CONTENTS

International Financial Crisis and Introspection of Economic Theories¡­¡­¡­...Research Team  (4)

International Financial Crisis and Marxism¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­  (4)

Theoretic Meditation on the International Financial Crises and Neo-liberalism¡­¡­¡­¡­¡­¡­.....(12)

The Global Financial Crisis and Keynesian Economics ¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ .. (22)

State-Capitalism and Chinese Mode¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­...(31)

Analysis on Western Countries' Nationalization Measures in Coping with Financial Crisis¡­.....(38)

The Financial Crisis's Implications on International Trade and Finance Order¡­¡­¡­¡­¡­¡­....(47)

A Study on the Effectiveness of Chinese Security Analysts' Earnings Forecasting Behavior

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.Guo Jie and Hong Jieyingª« (55)

Marketª²oriented Reform, Firm Performance and Executive Compensation in Chinese

State owned Enterprises¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­...Xin Qingquan and Tan Weiqiangª« (68)

Social Capital, Political Connections and Corporate Investment Decision  ?

ª«¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­Pan Yue, Dai Yiyi, Wu Chaopeng and Liu Jianliangª« (82)

Intellectual Property Rights, Market Structure, Imitation and Innovation ¡­¡­Zhuang Ziyinª« (95)

Export, FDI and Employment in Manufacturing Industries of China¡­¡­¡­..Mao Rishengª« (105)

Trade Accessibility, Factor Distribution and Agglomeration: A Case of China

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­....Deng Huihuiª« (118)

Productivity Growth and Factor Reallocation: China's Empirical Study¡­¡­¡­.Yao Zhanqiª« (130)

Disaster Risk and Wealth Distribution of Chinese Urban Residents

¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­...Chen Yanbin, Huo Zhen and Chen Junª« (144)

A Book Review¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.....Zhou Liqunª« (159)

International Financial Crisis and Marxism

Pei Xiaoge

(Institute of Economics, Chinese Academy of Social Sciences)

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Abstract:Marxism is not only directly facing the problem of capitalist market economy, but also establishing a unique angle to investigate international financial crisis, furnishing a scientific idea of melting crisis and accelerating development by liberating and enriching the people. The basic approach for China to convert the crisis into opportunity is to inaugurate and develop Theoretical System of Chinese Characteristic Socialism continuously and to promote development constantly. After erupt of the international financial crisis, western left wing economists, especially Communist Parties in various countries exhale plenty voice of Marxism and form a tendency which the influence of  Marxism gradually debouch low tide.

Key Words:Marxism; International Financial Crisis; Capitalist Economic Institution; Economic Cycle; Theoretical System of Chinese Characteristic Socialism

JEL Classification:F390£¬B140

Theoretic Meditation on the International Financial

Crises and Neoª²liberalism

Liu Yingqiu

(Graduate School, CASS)

Abstract:Neo-liberalism is a complicated system of theories and thoughts, which includes left-wing and right-wing; narrow sense and broad sense or economic theory, policy proposition and ethos. Both the rise and fall of Neo-liberalism were rooted in the crises. The narrow sense of Neo-liberalism represented by the theory of Hayek and Friedman adds fuel to the fire to the occurrence and evolution of the current international financial crises, and was proved of its failure. It's not only helpful for us to profoundly understand the causes and mechanisms of the international financial crises to make theoretic meditation on the connection between the current crises and Neoª²liberalism, but also can help us draw lessons from it so that we can drive Chinese economy develop in a maintainable healthy rate in the long run.

Key Words:International Financial Crises; Narrow Sense of Neo-liberalism; Broad Sense of Neo-liberalism; Theoretic Meditation

JEL Classification:B29£¬B40

The Global Financial Crisis and Keynesian Economics

Yang Chunxue and Xie Zhigang

£¨Institute of Economics, CASS£©

Abstract:Considering the dominating effect of their theories in policy-making, both Keynesianism and Neo-liberalism economics has played an essential role in the underlying causes of the current crisis, and therefore, should bear inescapable responsibility for the global financial crisis. The current response to this crisis of western governments is none the less Keynesian rescue plan, and will not change the free market system as economic foundation. Actually, Keynesianism and Neo-liberalism that share the dominating role in macroeconomics are both advocators of free market system, although Keynesian economists argue against laissez faire liberalism. Even new Keynesian economists are suspicious of the efficiency of short-term policy in long run. The gap between the two ideas is closing while their debating and learning from each other, and current crisis will accelerate the theoretic integrative process.

