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1. Trump ended WTO dispute settlement. Trade remedies are needed to fix it.

Author:
Chad P. Bown
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Unhappy with the rulings of the WTO dispute settlement system, which disproportionately targeted US use of trade remedies, the United States ended the entire system in 2019. There are multiple hurdles to agreeing to new terms of trade remedy use and thus potentially restoring some form of binding dispute settlement. First, a change would affect access to policy flexibility by the now large number of users of trade remedies. Second, although China’s exports are the overwhelming target of trade remedies, exporters in other countries increasingly find themselves caught up in trade remedy actions linked to China. Third, critical differences posed by China’s economic model may call for new rules for trade remedies, but no consensus on those rules has emerged. Even some of the most promising reforms have practical limitations, create additional challenges, or may be politically unviable.
Topic:
Economics, Trade, Donald Trump, and WTO
Political Geography:
China and United States of America

2. The private sector advances in China: The evolving ownership structures of the largest companies in the Xi Jinping era

Author:
Tianlei Huang and Nicolas Véron
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper documents recent structural changes in China’s corporate landscape, based on company-level data, providing a complementary perspective to that of official Chinese statistics. We classify China’s largest companies by revenue since 2004 (based on Fortune Global 500 rankings), and largest listed companies by market capitalization since 2010, into state and private-sector categories, using a conservative definition of the private sector. Among the largest companies by revenue, the private sector was nonexistent in the mid-2000s but has grown steadily in the past decade, even though the state sector still dominates. The aggregate revenue of private-sector companies has grown from zero in Fortune’s ranking in 2005 (based on 2004 revenue) to $104 billion in the 2011 ranking, or merely 3.8 percent of the $2.78 trillion in aggregate revenue for all Chinese companies in the ranking, and to $1.7 trillion in the latest 2021 ranking (based on 2020 revenue), or 19 percent of the Chinese companies’ aggregate revenue. As for market value of the largest listed firms, the private sector’s share in the top 100 listed Chinese companies was only 8 percent at end-2010 but crossed the 50 percent threshold in 2020 and retreated slightly in 2021 to 48 percent, following that year’s regulatory crackdown on several private-sector-dominated industries. These findings do not support a narrative of broad-based rollback in recent years of previous private-sector expansion.
Topic:
Economy, Private Sector, Corporations, and Business Management
Political Geography:
China and Asia

3. Public responses to foreign protectionism: Evidence from the US-China trade war

Author:
David Steinberg and Yeling Tan
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
Topic:
Economics, Political Economy, Public Opinion, Trade, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

4. Public responses to foreign protectionism: Evidence from the US-China trade war

Author:
David Steinberg and Yeling Tan
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
Topic:
Economics, International Trade and Finance, Protectionism, and Competition
Political Geography:
China, Asia, North America, and United States of America

5. The US–China trade war and phase one agreement

Author:
Chad P. Bown
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The Trump administration changed US trade policy toward China in ways that will take years for researchers to sort out. This paper makes four specific contributions to that research agenda. First, it carefully marks the timing, definitions, and scale of the products subject to the tariff changes affecting US-China trade from January 20, 2017 through January 20, 2021. One result is that each country increased its average duty on imports from the other to rates of roughly 20 percent, with the new tariffs and counter-tariffs covering more than 50 percent of bilateral trade. Second, the paper highlights two additional channels through which bilateral tariffs changed during this period: product exclusions from tariffs and trade remedy policies of antidumping and countervailing duties. These two channels have received less research attention. Third, it explores why China fell more than 40 percent short of meeting the goods purchase commitments set out for 2020, the first year of the phase one agreement. Finally, the paper considers additional trade policy actions—involving forced labor, export controls for reasons of national security or human rights, and reclassification of trade with Hong Kong—likely to affect US-China trade beyond the Trump administration.
Topic:
Education, Trade Wars, Trade Policy, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

6. How China lends: A rare look into 100 debt contracts with foreign governments

Author:
Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks, and Christoph Trebesch
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China is the world’s largest official creditor, but basic facts are lacking about the terms and conditions of its lending. Very few contracts between Chinese lenders and their government borrowers have ever been published or studied. This paper is the first systematic analysis of the legal terms of China’s foreign lending. The authors collect and analyze 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and compare them with those of other bilateral, multilateral, and commercial creditors. Three main insights emerge. First, the Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt. Second, Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring (“no Paris Club” clauses). Third, cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors’ domestic and foreign policies. Even if these terms were unenforceable in court, the mix of confidentiality, seniority, and policy influence could limit the sovereign debtor’s crisis management options and complicate debt renegotiation. Overall, the contracts use creative design to manage credit risks and overcome enforcement hurdles, presenting China as a muscular and commercially savvy lender to the developing world.
Topic:
Foreign Policy, Debt, Government, and Banking
Political Geography:
China and Asia

7. East Asia decouples from the United States: Trade war, COVID-19, and East Asia's new trade blocs

Author:
Peter A. Petri and Michael G. Plummer
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
he deepening US-China trade war and nationalist reactions to the COVID-19 pandemic are reshaping global economic relationships. Alongside these developments, two new megaregional trade agreements, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), will refocus East Asia’s economic ties in the region itself. The new accords are moving forward without the United States and India, once seen as critical partners in the CPTPP and RCEP, respectively. Using a computable general equilibrium model, we show that the agreements will raise global national incomes in 2030 by an annual $147 billion and $186 billion, respectively. They will yield especially large benefits for China, Japan, and South Korea and losses for the United States and India. These effects are simulated both in a business-as-before-Trump environment and in the context of a sustained US-China trade war. The effects were simulated before the COVID-19 shock but seem increasingly likely in the wake of the pandemic. Compared with business as before, the trade war generates large global losses rising to $301 billion annually by 2030. The new agreements offset the effects of the trade war globally, but not for the United States and China. The trade war makes RCEP especially valuable because it strengthens East Asian interdependence, raising trade among members by $428 billion and reducing trade among nonmembers by $48 billion. These shifts bring regional ties closer to institutional arrangements proposed in the 1990s and incentivize greater cooperation among China, Japan, and South Korea.
Topic:
Treaties and Agreements, Trade Wars, Trans-Pacific Partnership, Free Trade, COVID-19, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

