WTO Membership for China and Its Impact on Growth, Investment and Consumption: A New Flexible Keynesian Approach

The November 2001 accession of China to the WTO promises increased investment (already the world’s second in 1998 and third in 1999) particularly from the EU into the country. This investment is crucial to China’s expanding trade with the rest of the world and will contribute significantly to its growth. The paper focuses on this nexus, presents a new and flexible approach to modelling the impact of China’s WTO membership on its investment and growth within the general framework of multi-sectoral economies (Tran Van Hoa, 1992), and applies it to study this anticipated impact using recent World Bank data. Our approach dominates in efficiency the CGE and other neo-classical methods (such as used in GTAP models) in its data-consistent structure. The paper then briefly describes the fundamentals of the new two-stage hierarchical information (2SHI) or empirical Bayes estimation and forecasting theory (Tran Van Hoa, 1985, 1986a, 1993b, Tran Van Hoa and Chaturvedi, 1988, 1990, 1997), summarises its superior MSE properties for forecasts and simulation, and reports substantive empirical findings on China’s investment and growth given its trade enhancement positions. As an illustration of applications of our approach, impact on China’s growth over a 7-year timeframe of a price reduction and increased government spending, assumed as a result of the country’s WTO membership, is also investigated and briefly its policy implications discussed.WTO, China, investment, growth, Keynesian approach, simulation

WTO Membership for China and Its Impact on Growth, Investment, and Consumption: A New Flexible Keynesian Approach

The November 2001 accession of China to the WTO promises increased investment (already the world’s second in 1998 and third in 1999) particularly from the EU into the country. This investment is crucial to China’s expanding trade with the rest of the world and will contribute significantly to its growth. The paper focuses on this nexus, presents a new and flexible approach to modelling the impact of China’s WTO membership on its investment and growth within the general framework of multi-sectoral economies (Tran Van Hoa, 1992), and applies it to study this anticipated impact using recent World Bank data. Our approach dominates in efficiency the CGE and other neo-classical methods (such as used in GTAP models) in its data-consistent structure. The paper then briefly describes the fundamentals of the new two-stage hierarchical information (2SHI) or empirical Bayes estimation and forecasting theory (Tran Van Hoa, 1985, 1986a, 1993b, Tran Van Hoa and Chaturvedi, 1988, 1990, 1997), summarises its superior MSE properties for forecasts and simulation, and reports substantive empirical findings on China’s investment and growth given its trade enhancement positions. As an illustration of applications of our approach, impact on China’s growth over a 7-year timeframe of a price reduction and increased government spending, assumed as a result of the country’s WTO membership, is also investigated and briefly its policy implications discussed

Technology, Innovation and Latecomer Strategies: Evidence from the Mobile Handset Manufacturing Sector in China

Since the entry of Chinese domestic mobile handset manufacturers in 1998, Chinese domestic suppliers have successfully surpassed the market share of joint ventures (JVs) while direct imports have been largely phased out. By examining China’s mobile handset manufacturing sector as a whole and through case studies, we found several factors that contributed to the success of China’s domestic handset manufacturers which can be classified into three categories: market conditions, competition, and government’s support.

Management innovation made in China: Haier’s Rendanheyi

This article shows how emerging market companies like China’s Haier Group create management innovations that are appropriate for an environment characterized by increased volatility, uncertainty, complexity, and ambiguity (VUCA). Dealing with VUCA effectively requires practices favoring nimble and decentralized responses; the Haier Group developed a platform of management practices under the label Rendanheyi (in Chinese: 人单合一) to transform itself from a conventional hierarchical manufacturing firm into a highly responsive online-based entrepreneurial company with “zero distance to the customer”. We demonstrate how the organizational, competitive, institutional, and technological contexts mattered for the development of Rendanheyi. Our study contributes several insights for practitioners and academics. First, we showcase how context dependent management innovations are created to allow emerging market firms like Haier to deal with a high VUCA world. Second, we draw lessons from Haier’s experimentation process for other firms. Finally, we create an extended process model of management innovation that managers, in both emerging and developed countries, can readily apply

Urban services growth: Influencing factors and its effect on regional growth in China

Urban economic success depends on the growth of its services and there are various factors influencing urban services growth. However, earlier studies mostly focus on the demand and supply factors. Factors, such as the institutional environment and services spatial agglomeration, although are important in the context of urban services growth in China, are practically less emphasized. Thus, this study analyzed the contributions of demand, supply, institutional environment, and services spatial agglomeration as factors significance for urban services growth, using the hierarchical multiple regression. The Panel Unit Root Test, Panel Co-integration Model and Panel Vector Error Correction Model were used to examine the short-run and long-run effects of urban services growth on regional economic growth in China. The findings of the present study show that the demand, supply and services spatial agglomeration contributed significantly to urban services growth. However, the institutional environment had relatively smaller contributions, compared to other factors. The Error Correction Model indicated a short-run relationship, while the Panel Co-integration Model revealed the existence of a long-run relationship between urban services growth and regional economic growth in China. In conclusion, the government should implement strategies towards a more balanced urban services growth with specific priority on strategies to expand the demand and supply for urban services, improving residents’ income, to promote urbanization, and deepen division of labor as well as to increase the quality and quantity of factor inputs in urban services. Indeed, future strategies should focus more on measures to promote urban services agglomeration, while improving the urban services marketization and their openness leve

Mapping the State of Financial Stability

The paper uses the Self-Organizing Map for mapping the state of financial stability and visualizing the sources of systemic risks on a two-dimensional plane as well as for predicting systemic financial crises. The Self-Organizing Financial Stability Map (SOFSM) enables a two-dimensional representation of a multidimensional financial stability space and thus allows disentangling the individual sources impacting on systemic risks. The SOFSM can be used to monitor macro-financial vulnerabilities by locating a country in the financial stability cycle: being it either in the pre-crisis, crisis, post-crisis or tranquil state. In addition, the SOFSM performs better than or equally well as a logit model in classifying in-sample data and predicting out-of-sample the global financial crisis that started in 2007. Model robustness is tested by varying the thresholds of the models, the policymaker’s preferences, and the forecasting horizon.systemic financial crisis; systemic risk; self-organizing maps; visualisation; prediction; macroprudential supervision