Kui-Wai Li

China's Economic Growth: 1952-2010

This article attempts to account for China’s economic growth in terms of labor, capital, and total factor productivity by estimating a Cobb-Douglas production function using official Chinese data. It is an extension of Gregory C. Chow’s earlier work in 1993 and has two purposes: to find out whether the parameters of the production function have changed and to use the production function to forecast GDP growth up to 2010.

Causal relationships among economic aggregates in China

Using Chinas macro data from 1952-1989, the stationarity and causality tests tp two types of economic aggregates are applied. The first type relates to the conventional money, income and consumption relationship; and the other is associated with the interest rate, money and investment/income relationship as embodied in a financial repression model. Stationarity test results show that most variables have an integrated order of one. the causality test results show that a different direction of causality exists when different measurement of price is used. A causal relationship between interest rate, money and investment/income is also found.

Money and Monetization in China's Economic Reform

In addition to privatization marketization, liberalization and pragmatization, monetization has been argued as the fifth feature in chinas economic reform. If monetization is taken to mean a process through which variations in money supply or interest rate are to affect macroeconomic variables, the construction of four causality relationships between interest rate and investment, and money and national income do not support the evidence of such a process in China between the late 1970s and early 1990s.

Economic Performance of Human Capital in Post-Reform China

Provincial data are used to examine the economic performance of Chinas human capital, adjusted by mortality and interprovincial migration figures. The perpetual-inventory approach is used to compile Chinas human capital, which is further decomposed into skilled, unskilled, and different educational endowments. Statistical estimates are extended to the performance of four regions. The various human capital indicators are examined with different infrastructure variables. The empirical results show that human capital endowed with higher education is scarce across provinces, but skilled human capital can be improved by increasing the amount of secondary school education. Consideration of openness factors shows that foreign direct investment is complementary to the level of human capital endowed with higher education.

Determinants of Chinese and American Outward Investment

The Peoples Republic of China can become an important and influential player in the world through its overseas investments in developing countries. This article examines and compares the determinants of Chinese and American direct investment around the world. The cross-sectional analysis is adopted for the years 2005 and 2006. Basic and improved Sala-i-Martin extreme bound analyses are applied in searching for robust determinants. The results suggest that distance, infrastructure facilities, and energy reserves are important factors in attracting investment from China and the United States. Institutional factors are not robust determinants of Chinas outward direct investment, suggesting that Chinese investors do not pay enough attention to institutional risks in making investments.

The Economic Intricacies of Banking Reform in China

This article discusses some of the economic constraints facing the efficient performance of Chinese banks. While the condition of accession to the World Trade Organization (WTO) requires that banking in China will open to foreign competition by 2006, large nonperformance loans and the lack of international accounting standards continue to plague Chinese banks. This article considers the theory of financial liberalization and the social function of banks and uses bank data to simulate the effective operations of four policy instruments of greater interest-rate spread, tax and cost reduction, and recapitalization. Recapitalization, either by the government or from foreign sources, is the most effective instrument in eliminating nonperforming loans. Despite some favorable recent developments, the article concludes that there should be no further delay in effective bank reform in China.

Financing China Trade and Investment

This book contains a total of eleven chapters, covering the following areas of China’s economic reform. The monetary and financial reform examined China’s policy on interest rate, money supply, foreign bank lending and development of the equity and commodity markets. The discussion on the reform of trade and foreign direct investment examined China’s reform and performance with other Asia economies of Japan and Taiwan. A major form of foreign direct investment included the official flows and foreign exchange market. While much of the discussion focused on the early stage of development, these discussions are important in understanding the way the trade and financial sectors in China today, including the large international reserve China has accumulated, the trade surplus resulting from the “bringing in” policy on foreign direct investment and official flows and the trade performance in the post-WTO accession era. At the same time, readers can also identify some of the problems founded in the early stage of reform, including the accumulation of debts, and the position of the Chinese currency.

Performance of Financial Resources in China's Provinces

This paper examines the economic performance of financial resources in Chinas provinces for the period 1985-98. The empirical results indicate that different financial resources have different impacts on the economic growth. The growth of national bank loans and self-raised funds are important to the growth of provincial output. When a division is made between inner and coastal regions, diversion of financial resources has a significant impact on the economic growth of the coastal provinces, but not on the economic growth of interior provinces.

The Impact of Openness and Domestic Performance on Growth Using Nonparametric Estimation

This article distinguishes openness from domestic performance as different growth determinants and uses nonparametric estimation to reveal their direct effects on GDP. On average, openness promotes growth, but its effect on growth is negative when the levels of openness and domestic performance both are very low. The effect of domestic performance on growth is always positive averagely and locally, but its effect on growth is decreasing when the economy experiences the initial stage of globalization and domestic performance. Our result makes a useful contribution to the globalization debate because the distinction between openness and domestic performance shows how different economies can perform and improve in each aspect. Among the developing economies, openness is a necessary and prerequisite condition for growth, but the achievement of a high level in domestic performance is also important for growth.

Finance and Trade Development in Contemporary China: Guest Editor's Introduction

This introduction was written on August 8, 2008, a memorable day in the history of China as it opened and celebrated the Olympics. The Hong Kong APEC Study Center of the City University of Hong Kong organized two All-China Economics (ACE) international conferences in December 2006 and December 2007. The five articles in this issue were presented at the 2007 ACE international conference. I thank all the conference participants, guest speakers, paper presenters, the Hong Kong Special Administrative Region government, reviewers, article referees, and Professor Hung-Gay Fung, the editor of The Chinese Economy, for his foresight in dedicating an issue to the conference papers. China’s celebration of the 2008 Olympic Games in turn celebrated thirty years of economic reform since 1978. China is a different country now than thirty years ago, and the enormous changes in its economy are quite evident, providing contemporary academics with numerous research topics. The five articles in this issue share the theme of “Finance and Trade Development in Contemporary China,” its authors showing their keenness to pinpoint the various aspects of success as well as potential drawbacks in the Chinese economy. As the guest editor of this issue, I am proud of the progress made by the Chinese economy, and look forward to much greater and positive changes in the next thirty years.