8. How the United States marched the semiconductor industry into its trade war with China

Author:
Chad P. Bown
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The US-China trade war forced a reluctant semiconductor industry into someone else’s fight, a very different position from its leading role in the 1980s trade conflict with Japan. This paper describes how the political economy of the global semiconductor industry has evolved since the 1980s. That includes both a shift in the business model behind how semiconductors go from conception to a finished product as well as the geographic reorientation toward Asia of demand and manufactured supply. It uses that lens to explain how, during the modern conflict with China, US policymakers turned to a legally complex set of export restrictions targeting the semiconductor supply chain in the attempt to safeguard critical infrastructure in the telecommunications sector. The potentially far-reaching tactics included weaponization of exports by relatively small but highly specialized American software service and equipment providers in order to constrain Huawei, a Fortune Global 500 company. It describes potential costs of such policies, some of their unintended consequences, and whether policymakers might push them further in the attempt to constrain other Chinese firms.
Topic:
Science and Technology, Trade Wars, Industry, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

9. Protectionism under Trump: The China Shock, Intolerance, and the "First White President"

Author:
Marcus Noland
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In 2016, the United States elected an avowedly protectionist president. This paper uses US county-level electoral data to examine this outcome. The hypothesis that support for protectionism was purely a response to globalization is rejected. Exposure to trade competition encouraged a shift to the Republican candidate, but this effect is mediated by race, diversity, education, and age. If the turn toward protectionism is due to economic dislocation, then public policy interventions could mitigate the impact and support the reestablishment of a political consensus for open trade. If, however, the drivers are identity or cultural values, then the scope for constructive policy intervention is unclear.
Topic:
Economy, Trade, Donald Trump, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

10. EU Trade Policy amid the China-US Clash: Caught in the Cross-Fire?

Author:
Ana González and Nicolas Véron
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's rapid rise and unique economic system and the increasingly aggressive and disruptive US trade policy are posing an unprecedented threat to the global rules-based trading and economic system. The European Union has critical interests at stake in the current escalation, even as it has so far been comparatively spared from US trade policy belligerence and China's reactions. In this context, the European Union should adopt an independent and proactive stance, building on recent efforts and going beyond them. The European Union, even more than the United States or China, has a strategic interest in the preservation of the global rules-based order embodied by the World Trade Organization (WTO). It must play a leading role in steering WTO reform and modernization, working closely with broadly aligned third countries such as Japan and other players. It should expand its outreach beyond its immediate negotiating counterparts in both the United States and China, and leading European officials at both the EU and member state levels should work at better understanding China. While strengthening its domestic policy instruments to address new challenges, such as the screening of foreign direct investment for security purposes, the European Union must also resist its own temptations of protectionism and economic nationalism. In support of these objectives, the European Union should prepare itself for difficult decisions, which may involve revising some of its current red lines in international trade negotiations. Conversely, the European Union should stand firm on principles such as refusing one-sided agreements and rejecting abusive recourse to national security arguments in trade policies. The European Parliament, in working with the European Council and the European Commission, will have a critical role to play in steering the European Union through these challenging times.
Topic:
Bilateral Relations, Economy, Trade Wars, and Trade Policy
Political Geography:
China, Asia, North America, United States of America, and European Union

11. The 2018 US-China Trade Conflict after 40 Years of Special Protection

Author:
Chad P. Bown
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In 2018, the United States suddenly increased tariffs on nearly 50 percent of its imports from China. China immediately retaliated with tariffs on more than 70 percent of imports from the United States. This paper assesses what happened in 2018 and attempts to explain why. It first constructs a new measure of special tariff protection to put the sheer scope and coverage of the 2018 actions into historical context. It then uses the lens provided by the 2018 special tariffs to explain the key sources of economic and policy friction between the two countries. This includes whether China’s state-owned enterprises and industrial subsidies, as well as China’s development strategy and system of forcibly acquiring foreign technology, were imposing increasingly large costs on trading partners. Finally, it also examines whether the US strategy to provoke a crisis—which may result in a severely weakened World Trade Organization—was deliberate and out of frustration with the institution itself.
Topic:
Economics, International Trade and Finance, World Trade Organization, Bilateral Relations, Trade Wars, Donald Trump, and Imports
Political Geography:
China, Asia, North America, and United States of America

12. EU Trade Policy amid the China-US Clash: Caught in the Cross-Fire?

Author:
Felipe González and Nicolas Véron
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's rapid rise and unique economic system and the increasingly aggressive and disruptive US trade policy are posing an unprecedented threat to the global rules-based trading and economic system. The European Union has critical interests at stake in the current escalation, even as it has so far been comparatively spared from US trade policy belligerence and China's reactions. In this context, the European Union should adopt an independent and proactive stance, building on recent efforts and going beyond them. The European Union, even more than the United States or China, has a strategic interest in the preservation of the global rules-based order embodied by the World Trade Organization (WTO). It must play a leading role in steering WTO reform and modernization, working closely with broadly aligned third countries such as Japan and other players. It should expand its outreach beyond its immediate negotiating counterparts in both the United States and China, and leading European officials at both the EU and member state levels should work at better understanding China. While strengthening its domestic policy instruments to address new challenges, such as the screening of foreign direct investment for security purposes, the European Union must also resist its own temptations of protectionism and economic nationalism. In support of these objectives, the European Union should prepare itself for difficult decisions, which may involve revising some of its current red lines in international trade negotiations. Conversely, the European Union should stand firm on principles such as refusing one-sided agreements and rejecting abusive recourse to national security arguments in trade policies. The European Parliament, in working with the European Council and the European Commission, will have a critical role to play in steering the European Union through these challenging times.
Topic:
International Relations, Economics, Trade Wars, and Trade Policy
Political Geography:
China, Europe, Asia, North America, United States of America, and European Union

