CONTENTS

The Theoretical Logic of Sovereign Wealth Funds

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Xie Ping and Chen Chaoª« (ª©4ªª)

Inside Money and Optimal Tariff Policy of China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhang Shunming and Yu Jun ª« (ª©18ªª)

Relationship between the Degree of Internationalization and the Performance

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..Yang Zhong and Zhang Xiaoª« (ª©32ªª)

Dual Financial Institution and Farmers' Choice on Consumer Credit Behavior:

The Explanation and Analysis of ROSCA

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Zhu Xinkai and Liu Gangª« (ª©43ªª)

Risk Attitude and Stock Market Investment

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Li Tao and Guo Jie ª« (ª©56ªª)

A Study on the Adverse Selection Cost of Chinese Stock Exchangeª«

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­He Chengying, Lu Zonghui, He Xingqiang and Cai Jun ª« (ª©68ªª)

The Governance Roles of State-owned Controlling and Institutional Investors:

A Perspective of Earnings Management

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Bo Xianhui and Wu Lianshengª« (ª©81ªª)

Income-related Inequality of Health and Health Care Utilization

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..ª«Xie Eª« (ª©92ªª)

The Performance of Institutional Environment Evidence from China's

Private Listed Companies

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Luo Danglun and Tang Qingquanª« (ª©106ªª)

The Measurement of Local Administrative Monopoly Degree in China

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Yu Liangchun and Yu Donghuaª« (ª©119ªª)

Evolutionary Games and Evolutionary Economics

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Huang Kainan ª« (ª©132ªª)

Transaction of Property Rights of Land and Resources Allocation: 1650¡ª1950

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Long Denggaoª« (ª©146ªª)

A Summary for the Workshop of Northwest Rural China Development

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ª«Jia Ming and Qi Minª« (ª©157ªª)

The Theoretical Logic of Sovereign Wealth Funds

Xie Ping  and  Chen Chao

(China Investment Corporation)

Abstract: Sovereign wealth funds (SWFs) form a new class of institutional investors with significant influence on the global financial market. Assets under management (AUM) of global SWFs totaled around US$3.0 trillion at the end of 2007, and are still rising. Three developments are behind the current cause of SWFs: First, reform of international monetary system is the core reason for the rise in SWFs; Secondly, the phenomenal raise of energy price is an important reason contributing in the expansion of SWFs; finally, the economic globalization facilitates SWFs' operation. According to the model of ¡°National Economic Man¡± model, the foreign reserve of a nation will increase sharply and gradually and this nation will invest surplus wealth during the economic stage of early expansion or fast-growing stage. Whereas, with the decreasing of the production factors, accumulated wealth of a nation will gradually attain to peak. When the economy enters into wealth-oriented stage or the stage of sustainable low growth, the nation will increasingly rely on wealth accumulated by consumption, and incline to invest in risk-free assets. At present, the aims of SWFs are mainly focused on the following five aspects, including stabilization of the national balance sheet for different periods, diversification of the central bank's reserves, Smoothening inter-generation revenue of country, prevention of national socio-economic crisis and assistance of the government's overall development strategy.

Key Words: Sovereign Wealth Funds; Foreign Exchange Reserve; Investment

JEL Classification:F210,G180

Inside Money and Optimal Tariff Policy of China

Zhang Shunming and Yu Jun

Abstract: We construct a bilateral trade model incorporating inside money and other two physical commodities, and then develop it into a tariff game when taking tariff retaliation into account. Using the real data of China and the Rest of the World (ROW) in 2005, we employ this model in numerical analysis to discuss the optimal tariff policies for China. The main finding of this paper is that, inside money really affects the Nash equilibrium for this tariff game. In the trade case that China and ROW present, inside money may increase the retaliating power of the country with trade deficit, and negatively affect the benefits of the country with trade surplus. We also find that China's tariff policy in 2005 is close to the optimal level, and ROW's is far from the corresponding optima. The practical implication of our finding is that, in order to improve the welfare of China, the tariffs on the imported primary products need to be lightly reduced.

Key Words: Tariff Rate; Tariff Game; General Equilibrium; Nash Equilibrium

JEL Classification:C680, C720, F130, F470

Relationship between the Degree of Internationalization and the Performance

Yang Zhong and Zhang Xiao

(School of Administration, Nanjing University)

Abstract: It is a fundamentally question about how to measure the degree of internationalization in the international business research field. Many foreign scholars use different quantitive indicators to reflect the enterprises' international marketing involvement degree in the internationalization process. But, they bring more controversy about the relationship between the degree of internationalization and performance. So, it is an important work to develop the indicator system of the international degree. First, we develop an indicator system of international degree based on a pilot research. It improves the measure method of single indicator. Second, we use the indicators system to explore the relationship between international expansion and growth of Chinese enterprises based on the survey of 142 manufacturing enterprises. The result shows that the degree of internationalization scope will benefit the performance, but the degree of internationalization depth will not. Therefore, export by self or agency or enterprise network is the best choice of internationalization for the most Chinese enterprises now.