Key Words:Global Financial Crisis; Keynesian Economics; Greenspanism

JEL Classification:F39,B22

State-capitalism and Chinese Mode

Hu Leming, Liu Zhiming and Zhang Jian'gang

(Acadamy of Marxism, CASS)

Abstract:The correct understanding of Stateª²Capitalism and ¡°Chinese mode¡± is of theoretical and practical significance. The article summarizes firstly Marxist theory of Stateª²Capitalism and Contemporary Western intellectual's viewpoints on State-Capitalism, and then recalls the concrete practice of State-Capitalism in both the capitalist countries and the socialist countries, elaborates the essence of Chinese mode, points out that  the longª²term exploitation and restraint of State-Capitalism by the means of Chinese mode has a certain historic inevitability.

Key Words:State-capitalism; Chinese Mode; Socialism with China's Character

JEL Classification:F39, B24

Analysis on Western Countries¡¯Nationalization Measures in

Coping with Financial Crisis

Jin Bei and Liu Jiejiao

(Institute of Industrial Economics, Chinese Academy of Social Science)

Abstract£ºWestern countries have seen nationalization and denationalization by turns. The reason why nationalization could be an important method of resolving the financial and economic crisis is that the distinctive characteristic of stateª²owned enterprise determines their advantage in resisting the crisis. As a desperate measure in the desperate time of financial crisis, nationalization would not change the dominant position of private ownership in Western countries; however, it plays an important, even decisive role in reducing bankruptcy risks and resuming functions of financial institutions, as well as preventing heavier shock to real economy. At the same time, it is of great significance for us to further understand the political and economic structure of Western countries, recognize the special status and functions of stateª²owned enterprise in market economy; adhere to and improve the socialist system and better exert the role of state sector and state-owned enterprise.

Key Words£ºWestern Countries; Financial Crisis; Nationalization; Stateª²owned Enterprise

JEL Classification£ºF390,L320,L330

The Financial Crisis¬ðs Implications on International

Trade and Finance Order

Li Xiangyang

Abstract: The international financial crisis will have profound implications on global trade and finance in the long-term. The U.S. over-indebted economy is expected to end up and global economic growth is expected to slow, so the current WTO norms will be transgressed, the divergences between developed countries and developing countries on new trade rules will be amplified. At the same time, the dollar¡¯s world currency status will come under fire, and an IMF-based reserveª²currency system maybe coexist with the dollar. As a result, the pace of globalization will slow.

Key Words£ºInternational Financial Crisis; Overª²indebted Economy; Globalization

JEL Classification£ºF39,F02

A Study on the Effectiveness of Chinese Security Analysts¬ð

Earnings Forecasting Behavior

Guo Jie and Hong Jieying

(Renmin University of China; Universit¨¦ Toulouse 1)

Abstract£ºWhen Chinese security analysts make earnings forecasts, is their forecasting behavior efficient? If not, why? Utilizing a sample of 5522 earnings forecasts made by 856 domestic analysts for 1005 Chinese listed companies during 2005¡ª2007 and following the research method proposed by Chen and Jiang (2006), we answered above two questions in this paper. First, regardless of analysts making more optimistic or pessimistic personal earnings forecasts than market consensus, their earnings forecasting behavior is inefficient which shows a pattern of overweighting private information. Second, the reasons behind this overweighting behavior include analysts¡¯incentives to gain higher perceived forecasting ability and poor quality of information disclosure by Chinese listed companies, while neither overconfidence psychological bias nor incentives to get high trading commissions has insignificant explanatory power. Our findings provide important policy implications for investors to use analysts earnings forecasts as reference and related parties to take proper measures to improve analysts¡¯forecasting behavior.