13. Protectionism under Trump: The China Shock, Intolerance, and the "First White President"

Author:
Marcus Noland
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In 2016, the United States elected an avowedly protectionist president. This paper uses US county-level electoral data to examine this outcome. The hypothesis that support for protectionism was purely a response to globalization is rejected. Exposure to trade competition encouraged a shift to the Republican candidate, but this effect is mediated by race, diversity, education, and age. If the turn toward protectionism is due to economic dislocation, then public policy interventions could mitigate the impact and support the reestablishment of a political consensus for open trade. If, however, the drivers are identity or cultural values, then the scope for constructive policy intervention is unclear.
Topic:
Economics, Politics, Donald Trump, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

14. Maintaining Financial Stability in the People's Republic of China during Financial Liberalization

Author:
Nicholas Borst and Nicolas R. Lardy
Publication Date:
08-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's banking system is now the largest in the world, and its capital markets are rapidly approaching the size of those in the advanced economies. Borst and Lardy trace the evolution of China's financial system away from a traditional bank-dominated and state-directed financial system toward a more complex, market-based system. They analyze and outline the optimal sequence of financial reforms needed to manage the new risks accompanying this evolution.
Topic:
Economics, Markets, Financial Crisis, and Reform
Political Geography:
China

15. The Hyperglobalization of Trade and Its Future

Author:
Arvind Subramanian and Martin Kessler
Publication Date:
08-2013
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper describes seven salient features of trade integration in the 21st century: Trade integration has been more rapid than ever (hyperglobalization); it is dematerialized, with the growing importance of services trade; it is democratic, because openness has been embraced widely; it is criss-crossing because similar goods and investment flows now go from South to North as well as the reverse; it has witnessed the emergence of a mega-trader (China), the first since Imperial Britain; it has involved the proliferation of regional and preferential trade agreements and is on the cusp of mega-regionalism as the world's largest traders pursue such agreements with each other; and it is impeded by the continued existence of high barriers to trade in services. Going forward, the trading system will have to tackle three fundamental challenges: In developed countries, the domestic support for globalization needs to be sustained in the face of economic weakness and the reduced ability to maintain social insurance mechanisms. Second, China has become the world's largest trader and a major beneficiary of the current rules of the game. It will be called upon to shoulder more of the responsibilities of maintaining an open system. The third challenge will be to prevent the rise of mega-regionalism from leading to discrimination and becoming a source of trade conflicts. We suggest a way forward—including new areas of cooperation such as taxes—to maintain the open multilateral trading system and ensure that it benefits all countries.
Topic:
Economics, Globalization, International Trade and Finance, Markets, and Treaties and Agreements
Political Geography:
China

16. Why Growth in Emerging Economies Is Likely to Fall

Author:
Anders Åslund
Publication Date:
11-2013
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Emerging-market growth from 2000 to 2012 was untypically high. This paper highlights the many reasons why emerging-economy growth is likely to be lower going forward. Much of the catch-up potential has already been used up. The extraordinary credit and commodity booms are over, and many large emerging economies are financially fragile. They have major governance problems, so they need to carry out major structural reforms to be able to proceed with a decent growth rate, but many policymakers are still in a state of hubris and not very inclined to opt for reforms. They are caught up in state and crony capitalism. Rather than providing free markets for all, the West might limit its endeavors to its own benefit. Economic convergence has hardly come to an end, but it has probably reached a hiatus that is likely to last many years. The emerging economies need to improve their quality of governance and other economic policies substantially to truly catch up. For a decade or so, the West could take the global economic lead once again as in the 1980s.
Topic:
Economics, Emerging Markets, International Trade and Finance, Monetary Policy, and Governance
Political Geography:
Russia, China, India, South Africa, and Brazil

17. Spillover Effects of Exchange Rates: A Study of the Renminbi

Author:
Arvind Subramanian, Aaditya Mattoo, and Prachi Mishra
Publication Date:
03-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper estimates the impact of China's exchange rate changes on exports of competitor countries in third markets, known as the "spillover effect." Recent theory is used to develop an identification strategy in which competition between China and its developing country competitors in specific products and destinations plays a key role. The variation is used—afforded by disaggregated trade data—across exporters, importers, product, and time to estimate this spillover effect. The results show robust evidence of a statistically and quantitatively significant spillover effect. Estimates suggest that, on average, a 10 percent appreciation of China's real exchange rate boosts a developing country's exports of a typical 4-digit Harmonized System (HS) product category to third markets by about 1.5 to 2 percent. The magnitude of the spillover effect varies systematically with product characteristics as implied by theory.
Topic:
Development, Economics, and Markets
Political Geography:
China

