Jianwei Xu

China’s Belt and Road initiative: can Europe expect trade gains?

The Belt and Road initiative, recently embarked on by China, aims to improve cross-border infrastructure in order to reduce transportation costs across a massive geographical area between China and Europe. We estimate how much trade might be created among Belt and Road countries as a consequence of the reduction in transportation costs (both railway and maritime) and find that European Union countries, especially landlocked countries, should benefit considerably. This is also true for eastern Europe and Central Asia and, to a lesser extent, south-east Asia. In contrast, if China were to seek to establish a free trade area within the Belt and Road region, EU member states would benefit less, while Asia would benefit more. Xi Jinping’s current vision for the Belt and Road, centred on improving transport infrastructure, is very good news for Europe as far as trade creation is concerned.

Labor Market Dynamics and Structural Change: Evidence from China

Structural change theories usually assume agents are homogeneous. However, because of demand-side or supply-side heterogeneities, the probability of switching among sectors differs across people. This paper reveals these differences through restoring a long-period, individual-level panel dataset from Chinas Urban Household Survey for 1986–2009. We find that both for people who started working for the first time and those who switched jobs, the sector choice depends on personal characteristics. In particular, women and people with higher educational attainment or a previous white-collar job are more likely to join the tertiary sector and less likely to join the primary sector. These effects are substantial even if the macroeconomic variables used in conventional structural change theories are controlled. They are also robust in various periods and at more detailed industry levels. Our research suggests that it is important to pay greater attention to the labor composition when making policy related to economic structural change.

Industry-specific Real Effective Exchange Rate for China: 2000–2009

This paper measures the industry-specific real effective exchange rate (REER) for China by matching domestic and foreign industry-level price and trade data series. We find that after 2005 the REER appreciates more in the “chemical, plastics, rubber and fuels industry” and the “machinery and equipment industry,” but remains roughly constant or even depreciates in other industries. The nominal exchange rate generally accounts for over 50 percent of the aggregate real effective exchange rate fluctuations, but this conclusion does not apply to three of nine industries. We apply the industry-specific REER to re-examine the relationship between the exchange rate and trade, and find that the industry-specific REER index performs better than the traditional aggregate REER index. We recommend that the Chinese Government officially adopt industry-specific exchange rates instead of using the aggregate effective exchange rates to evaluate the competitiveness of Chinese industries in the international market.

The Skill Structure of Export Wage Premium: Evidence from Chinese Matched Employer–Employee Data

We study how the wage gap between exporting and non-exporting firms (export wage premium) differs across skill groups, using unique matched employer–employee data from China. We find robust evidence that exporters pay relatively higher wages than non-exporters to more educated workers. The differences in export wage premium across education groups are sizable. Further investigations show that the positive correlation between export wage premium and education is more pronounced in sectors with higher scope for quality differentiation. This is consistent with the theory that exporters produce relatively higher quality goods which require relatively higher quality skilled workers.