Bargaining Power and Foreign Direct Investment in China: Can 1.3 Billion Consumers Tame the Multinationals?

Foreign direct investment (FDI) has become a much desired commodity by nations, regions and cities throughout the world. Indeed, governments bid for FDI because it is commonly thought to be an important engine of economic growth, job creation, and technological upgrading. The People’s Republic of China (PRC), the developing world’s largest recipient of FDI and one of the world’s fastest growing economies, is often cited as evidence for the beneficial effects of FDI. Given the PRC’s size and the huge allure of its cheap labor force and customer base, one would think that if any country had the bargaining power vis a vis multinational corporations to benefit from FDI, it would be China. But does FDI really deliver these commonly perceived benefits? To answer this question, we study the impact of inward FDI on wages, job creation, investment and tax generation in the PRC from 1986-1999 by running panel regression analysis on provincial level data. An innovation of our analysis is to distinguish the impact of FDI inflows from that of economic liberalization, per se. We find that, contrary to the conventional wisdom, inward FDI has a relatively small positive impact on wages and employment, while having a negative impact on domestic investment and tax revenue. We suggest that the decentralization of the FDI bidding process in China contributes to these negative outcomes, and argue that the limitation on FDI management tools associated with China’s WTO entry is likely to further reduce the benefits of FDI for Chinese workers and citizens.

Fundamental Enterprise Income Tax Reform in China: Motivations and Major Changes

On 16 March 2007, the National People\u27s Congress of China promulgated a new Enterprise Income Tax Law (EIT Law) to take effect on 1 January 2008. It is the first law in Chinese history that imposes an income tax on all forms of enterprise. It replaces the current FIE Income Tax Law applicable to enterprises with foreign direct investment and the Interim Enterprise Income Tax Regulations (Interim EIT Regulations) applicable to Chinese-owned enterprises. Most notably, the EIT Law abolishes the tax incentives applicable only to foreign-investment enterprises (FIEs) and introduces a general tax rate that is internationally competitive. The promulgation of the EIT Law symbolizes the maturity of China\u27s tax policy, China\u27s commitment to the principles of the World Trade Organization (WTO) and China\u27s confidence in its economic development policy. This article provides some background on this fundamental tax reform and an overview of the key changes and their implications

Fundamental Enterprise Income Tax Reform in China: Motivations and Major Changes

On 16 March 2007, the National People\u27s Congress of China promulgated a new Enterprise Income Tax Law (EIT Law) to take effect on 1 January 2008. It is the first law in Chinese history that imposes an income tax on all forms of enterprise. It replaces the current FIE Income Tax Law applicable to enterprises with foreign direct investment and the Interim Enterprise Income Tax Regulations (Interim EIT Regulations) applicable to Chinese-owned enterprises. Most notably, the EIT Law abolishes the tax incentives applicable only to foreign-investment enterprises (FIEs) and introduces a general tax rate that is internationally competitive. The promulgation of the EIT Law symbolizes the maturity of China\u27s tax policy, China\u27s commitment to the principles of the World Trade Organization (WTO) and China\u27s confidence in its economic development policy. This article provides some background on this fundamental tax reform and an overview of the key changes and their implications

CHINA'S ACCESSION TO WTO AND SHIFTS IN THE AGRICULTURE POLICY

The overall goal of our paper is to explore this question of how China's policy will likely respond as the nation enters the WTO. Specifically, we will have three objectives. First, we briefly review China's existing agriculture policy and past performance of China's agriculture and how it has changed during the past 20 years of reform. Next, we examine the main features of the agreement that China must adhere to as they enter WTO. Finally, we consider a number of possible ways that policy makers may respond, primarily focusing on the national government's viewpoint.International Relations/Trade,

A Comparison of Solar and Wind Energy Development Between Western China and the Western US