18. Chinese Investment in Latin American Resources: The Good, the Bad, and the Ugly

Author:
Theodore H. Moran, Julia Muir, and Barbara Kotschwar
Publication Date:
02-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
China's need for vast amounts of minerals to sustain its high economic growth rate has led Chinese investors to acquire stakes in natural resource companies, extend loans to mining and petroleum investors, and write long-term procurement contracts for oil and minerals in Africa, Latin America, Australia, Canada, and other resource-rich regions. These efforts to procure raw materials might be exacerbating the problems of strong demand; "locking up" natural resource supplies, gaining preferential access to available output, and extending control over the world's extractive industries. But Chinese investment need not have a zero-sum effect if Chinese procurement arrangements expand, diversify, and make more competitive the global supplier system. Previous Peterson Institute research (see Moran 2010) and new research undertaken in this paper, show that the majority of Chinese investments and procurement arrangements serve to help diversify and make more competitive the portion of the world natural resource base located in Latin America. For a more comprehensive analysis, the authors conduct a structured comparison of four Peruvian mines with foreign ownership: two Organization for Economic Cooperation and Development-based, and two Chinese. They examine what conditions or policy measures are most effective in inducing Chinese investors to adopt international industry standards and best-practices, and which are not. They distill from this case study some lessons for other countries in Latin America, Africa, and elsewhere that intend to use Chinese investment to develop their extractive sectors: first, that financial markets bring accountability; second, that the host country regulatory environment makes a significant difference; and third, that foreign investment is a catalyst for change.
Topic:
Economics, International Trade and Finance, and Natural Resources
Political Geography:
China, Canada, Latin America, and Australia

19. The Renminbi Bloc Is Here: Asia Down, Rest of the World to Go?

Author:
Arvind Subramanian and Martin Kessler
Publication Date:
10-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
A country's rise to economic dominance tends to be accompanied by its currency becoming a reference point, with other currencies tracking it implicitly or explicitly. For a sample comprising emerging market economies, we show that in the last two years, the renminbi has increasingly become a reference currency which we define as one which exhibits a high degree of co-movement (CMC) with other currencies. In East Asia, there is already a renminbi bloc, because the renminbi has become the dominant reference currency, eclipsing the dollar, which is a historic development. In this region, 7 currencies out of 10 co-move more closely with the renminbi than with the dollar, with the average value of the CMC relative to the renminbi being 40 percent greater than that for the dollar. We find that co-movements with a reference currency, especially for the renminbi, are associated with trade integration. We draw some lessons for the prospects for the renminbi bloc to move beyond Asia based on a comparison of the renminbi's situation today and that of the Japanese yen in the early 1990s. If trade were the sole driver, a more global renminbi bloc could emerge by the mid-2030s but complementary reforms of the financial and external sector could considerably expedite the process.
Topic:
Development, Economics, Emerging Markets, Foreign Exchange, and Monetary Policy
Political Geography:
China and Asia

20. Choice and Coercion in East Asian Exchange Rate Regimes

Author:
C. Randall Henning
Publication Date:
09-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper examines the exchange rate regimes of East Asian countries since the initial shift by China to a controlled appreciation in July 2005, testing econometrically the weights of key currencies in the implicit baskets that appear to be targeted by East Asian monetary authorities. It finds, first, that Malaysia, Thailand, Singapore and the Philippines have formed a loose but effective “renminbi bloc” with China, and that South Korea has participated tentatively since the global financial crisis. Second, the emergence of the renminbi bloc in terms of the exchange rate has been facilitated by the continued dominance of the US dollar as a trade, investment, and reserve currency. Third, exchange rate stabilization is explained by the economic strategies of these countries, which rely heavily on export development and financial repression, and the economic rise of China. Fourth, analysts should specify the exchange rate preferences of these emerging market countries carefully before drawing inferences about Chinese influence within the region.
Topic:
Development, Emerging Markets, Foreign Exchange, and International Trade and Finance
Political Geography:
China, Malaysia, Asia, South Korea, Philippines, Singapore, and Thailand

21. Capital Account Policies and the Real Exchange Rate

Author:
Olivier Jeanne
Publication Date:
09-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper presents a simple model of how a small open economy can undervalue its real exchange rate using its capital account policies. The paper presents several properties of such policies, and proposes a rule of thumb to assess their welfare cost. The model is applied to an analysis of Chinese capital account policies.
Topic:
Development, Economics, Emerging Markets, and Monetary Policy
Political Geography:
China

22. Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration

Author:
Stephan Haggard and Marcus Noland
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although the authors cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
Topic:
Foreign Policy, Economics, International Trade and Finance, and Bilateral Relations
Political Geography:
China, Israel, and North Korea

23. A China Round of Multilateral Trade Negotiations

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Until recently, the World Trade Organization (WTO) has been an effective framework for cooperation because it has continually adapted to changing economic realities. The current Doha Agenda is an aberration because it does not reflect one of the biggest shifts in the international economic and trading system: the rise of China. Even though China will have a stake in maintaining trade openness, an initiative that builds on but redefines the Doha Agenda would anchor China more fully in the multilateral trading system. Such an initiative would have two pillars. First, a new negotiating agenda that would include the major issues of interest to China and its trading partners, and thus unleash the powerful reciprocal liberalization mechanism that has driven the WTO process to previous successes. Second, new restraints on bilateralism and regionalism that would help preserve incentives for maintaining the current broad non-discriminatory trading order.
Topic:
Economics, Globalization, International Trade and Finance, and Markets
Political Geography:
China and Israel

24. Capital Account Liberalization and the Role of the Renminbi

Author:
Nicholas R. Lardy and Patrick Douglass
Publication Date:
02-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Despite an erosion of consensus on its benefits, capital account convertibility remains a long-term goal of China. This paper identifies three major preconditions for convertibility in China: a strong domestic banking system, relatively developed domestic financial markets, and an equilibrium exchange rate. The authors examine each of these in turn and find that, in significant respects, China does not yet meet any of the conditions necessary for convertibility. They then evaluate China's progress to date on capital account liberalization, including recent efforts to promote renminbi internationalization and greater use of the renminbi in trade settlement. The paper concludes with an overview of remaining obstacles to convertibility and policy recommendations.
Topic:
Development, Economics, and Monetary Policy
Political Geography:
China

25. Foreign Manufacturing Multinationals and the Transformation of the Chinese Economy: New Measurements, New Perspectives