Key Words£ºSecurity Analyst; Earnings Forecasting Behaviour; Efficiency

JEL Classification£ºG11£¬G23£¬Z19

Market-oriented Reform, Firm Performance and Executive

Compensation in Chinese Stateª²owned Enterprises

Xin Qingquan and Tan Weiqiang

(School of Economics and Business Administration,Chongqing Univesity

;Department of Economics and Finance, City University of Hong Kong)

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Abstract£ºBased on the institutional settings of recent market-oriented reform of Chinese state-owned enterprises (SOEs), this paper analyses the impact of market force on the choice of executive compensation in SOEs. Using the data on stated-owned listed firms, we find that market-oriented reform increases the sensitivity of executive compensation to performance. Compared to the accounting performance, our evidence shows that stock returns play an increasing important role in executive incentive contracts. Our findings also show that government protection and government control level of SOEs influence the ability of market forces to shape the incentive contracts in SOEs. Moreover, SOEs located in the provinces with high degree of regional marketization have fewer perks. These results suggest that market force induces the adaptation of governance structure.

Key Words£ºMarket-oriented Reform; SOEs; Firm Performance; Executive Compensation

JEL Classification£ºG320£¬G380£¬J310

Social Capital, Political Connections and Corporate Investment Decision

Pan Yue^a,  Dai Yiyi^b,  Wu Chaopeng^b and Liu Jianliang^a

(a: Department of Finance, School of Economics, Xiamen University;

b: School of Management, Xiamen University)

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Abstract: This paper introduces the sociological concept of ¡°social capital¡±, and for the first time ever, empirically studies the influence of the different levels of social capital of Chinese provinces on outward investment decisions, selection of the desired type of equity investment, and investment diversification decisions, from a micro perspective. Furthermore, we conduct an inª²depth analysis of the interchangeability of the roles of social capital and corporate political connections in corporate investment decisions. We find that in provinces with higher levels of social capital, publiclisted companies are more inclined towards outward investment and more willing to form joint ventures with other enterprises and show a stronger desire to diversify their investments. We also find that the roles of social capital and political connections are interchangeable in corporate investment decisions; in other words, when no political connections are available, social capital tends to have a stronger influence on the company¡¯s investment decision, and vice versa. Our study has not only enriched the research of social capital in the context of financial science, but also opened up a new field in the interdisciplinary research of social capital and political connections.

Key Words: Social Capital; Political Connections; Investment Decision

JEL Classification: M110£¬M140£¬L290

Intellectual Property Rights, Market Structure, Imitation and Innovation

Zhuang Ziyin

(Economics and Management School, Wuhan University)

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Abstract: We develop an extended North-South Product cycle model in which North innovation, South imitation, and Foreign Direct Investment (FDI) are all endogenous. Our model predicts whether tighter Intellectual Property Rights (IPRs) benefit the North or South depends crucially on market structure. Under oligopoly due to vertical innovation, tighter IPRs hurts both regions. Under monopolistic competition due to horizontal innovation, tighter IPRs benefits both in the long run if here exists an appropriate degree of IPRs protection. We find that there exists an optimal degree of IPRs protection in the South, which may differentiate from that in the North..

Key Words: Intellectual Property Rights; Market Structure; FDI; Imitation; Innovation

JEL Classification: F23, F43,O31, O33,O34

Export, FDI and Employment in Manufacturing Industries of China

Mao Risheng

(Institute of World Economics and Politics, CASS)

Abstract: In this paper, I try to clarify three different impacts of export and FDI on the employment in manufacturing industries of China.Based on the panel data covering 329 detailed manufacturing industries between the year 1999 and 2007£¬ this empirical work yields four main results. First, there is difference between the current and lagged impact of FDI and export on employment in manufacturing industries. Second, the output impact of FDI and export on employment is significant and important. Third, the efficiency impact of FDI and export on employment is also significant. However, the significance of this efficiency impact depends on the factor ratio properties in manufacturing industries.Four, the laborª²demand elasticity on wage is associated with the export openness and FDI penetration, which empirical results are closely related to the ownership characteristics of manufacturing industries in China.

