the developing countries, the rising inequality results from intraindustry trade through increasing the number of differential products. NorthSouth Trade has much the same impact on wage inequality as does skillbiased technical progress.
Key Words:
Wage Inequality；Skillbiased Technical Progress；Northsouth Trade
JEL Classification:F160，J300
Power Sector Development in PRC:Impact of Tariff Increase and Blackout
Lin Boqiang
（Asian Development Bank）
Abstract: The PRC's production process has been modernized in the last two decades and now heavily depends on electricity. Since the power shortage starting in 2003, the availability and quality of power supply have become a key economic and political issue for the PRC. The direct impact of the current power shortage has been (i) increase in power tariffs, and (ii) the unavailability and poor reliability of power supply. The paper discussed the methodology in studying the impact of power shortage in two areas: tariff increase and lower power quality. The paper analyzed the impact of electricity tariff increase on various industries and provinces and quantified the impact of lower power quality on the industry using survey data. The paper concluded that the direct impact of power shortage on industries was substantial larger than the cost of electricity supply. The paper also concluded that it was not necessarily true that the power shortage had a larger impact in the more developed provinces. The magnitude of impact depended on the industrial mix, level on dependency on electricity, and the available alternatives.
Key Words:
Power Tariffs; Power Quality; Environmental Impact
JEL Classification:L940, Q410, Q430
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