Author:
Theodore H. Moran
Publication Date:
04-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
What is the relationship between foreign manufacturing multinational corporations (MNCs) and the expansion of indigenous technological and managerial technological capabilities among Chinese firms? China has been remarkably successful in designing industrial policies, joint venture requirements, and technology transfer pressures to use FDI to create indigenous national champions in a handful of prominent sectors: high speed rail transport, information technology, auto assembly, and an emerging civil aviation sector. But what is striking in the aggregate data is how relatively thin the layer of horizontal and vertical spillovers from foreign manufacturing multinationals to indigenous Chinese firms has proven to be. Despite the large size of manufacturing FDI inflows, the impact of multinational corporate investment in China has been largely confined to building plants that incorporate capital, technology, and managerial expertise controlled by the foreigner. As the skill-intensity of exports increases, the percentage of the value of the final product that derives from imported components rises sharply. China has remained a low value-added assembler of more sophisticated inputs imported from abroad—a “workbench” economy. Where do the gains from FDI in China end up? While manufacturing MNCs may build plants in China, the largest impact from deployment of worldwide earnings is to bolster production, employment, R, and local purchases in their home markets. For the United States the most recent data show that US-headquartered MNCs have 70 percent of their operations, make 89 percent of their purchases, spend 87 percent of their R dollars, and locate more than half of their workforce within the US economy—this is where most of the earnings from FDI in China are delivered.
Topic:
Economics, Industrial Policy, International Trade and Finance, and Science and Technology
Political Geography:
United States, China, and Israel

26. Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition

Author:
Arvind Subramanian
Publication Date:
09-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Against the backdrop of the recent financial crisis and the ongoing rapid changes in the world economy, the fate of the dollar as the premier international reserve currency is under scrutiny. This paper attempts to answer whether the Chinese renminbi will eclipse the dollar, what will be the timing of, and the prerequisites for this transition, and which of the two countries controls the outcome. The key finding, based on analyzing the last 110 years, is that the size of an economy—measured not just in terms of GDP but also trade and the strength of the external financial position—is the key fundamental correlate of reserve currency status. Further, the conventional view that sterling persisted well beyond the strength of the UK economy is overstated. Although the United States overtook the United Kingdom in terms of GDP in the 1870s, it became dominant in a broader sense encompassing trade and finance only at the end of World War I. And since the dollar overtook sterling in the mid-1920s, the lag between currency dominance and economic dominance was about 10 years rather than the 60-plus years traditionally believed. Applying these findings to the current context suggests that the renminbi could become the premier reserve currency by the end of this decade, or early next decade. But China needs to fulfill a number of conditions—making the reniminbi convertible and opening up its financial system to create deep and liquid markets—to realize renminbi preeminence. China seems to be moving steadily in that direction, and renminbi convertibility will proceed apace not least because it offers China's policymakers a political exit out of its mercantilist growth strategy. The United States cannot in any serious way prevent China from moving in that direction.
Topic:
Economics, Markets, and Monetary Policy
Political Geography:
United States and China

27. The G-20 and International Financial Institution Governance

Author:
Edwin M. Truman
Publication Date:
09-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper addresses the agenda for the Group of Twenty (G-20) leaders' meeting in Seoul, Korea in November 2010. This is an opportunity and challenge for Asian leaders in particular. Their test will be, first, to demonstrate that they can responsibly advance economic recovery. They must also deliver on institutional reform, in particular of the International Monetary Fund (IMF). I advocate a substantial expansion of the IMF's role as lender of last resort that is integrated with the surveillance role of the IMF in the form of comprehensive prequalification for IMF assistance and policy advice and a substantial increase in the IMF's financial resources. I also propose an approach to meaningful reform of the distribution of IMF quotas along with limiting European seats on the IMF executive board.
Topic:
Economics, Emerging Markets, Global Recession, Financial Crisis, and Governance
Political Geography:
China, Israel, Asia, and Korea

28. Trade Disputes Between China and the United States: Growing Pains so Far, Worse Ahead?

Author:
Gary Clyde Hufbauer and Jared C. Woollacott
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This study covers the history of Sino-US trade relations with a particular focus on the past decade, during which time each has been a member of the World Trade Organization (WTO). Providing a brief history of 19th and 20th century economic relations, this paper examines in detail the trade disputes that have arisen between China and the United States over the past decade, giving dollar estimates for the trade flows at issue. Each country has partaken in their share of protectionist measures, however, US measures have been characteristically defensive, protecting declining industries, while Chinese measures have been characteristically offensive, promoting nascent industries. We also cover administrative and legislation actions within each country that have yet to be the subject of formal complaint at the WTO. This includes an original and comprehensive quantitative summary of US Section 337 intellectual property rights cases. While we view the frictions in Sino-US trade a logical consequence of the rapid increase in flows between the two countries, we caution that each country work within the WTO framework and respect any adverse decisions it delivers so that a protracted protectionist conflict does not emerge. We see the current currency battle as one potential catalyst for such conflict if US and Chinese policymakers fail to manage it judiciously.
Topic:
Economics, International Trade and Finance, Markets, and Bilateral Relations
Political Geography:
United States and China