Key Words: Export; FDI; Manufacturing Industries; Employment

JEL Classification: F16£¬ F23£¬ J23

Trade Accessibility, Factor Distribution and Agglomeration: A Case of China

Deng Huihui

(Renmin University of China)

Abstract: This paper studies a three-region, two-sector spatial equilibrium model where manufacturing sector utilizes an increasing returns to scale Cobb-Douglas function with two factors(capital and labor)to produce differentiated goods, to investigate the effect of factor intensity on agglomeration behavior in the context of the new economic geography. The main results are: (i)a rise in capital intensity stimulates agglomeration in the economy£¬and the extent of capital and industry concentration is more than labor concentration when trade costs are sufficiently low, and vice versa£»(ii)when the coast has a sufficiently strong advantage in international trade and hosts a larger number of consumers, it definitely becomes the location for industrial agglomeration even though the domestic transport costs are very high, and its leadership strengthened by the positive feedback mechanism from increasing returns to scale; (iii)given China¡¯s huge market potential and increasing trade accessibility, the home market effect can, therefore, be generalized in a strict ceteris paribus sense.

Key Words: Agglomeration; Factor Distribution; Trade Accessibility; Spatial Equilibrium Model

JEL Classification:R12£¬ F12£¬ R30

Productivity Growth and Factor Reallocation£ºChina¡¯s Empirical Study

Yao Zhanqi

(Institute of Finance and Trade Economics, CASS)

Abstract: This paper analyzes the TFP growth and factor reallocation effects for the case of 6 macroeconomic sectors and 14 manufacturing during the period 1985¡ª2007, and demonstrates the basic statements based on the understanding of theoretical correlation between factor reallocation and TFP growth. The main conclusions and findings are listed as follows£º £¨a£© The results of TFP growth are similar, measured with either Solow residuals or data envelopment analysis. £¨b£©The factor reallocation effects are minimal not only for 6 sectors and 14 manufacturing. It turns out that the 6 sectors have considerably larger labor allocation effect than the manufacturing subsectors. £¨c£© Manufacturing¡¯s aggregate capital productivity and capital reallocation are larger than 6 sectors. Six sectors have negative reallocation figures of total factor productivity since the structure of capital factor between individual sectors is more unbalanced than manufacturing.

Key Words: Total Factor Productivity; Total Reallocation Effect; Data Envelopment Analysis; Stochastic Frontier Production Function

JEL Classification: F40,F61

Disaster Risk and Wealth Distribution of Chinese

Urban Residents

Chen Yanbin^a, Huo Zhen^b and Chen Jun^a

(a: School of Economics, Renmin University of China£»

b: Economics Department, University of Minnesota, USA)

Abstract: Based on the description of wealth distribution of the Chinese urban residents, the paper constructed a computational dynamic stochastic general equilibrium model (DSGE) with idiosyncratic risk, aggregate risk and disaster risk. The calibration results show us that: (1) the model without disaster risk can hardly simulate the wealth distribution of the Chinese urban residents; (2) the introduction of total factor productivity (TFP) disaster risk into the model can make the simulation results less sensitive to the elasticity of output with respect to capital, even though it may make the wealth distribution generated by the model more even; (3) the introduction of the capital disaster risk can reduce the wealth share of the poor and increase the wealth share of the wealthy, and hence, it can simulate the wealth distribution of the Chinese urban residents very well. The analytical results tell us that the disaster risk, existing in the real world, may influence the behavior pattern of the residents and hence the macro economy. The introduction of the disaster risk into the model is sure to increase the explanation strengths of the model to the real world.

Key Words: Disaster Risk£»Wealth Distribution£»Wealth Inequality£»Income Distribution£» Precautionary Saving

JEL Classification: D190,D590

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