James Xiaohe Zhang

Will RMB appreciation reduce trade deficit in the US

Although the Renminbi (RMB) appreciated by more than 25% against the US dollar in nominal terms between 2005 and 2011, Chinas exports continued to grow, leading to a surplus, representing approximately for 10% of its GDP. This paper assesses the major explanations for the surge of Chinas exports and trade surplus and tackles the issue of whether an appreciation of the RMB would help the US to reduce its trade deficits. After conducting simulation exercises on the multi-country macro-econometric Fair model, this paper offers some new explanations for the unexpected surge in Chinas trade surplus, namely a low overall price elasticity and a high domestic income elasticity for the tradable goods in both countries, and a consequential sluggish price pass-through process of the RMB appreciation on the US market. It thus questions the effectiveness of RMB appreciation as an instrument to restore the trade balance between China and the US.

The impact of the RMB revaluation on China and the world economy

China’s accession to the World Trade Organization (WTO) in 2001 was widely regarded as a major milestone in the development of the Chinese economy as well as the multilateral trading system. This book provides a remarkable background of information about China’s economy after WTO accession and analyses many important issues concerning China’s economic growth, international trade, transparency of trade policy, regional trade arrangements, foreign direct investment, banking sector liberalization, exchange rate reform, agricultural trade and energy demand.

Gender equality in education and economic growth in selected Southern African countries

Poverty reduction remains a big challenge in the Southern Africa Development Community (SADC) region, and economic growth is seen as a key ingredient to reduce poverty rates. Therefore, the region has been making significant commitments to embrace a more inclusive growth approach through the creation of the SADC Gender Unit as well as the regional Protocol on Gender. The aim of these interventions is to promote sustainable economic growth and reduce poverty rates. However, the attempts at testing for a positive and significant contribution of gender equality in education on economic growth have generated mixed results. Furthermore, as the empirical evidence comes from various parts of the world, only very little attention has been devoted to the SADC region. This research aims to fill this gap in literature. Hence this study examines the impact of gender equality in education on economic growth on a panel data of five Southern African countries between 1970 and 2010. The number of panels was restricted by data availability and a set of regression equation have been carried out for the sample, using Stata software Version 12. In this analysis, gender equality in education is measured by the ratio of girls to boys in primary enrolment, and economic growth is measured by real Gross Domestic Product (GDP) per capita at 2005 constant prices. To account for the possible endogeneity of the gender equality variable, the instrumental variable (IV) techniques are used. Gender equality in education is instrumented by religion as it tested to be a powerful instrument. The evidence presented in this analysis suggests that there is a positive and significant effect of gender equality in education on economic growth in the region at 1% and 10% significance levels. We have also tested the sensitivity of our results to changes in the model specification. The dependent variable was re-specified to per capita GDP at purchasing power parity as opposed to real GDP per capita. In addition a time-trend variable was added to the existing explanatory variable. Gender equality in education remains positive and significant at the 1% significance level. These results indicate that the effects of gender equality in education to be positive significant and robust to changes in specification. This result advocates some policy adjustment in education planning within the region to ensure the retention of girl students, as well as raising education quality, to stimulate economic growth. Reducing gender inequality in education will not only promote growth but also help to d advance other valuable development goals.

Is China's Economic Growth Sustainable? a General Equilibrium Analysis

Despite China’s remarkable economic growth over the last three decades have been well acknowledged, there seems no consensus being reached on how this growth is created and whether it can be sustained in the future. While some economists (e.g., Holz, 2008) argue that “China’s potential for economic growth from relatively low labor costs will continue to exist for another 30 years”, others (e.g., Hofman and Kuijs, 2008, Prasad, 2009, Whalley and Xin, 2010) have questioned its sustainability. Based on a brief literature review and with the help of a well-known CGE model (the GTAP model), this paper attempts to identify the most significant factors that have contributed to the miraculous economic growth in China, namely international trade, FDI, and migrant labor, and to explore how some other economic potentials such as the removal of the household registration system and engaging free trade with its major trade partners could be further exploited. The GTAP is a multi-region, multi-sector CGE model that has been used widely to tackle many economic and trade policy issues in developing countries. The latest version of the dataset which is based on 2007 actual data is used for running two sets of eight counter-factual simulations. According to the results of the simulations, it is concluded that the export-orientation development strategy, effective use of FDI, and exploitation of comparative advantage of its migrant workers are the most significant factors that have contributed to the remarkable economic growth in China. While the opening effect accounts for roughly 40% of GDP growth, the effective use of the migrant workers contributes to about 50%, leaving the remaining 10% or less as the contribution of TFP. Although not all of these factors will persist in the future, several alternative reform measures including the removal of the household registration system and further liberalising international trade through forming FTAs with its major trade partners would keep contributing to sustain China’s economic growth. The policy implication is that China should continue its opening and reform policies toward developing a more liberalised domestic factor market and engaging more FTAs with its major trading partners. When these economic potentials are further exploited, China’s rapid economic growth can be sustained further for at least another decade.

RMB Appreciation or Fiscal Stimulus, and their Policy Implications

The book explores the implications of both the extension of the market into key parts of the Chinese economy and the integration of China into the global economy. The main focus of the book is on the role and nature of China’s financial system and its ability to transform enterprise and household behaviour and the performance of investment finance, notably in the context of a two-way flow of foreign direct investment. All the extensive chapters highlight the issue of sustainability – some see the incompleteness of market reform as a problem; others are more willing to accept a pragmatic blending of the operation of the free market and government intervention.

A general equilibrium analysis of China's urbanization

ABSTRACT One of the issues of rapid urbanization in China is how the liberalization of factor markets will impact its economy. Based on a general equilibrium theoretical framework, this paper develops some hypotheses including that while the removal of the household registration system would generate unambiguous welfare gains, the land reform may have some modest impact on income redistribution. These theoretical hypotheses are examined with some empirical statistical data and simulation experiments based on a computable general equilibrium model (the GTAP model) in which several different policy scenarios including reforms in both labour and land markets are considered.