29. Criss-Crossing Globalization: Uphill Flows of Skill-Intensive Goods and Foreign Direct Investment

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Th is paper documents an unusual and possibly significant phenomenon: the export of skills embodied in goods, services, or capital from poorer to richer countries. We fi rst present a set of stylized facts. Using a measure that combines the sophistication of a country's exports with the average income level of destination countries, we show that the performance of a number of developing countries, notably China, Mexico, and South Africa, matches that of much more advanced countries, such as Japan, Spain, and the United States. Creating a new combined dataset on foreign direct investment (FDI) (covering greenfi eld investments as well as mergers and acquisitions) we show that fl ows of FDI to Organization for Economic Cooperation and Development (OECD) countries from developing countries like Brazil, India, Malaysia, and South Africa as a share of their GDP are as large as fl ows from countries like Japan, Korea, and the United States. Th en, taking the work of Hausmann et al. (2007) as a point of departure, we suggest that it is not just the composition of exports but their destination that matters. In both cross-sectional and panel regressions, with a range of controls, we fi nd that a measure of uphill fl ows of sophisticated goods is signifi cantly associated with better growth performance. Th ese results suggest the need for a deeper analysis of whether development benefi ts might derive not from deifying comparative advantage but from defying it.
Topic:
Economics, Globalization, and Foreign Direct Investment
Political Geography:
China, South Africa, and Mexico

30. Sanctioning North Korea: The Political Economy of Denuclearization and Proliferation

Author:
Stephan Haggard and Marcus Noland
Publication Date:
07-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
As a small country dependent on foreign trade and investment, North Korea should be highly vulnerable to external economic pressure. In June 2009, following North Korea's second nuclear test, the UN Security Council passed Resolution 1874, broadening existing economic sanctions and tightening their enforcement. However, an unintended consequence of the nuclear crisis has been to push North Korea into closer economic relations with China and other trading partners that show little interest in cooperating with international efforts to pressure North Korea, let alone in supporting sanctions. North Korea appears to have rearranged its external economic relations to reduce any impact that traditional sanctions could have.
Topic:
Economics, International Trade and Finance, and Sanctions
Political Geography:
China, North Korea, and United Nations

31. Reconciling Climate Change and Trade Policy

Author:
Arvind Subramanian, Aaditya Mattoo, Dominique van der Mensbrugghe, and Jianwu He
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. While this paper confirms the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects, output and exports of energy-intensive manufactures are projected to decline, potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. The paper's quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.
Topic:
Climate Change, Economics, Energy Policy, Environment, and International Trade and Finance
Political Geography:
China

32. The (Non) Impact of UN Sanctions on North Korea

Author:
Marcus Noland
Publication Date:
12-2008
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This study finds that North Korea's nuclear test and the imposition of UN Security Council sanctions have had no perceptible effect on North Korea's trade with its two largest partners, China and South Korea. Before North Korea conducted an underground nuclear test, it was widely believed that such an event would have cataclysmic diplomatic ramifications. However, beginning with visual inspection of data and ending with time-series models, no evidence is found to support the notion that these events have had any effect on North Korea's trade with its two principal partners.
Topic:
United Nations and Weapons of Mass Destruction
Political Geography:
China, Asia, South Korea, and North Korea

33. Migration Experiences of North Korean Refugees: Survey Evidence from China

Author:
Stephan Haggard, Marcus Noland, and Yoonok Chang
Publication Date:
03-2008
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Chronic food shortages, political repression, and poverty have driven tens of thousands of North Koreans into China. This paper reports results from a large-scale survey of this population. The survey provides insight not only into the material circumstances of the refugees but also into their psychological state and aspirations. One key finding is that many North Korean refugees suffer severe psychological stress akin to post-traumatic stress disorder (PTSD). This distress is caused in part by experiences in China. However, we demonstrate that it is also a result of the long shadow cast by the North Korean famine and abuses suffered at the hands of the North Korean political regime. These traumas, in turn, affect the ability of the refugees to hold jobs in China and accumulate resources for on-migration to third countries. Most of the refugees want to permanently resettle in South Korea, though younger, better-educated refugees have a greater inclination to prefer the United States as a final destination.
Topic:
Humanitarian Aid
Political Geography:
United States, China, Asia, South Korea, and North Korea

34. Multilateralism beyond Doha

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
10-2008
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
A fundamental shift is taking place in the world economy to which the multilateral trading system has failed to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were not even on the negotiating agenda. The paper advances five propositions: (1) the traditional negotiating dynamic, driven by private-sector interests largely in the rich countries, is running out of steam; (2) the world economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic security has become a paramount concern for consumers, workers, and ordinary citizens; (3) international economic integration can contribute to enhanced security; (4) addressing these new concerns-relating to food, energy, and economic security-requires a wider agenda of multilateral cooperation, involving not just the World Trade Organization but other multilateral institutions as well; and (5) despite shifts in economic power across countries, the commonality of interests and scope for give-and-take on these new issues make multilateral cooperation worth attempting.
Topic:
Security, Economics, International Trade and Finance, Treaties and Agreements, and World Trade Organization
Political Geography:
United States, China, and Europe

35. Exit Polls: Refugee Assessments of North Korea's Transition

Author:
Stephan Haggard, Marcus Noland, and Yoonok Chang
Publication Date:
12-2007
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Results from a survey of more than 1,300 North Korean refugees in China provide insight into changing economic conditions in North Korea. There is modest evidence of slightly more positive assessments among those who exited the country following the initiation of reforms in 2002. Education breeds skepticism; higher levels of education were associated with more negative perceptions of economic conditions and reform efforts. Other demographic markers such as gender or provincial origin are not robustly correlated with attitudes. Instead, personal experiences appear to be central: A significant number of the respondents were unaware of the humanitarian aid program and the ones who knew of it almost universally did not believe that they were beneficiaries. This group's evaluation of the regime, its intentions, and accomplishments is overwhelmingly negative—even more so than those of respondents who report having had experienced incarceration in political detention facilities—and attests to the powerful role that the famine experience continues to play in the political economy of the country.
Topic:
Development, Economics, and Politics
Political Geography:
China, North Korea, and Korea