China and the US are pursuing carbon neutrality targets as the world\u27s largest emitters. Powered by renewable energy, green electricity is a crucial step to help both countries to realize their carbon neutrality goal. Having similar natural situations and abundant solar and wind resources, both countries\u27 western regions shared significant similarities in the weight of land size, population, and social economy to the nation, which makes both western regions comparable. However, both countries are currently at different developing paces in developing solar and wind energy, which requires an unbiased method to conduct this assessment. This study designed a renewable energy assessment framework by defining vital influential factors and their sub- factors first, then aggregating all normalized values of selected factors to conduct a final performance score for each province and state in both western regions. Additionally, a ranking can be given within each region based on the final normalized score. Overall, the results show that although the two western regions are in different development stages, both share similarities in their solar and wind performance except the performance on social policy, as the western US has more types of solar, and consumers can choose incentives. At the provincial and state level, the top three performers in western China and the western US are Inner Mongolia, Qinghai, Ningxia, Colorado, Arizona, and Wyoming, respectively. Based on the performance result, recommended policy implications are given to both western regions for future usage. This framework can be applied to other renewable energy development assessments after successfully defining the key factors and their sub-factors

Will Economic Restructuring in China Reduce Trade-Embodied CO2 Emissions?

We calculate CO2 emissions embodied in China’s net exports using a multi-regional input-output database. We find that the majority of China’s export-embodied CO2 is associated with production of machinery and equipment rather than energy-intensive products, such as steel and aluminum. In 2007, the largest net recipients of embodied CO2 emissions from China include the EU (360 million metric tons, mmt), the U.S. (337 mmt), and Japan (109 mmt). Overall, annual CO2 emissions embodied in China’s net exports totaled 1,177 mmt, equal to 22% of China’s total CO2 emissions. We also develop a global general equilibrium model with a detailed treatment of energy and CO2 emissions. We use the model to analyze the impact of a sectoral shift in the Chinese economy away from industry and towards services, both without and with a decrease in China’s trade surplus, and a tax on energy-intensive exports, which reflect policy objectives in China’s Twelfth Five-Year Plan (2011–2015). We find that without a decrease in the trade surplus, both policies will have a limited impact on China’s net exports of embodied CO2 emissions. The policies have an even smaller effect on global emissions, as reduced production in China is partially offset by increased production elsewhere.We acknowledge the support of the National Social Science Foundation of China (Project No. Project No. 09&ZD029) and the Institute for Energy, Environment, and Economy at Tsinghua University, which is supporting Tianyu Qi’s doctoral research as a visiting scholar at the Massachusetts Institute of Technology. We further acknowledge the support of Eni S.p.A., ICF International, and Shell International Ltd., initial sponsors of the China Energy and Climate Project in the MIT Joint Program on the Science and Policy of Global Change at MIT. None of the sponsoring organizations played a role in the study design, collection, analysis, or interpretation of the data used for this study, nor did they influence our decisions to submit the article for publication, and all errors are our own. We also acknowledge general industrial and government sponsors of the Joint Program on the Science and Policy of Global Change (http://globalchange.mit.edu/sponsors/all)

PACIOLI 17; Innovation in the management and use of Micro Economic Databases in Agriculture

The PACIOLI network explores the need for and feasibility of innovation in farm accounting and its consequences for data gathering for policy analysis in Farm Accountancy Data Networks (FADNs). PACIOLI 17 took place in Ettenhausen, Switzerland, in June 2009. The theme of the workshop was 'Innovation in the management and use of Micro Economic Databases in Agriculture'

China: New Engine of World Growth

Twenty-five years of reform have transformed China from a centrally planned and closed system to a predominantly market-driven and open economy. As a consequence, China is emerging as the new powerhouse for the world economy. China: new engine for world growth discusses the impact and significance of this transformation. It points out risks to the growth process and unfinished tasks of reform. It presents conclusions from recent research on growth, trade and investment, the financial sector, income and regional disparities, industrial location and private sector development. Ross Garnaut is a Professor of Economics in the Research School of Pacific and Asian Studies, and Chairman of the China Economy and Business Program at The Australian National University. He was Australia’s Ambassador to China in the 1980s. Ligang Song is a Fellow in the Asia Pacific School of Economics and Government, and Director of the China Economy and Business Program at The Australian National University