Key Words: Internationalization; Degree of Internationalization; Performance

JEL Classification:

F230£¬M160

Dual Financial Institution and Farmers' Choice on Consumer

Credit Behavior:The Explanation and Analysis of ROSCA

Zhu Xinkai(School of Agricultural Economics and Rural Development, Renmen University of China)Liu Gang

(School of Business, Renmen University of China)

Abstract: Formal financial failure supplies the generation and development of non-formal financial with institutional basis. And the coexistent dual system is the main feature of rural financial system in China. This paper introduces assumptions such as famers income uncertainty and liquidity constraint on the basis of Besley Model, and takes example for Lunhui, a kind of Rotating Savings and Credit Association (ROSCA), which generally existed in south rural area. This paper analyses the superiority of civil cooperative financial institutions in terms of reducing waiting time of farmers for consumer durables, expanding current consumption, relieving liquidity constraint and raising utility level under the circumstances of famer's income uncertainty. And this paper analyses the default risk of Lunhui and unique advantages compared with formal financial, draws the conclusion of choice boundary of consumer credit behavior under the coexistence of Lunhui and formal financial. In the end, on the basis of conclusive comments, we gave relevant suggestions.

Key Words:Non-formal Financial; Liquidity Constraint; Uncertainty;ROSCA; Consumer Credit

JEL Classification:G28,G29

Risk Attitude and Stock Market Investment

Li Taoª¬a and Guo Jieª¬b(a: School of Economics, CUFE; b: School of Economics, RUC)

¡¡

Abstract: Based on a survey of Chinese urban resident investment behaviour in 15 cities in 2007, we find that for Chinese people taken as a whole, their risk attitudes have no significant effect on their stock investment probability, which is totally different from those findings from western literature. We propose a new theoretical explanation: since different levels of social interaction could reduce the subjective estimation of an investor's feeling on stock investment risk to different extents, his risk attitude could not significantly explain whether he will invest in stock or not. According to both regression results and statistical tests from two sub-samples, we observe the absolute risk aversion of people with a lower social interaction level significantly reduces their stock investment probability, while the risk attitudes of people with a higher social interaction lev

el have no significant effect. Moreover, there exists statistically significant difference between the influences of risk attitudes from two sub-samples with different social interaction levels. These findings have important policy implications. Government policies should pay more attention to the risk education on different groups of individual investors according to their social interaction leve

ls and hence change their insensitiveness to investment risk under mass stock market participation conditions. By doing this, government could promote both the healthy development of Chinese stock market and individual investors' welfare.

Key Words:Risk; Social Interaction; Stock Market Participation

JEL Classification:D80£¬G11£¬Z13

A Study on the Adverse Selection Cost of Chinese Stock Exchange

He Chengyingª¬1, Lu Zonghuiª¬2, He Xingqiangª¬3 and Cai Junª¬4

(1.Zhijing Univerasity of Finance & Economics, 2. Guosen Securities Co.,Ltd;

3. Lingnan College, Sun Yat-sen University£»   4.  Department of Economics and

Finance, City University of Hong Kong)

Abstract:For the first time, employing a model of components of bid-ask spread for order-driven market, this paper decomposes the bid-ask spread of Shanghai Stock Exchange into adverse selection and order processing cost components, investigates the relationship between the components of bid-ask spread and order size, extensively examines the impacts of firm size, price, trading activity, and volatility on adverse selection cost, explores the intraday pattern of adverse selection cost and information-based trading. Results obtained show that the adverse selection cost increases with trade size, the order processing is generally not characterized with scales of economics. With stocks of large firms, high-priced, large trading volume, and wide coverage, their adverse selection costs are relatively low. The adverse selection cost increases with a stock's price volatility. Moreover, we find that the adverse selection component of the bid-ask spread exhibits a L-shaped intra-day pattern, which implies that the relatively heavy trading just after open is dominated by information-based trading, whereas the heavy trading just before close dominated by liquidity trading. These findings suggest important policy implications for the development of stock market.

Key Words: Liquidity; Bid-ask Spread; Adverse Selection Cost; Order Processing Cost; Information-based Trading

JEL Classification:C14, G15

The Governance Roles of State-owned Controlling

and Institutional Investors:

A Perspective of Earnings Management

Bo Xianhui and Wu Liansheng

(Guanghua School of Management, Peking University)

Abstract: The reform of SOEs is one of the most important issues of economic reform and development, and the important precondition to advance SOEs reform is defining the corporate governance character of SOEsª± With the impelling of market-oriented reform by regulators, institutional investors become a main body of investing in capital market of China, and the important base to advance marketization reform is to study the corporate governance role of institutional investorsª±This study aims to examine the corporate governance characters of state-owned controlling and institutional investors and their interactive effect from the perspective of earnings managementª± We find that the level of income-increasing earnings management is higher in non-stated firms than that of state-owned firms, and income-increasing earnings management is negatively associated with institutional ownership and the negative relationship only holds for non-stated firmsª± Moreover, both institutional investors and state-owned controlling are not associated with income-decreasing earnings managementª± It shows that state-owned controlling and institutional investors are in favor of improving corporate governance,

but state-owned controlling will restrict the governance role of institutional investors.