36. Congress, Treasury, and the Accountability of Exchange Rate Policy: How the 1988 Trade Act Should Be Reformed

Author:
Randall Henning
Publication Date:
09-2007
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The controversy within the United States over Chinese exchange rate policy has generated a series of legislative proposals to restrict the discretion of the Treasury Department in determining currency manipulation and to reform the department's accountability to Congress. This paper reviews Treasury's reports to Congress on exchange rate policy—introduced by the 1988 Trade Act—and Congress's treatment of them. It finds that the accountability process has often not worked well in practice: The reports provide only a partial basis for effective congressional oversight. For its part, Congress held hearings on less than half of the reports and overlooked some important substantive issues. Several recommendations can improve guidance to the Treasury, standards for assessment, and congressional oversight. These include (1) refining the criteria used to determine currency manipulation and writing them into law, (2) explicitly harnessing US decisions on manipulation to the International Monetary Fund's rules on exchange rates, (3) clarifying the general objectives of US exchange rate policy, (4) reaffirming the mandate to seek international macroeconomic and currency cooperation, (5) requiring Treasury to lead an executivewide policy review, and (6) institutionalizing multicommittee oversight of exchange rate policy by Congress. Legislators should strengthen reporting and oversight of broader exchange rate policy in addition to strengthening the provisions targeting manipulation.
Topic:
Economics, Foreign Exchange, and International Trade and Finance
Political Geography:
United States and China

37. North Korea's External Economic Relations

Author:
Stephan Haggard and Marcus Noland
Publication Date:
08-2007
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
North Korea's international transactions have grown since the 1990s famine period. Illicit transactions appear to account for a declining share of trade. Direct investment is rising, but the county remains significantly dependent on aid to finance imports. Interdependence with South Korea and China is rising, but the nature of integration with these two partners is very different: China's interaction with North Korea appears to be increasingly on market-oriented terms, while South Korea's involvement has a growing noncommercial or aid component. These patterns have implications for North Korea's development, the effectiveness of UN sanctions, and its bargaining behavior in nuclear negotiations.
Topic:
Markets and United Nations
Political Geography:
China, Asia, and North Korea

38. A (Lack of) Progress Report on China's Exchange Rate Policies

Author:
Morris Goldstein
Publication Date:
06-2007
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This working paper assesses the progress made in improving China's exchange rate policies over the past five years (that is, since 2002). I first discuss four indicators of progress on China's external imbalance and its exchange rate policies—namely, the change in (and level of) China's global current account position, movements in the real effective exchange rate of the renminbi (RMB), the role of market forces in the determination of the RMB, and China's compliance with its obligations on exchange rate policy as a member of the International Monetary Fund (IMF). I then discuss why the lack of progress in improving China's exchange rate policies matters for the economies of the China and the United States and for the international monetary and trading system. I also argue that several popular arguments and excuses for why more cannot be accomplished on removing the large undervaluation of the RMB are unpersuasive. Finally, I consider what can and should be done by China, the United States, and the IMF to accelerate progress over the next year or two.
Topic:
Development, Economics, and Foreign Exchange
Political Geography:
United States, China, and Asia

39. Prospects for Regional Free Trade in Asia

Author:
Gary Clyde Hufbauer and Yee Wong
Publication Date:
10-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Frustrated with lackluster momentum in the WTO Doha Round and the Asia Pacific Economic Cooperation (APEC) forum, and mindful of free trade agreement (FTA) networks centered on the United States and Europe, Asian countries have joined the FTA game. By 2005, Asian countries (excluding China) had ratified 14 bilateral and regional FTAs and had negotiated but not implemented another seven. Asian nations are also actively negotiating some 23 bilateral and regional FTAs, many with non-Asian partners, including Australia, Canada, Chile, the European Union, India, and Qatar. China has been particularly active since 2000. It has completed three bilateral FTAs—Thailand in 2003 and Hong Kong and Macao in 2004—and is initiating another 17 bilateral and regional FTAs. However, a regional Asian economic bloc led by China seems distant, even though China accounts for about 30 percent of regional GDP. As in Europe and the Western Hemisphere, many Asian countries are pursuing FTAs with countries outside the region. On present evidence, the FTA process embraced with some enthusiasm in Asia, Europe, and the Western Hemisphere more closely resembles fingers reaching idiosycratically around the globe rather than politico-economic blocs centered respectively on Beijing, Brussels, and Washington.
Topic:
Economics, International Trade and Finance, and Regional Cooperation
Political Geography:
United States, China, Europe, Washington, Canada, India, Beijing, Asia, Australia, Qatar, Chile, Hong Kong, Brussels, and Macao

40. What Might the Next Emerging-Market Financial Crisis Look Like?

Author:
Morris Goldstein and Anna Wong
Publication Date:
07-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper addresses the following question: If a financial crisis affecting a group of emerging economies were to take place sometime over the next three years, where would the crisis likely originate, how could it be transmitted to other economies, and which economies would be most affected by particular transmission or contagion mechanisms? A set of indicators is presented to gauge the vulnerability of individual emerging economies to various shocks, including a slowdown in import demand in both China and the United States, a fall in primary commodity prices, increased costs and lower availability of external financing, alternative patterns of exchange rate changes, and pressures operating on monetary and fiscal policies in emerging economies.
Topic:
Economics, Emerging Markets, Globalization, and International Trade and Finance
Political Geography:
United States and China

41. The Chinese Economy: Prospects and Key Policy Issues

Author:
Morris Goldstein
Publication Date:
04-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
No abstract is available.
Topic:
Economics, Industrial Policy, and International Trade and Finance
Political Geography:
China and Asia

42. Global Economic Prospects: Slower But Still Solid Growth in 2005; Worries About Growth and Inflation for 2006

Author:
Michael Mussa
Publication Date:
04-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
After surging to the highest growth rate in a generation, world real GDP is set to slow from a rate of just over 5 percent for 2004 to about 4 percent for 2005 and a tad slower for 2006. The economic slowdowns in several important economies in the second half of last year, including much of continental Europe and Japan, already make it clear that year-over-year growth will slow for 2005. But the continued strong growth of domestic demand in other countries, most notably the United States and China, virtually assures that global growth this year will not fall below potential.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, Japan, China, Europe, Israel, and East Asia

43. China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity

Author:
Nicholas R. Lardy and Morris Goldstein
Publication Date:
03-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
According to a popular argument put forward by three Deutsche Bank economists (Dooley, Folkerts-Landau, and Garber, here after DFG), one needn't worry about the sustainability of either the large US current account deficit or the undervalued exchange rates of a group of Asian economies (Dooley, Folkerts-Landau, and Garber 2003, 2004a, 2004b, 2004c; Folkerts-Landau 2004). In their view, the United States and the Asian economies have entered into an implicit contract—the so-called revived Bretton Woods system (hereafter BW2)—that can comfortably carry on for another decade or two, with significant net benefits to both parties.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, China, and Asia

44. Doubling the Global Work Force: The Challenge of Integrating China, India, and the Former Soviet Bloc into the World Economy

Author:
Richard B. Freeman
Publication Date:
11-2004
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In 1985, the global economic world (N. America, S. America, Western Europe, Japan, Asian Tigers, Africa) consisted of 2.5 billion people. In 2000 as a result of the collapse of communism, India's turn from autarky, China's shift to market capitalism, global economy encompassed 6 billion people. Had China, India, and the former Soviet empire stayed outside, global economy would have had 3.3 billion.
Topic:
International Relations, Economics, and Government
Political Geography:
Africa, Japan, China, America, India, Asia, and Western Europe

45. What Went Right in Japan

Author:
Adam S. Posen
Publication Date:
09-2004
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Japan's recovery is strong. Real GDP growth will exceed 4 percent this year and likely be 3 percent or higher in 2005 and perhaps even 2006. The Japanese economy has been growing solidly for the last five quarters (average real 3.2 percent annualized rate), and the pace is sustainable, given Japan's underlying potential growth rate (which has risen to 2 to 2.5 percent per year) and the combination of catch-up growth closing the current output gap and some reforms that will raise the growth rate for quarters to come (though not permanently). Indicators of domestic demand beyond capital investment are increasingly positive, including housing starts bottoming out, inventories drawing down, and diminished deflation. Moreover, on the external side, while China was the main source of export growth in 2003, the composition of exports has become more balanced this year and is widening beyond that seen in other recoveries. Just as in the United States and other developed economies, a sharp slowdown in Chinese growth and a sustained further increase in energy prices represent the primary risks to the outlook.
Topic:
Development and Economics
Political Geography:
United States, Japan, China, Israel, East Asia, and Asia

46. Adjusting China's Exchange Rate Policies

Author:
Morris Goldstein
Publication Date:
06-2004
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
During the past year, there has been considerable debate about, and much international criticism of, China's exchange rate and its currency regime. Yes, criticism of China in the United States would likely be more muted if the ongoing recovery were not so “jobless,” if employment in the US manufacturing sector had not (mainly for other reasons) declined so much in the three-year run-up to this presidential elect ion year, if so much attention were not focused on the very large bilateral US trade deficit with China instead of China's economically—more meaningful overall balance-of-payments position, and if the United States had not done such a poor job of improving its saving-investment imbalance—particularly in the public sector.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, China, and Asia

47. Foreign Direct Investment in China: Effects on Growth and Economic Performance

Author:
Edward M. Graham and Erika Wada
Publication Date:
04-2001
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
By almost all accounts, foreign direct investment (FDI) in China has been one of the major success stories of the past 10 years. Starting from a base of less than $19 billion in 1990, the stock of FDI in China rose to over $300 billion at the end of 1999. Ranked by the stock of inward FDI, China thus has become the leader among all developing nations and second among the APEC nations (only the United States holds a larger stock of inward FDI). China's FDI consists largely of greenfield investment, while inward FDI in the United States by contrast has been generated more by takeover of existing enterprises than by new establishment, a point developed later in this paper. The majority of FDI in China has originated from elsewhere in developing Asia (i.e., not including Japan). Hong Kong, now a largely self-governing “special autonomous region” of China itself, has been the largest source of record. The dominance of Hong Kong, however, is somewhat illusory in that much FDI nominally from Hong Kong in reality is from elsewhere. Some of what is listed as Hong Kong-source FDI in China is, in fact, investment by domestic Chinese that is “round-tripped” through Hong Kong. Other FDI in China listed as Hong Kong in origin is in reality from various western nations and Taiwan that is placed into China via Hong Kong intermediaries. Alas, no published records exist to indicate exactly how much FDI in China that is nominally from Hong Kong is in fact attributable to other nations.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States, Japan, China, Israel, East Asia, Asia, and Hong Kong

48. The New Asian Challenge

Author:
C. Fred Bergsten
Publication Date:
03-2000
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The initial postwar challenge from East Asia was economic. Japan crashed back into global markets in the 1960s, became the largest surplus and creditor country in the 1980s, and was viewed by many as the world's dominant economy by 1990. The newly industrialized countries (Korea, Taiwan, Hong Kong, Singapore) followed suit on a smaller but still substantial scale shortly thereafter. China only re-entered world commerce in the 1980s but has now become the second largest economy (in purchasing power terms), the second largest recipient of foreign direct investment inflows, and the second largest holder of monetary reserves. Indonesia and most of Southeast Asia grew at 7 percent for two or more decades. The oil crises of the 1970s and the financial crises of the late 1990s injected temporary setbacks but East Asia has clearly become a third major pole of the world economy, along with North America and Western Europe.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Japan, China, Europe, Israel, Taiwan, East Asia, Asia, North America, Korea, Singapore, and Hong Kong