Key Words: State-owned Enterprises; Institutional Investor; Earnings Management; Corporate Governance

JEL Classification:G390£¬M490

Income-related Inequality of Health and Health Care Utilization

XIE  E

(School of Economics, Shandong University)

Abstract: Using  data of  the China Health and Nutrition Surveys( CHNS),this paper tests for the extent of deviations  from the  principle of horizontal equity  - i.e.  those in equal need to be treated equally and computes the contribution of income in health inequality and utilization inequality of health care. The main conclusion is that there is pro-rich inequality in health and use of health care, income contribution to inequality of health care use  accounts for 0ª±13¡ª0ª±2. Insurance also enlarges the inequality of health care use. Inequality of health of rural is bigger than urban, both rural and urban health inequality is  increasing. From 1991 to 2006, urban and rural changes in  income account for 7ª±08% and 13ª±38% respectively of rising inequality.

Key Words: Health Inequality; Inequality in Health Care Utilization; Income; Concentration Index; Oaxaca Decomposition

JEL Classification:I10,I18

The Performance of Institutional Environment Evidence

from China's Private Listed Companies

Luo Danglun and Tang Qingquan

(LingNan College, Sun Yat-sen University£»School of Business, Sun Yat-sen Univ

ersity)

Abstract£ºChina is in the period of economy transition. The government plays an important

role of the external surrounding of the private enterprises, and it also has significant impact on the survival and development of the enterprises. It influences the competition among the enterprises as well. Therefore, it becomes a key aspect of strategic decision and operating action of private

enterprises that how to dealing with the relationship with the government. The article used the data of Chinese private enterprises, and studied the relationship between the government and the private enterprises during 2002¡ª2005. It observed the factors which maybe impact the motivation of forming political relation of the private enterprises, and the results showed the lower level of regional property right protection, the more powerful of the government intervention and the slower of the financial development, the more motivation will the private enterprises have to build up relationship with the government. The reason is that the relationship with the government can be a substitute protecting mechanism of the imperfect market for the private enterprises, which is formed spontaneously during the transition economies.

Key Words£º Market Environment; Political Relationship; Privately Control

JEL Classification£ºG380, G390

The Measurement of Local Administrative Monopoly Degree in China

Yu Liangchun and Yu Donghua

(Economics School of Shandong University)

Abstract£ºThis article has carried on the measurement and the comparison to Chinas provinces local administrative monopoly degree during the reforming transition period through the construction of local administrative monopoly index. The local administrative monopoly index is consisted of three level indicator system, including 4 first-level, 19 second-level and 49 third-level indicators. These indicators reflect the influence of local administrative monopoly on market competition from different aspects such as institution, structure, behavior and performance, and they can be confirmed and used as the foundational economic analysis tool to analyze the local administrative monopoly degree and its dynamic evolution of different areas. This has provided the policy-making reference for the competition policy and the area development policy-making.

Key Words£º Local Administrative Monopoly£»Index£»ISCP Paradigm£»Measurement

JEL Classification£ºF10, L60, R12

Evolutionary Games and Evolutionary Economics

Huang Kainan

(Center for Economic Research, Shandong University)

Abstract: Evolutionary games and evolutionary economics are very popular in the economics. However, the relationships between the two theories are very ambiguous and sometimes are distorted and mistaken. Economists never deepen their research on this topic. Based on analyzing the basic frameworks and developments of both theories, this article attempts to make a breakthrough on this area, investigates their complementarities and diversities, and illuminates effects and restrictions of evolutionary games, and points out the future direction of two theories.

Key Words:Evolutionary Games; Evolutionary Economics; Theoretical Comparison

JEL Classification:B25, C70

Transaction of Property Rights of Land  and Resources Allocation£º1650¡ª1950

Long Denggao

(Economics Institute, School of Humanities and Social Sciences, Tsinghua University)

Abstract: Due to the development of property rights of land and their variety of transaction, the distribution (allocation) of production factors and resources was facilitated in Ming and Qing Dynasties. Peasants and landowners made adjustment between current income and future earnings through land markets. They made free choices and diversified arrangement among several production factors and their returns. They met their financial demands in their lives and productions. Therefore, the production factors were in the dynamic allocations, with capitals from strata of society flowing to the land, as well as lands distributed to the labors with productive efficiency by all kinds of transaction. Agricultural efficiency was improved with few technology innovations. Unfortunately, the heritage of Chinese economy has not been developed in the academic research in China. On the contrary, the doctrines made people fall into error in the historical studies, as well as misgivings to the reform of land institution now.

Key Words:Transaction of Land Rights£» Financial Demands£» Property Rights in Land; Allocation of Resources

JEL Classification:Q15,N50

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