Research on control strategies of economic risks in China\u27s Inter-regional transfer of industries

In the process of China\u27s inter-regional transfer of industries, there is a large number of economic risks. This article tries to develop a set of scientific and practical control strategies of the economic risks, to achieve the desired goal of stable and sustainable economic growth and continued improvement in local social welfare

How China's government and state enterprises partitioned property and control rights

In 1980, China's government owned and controlled its state enterprises, which were managed (inefficiently) by bureaucrats. During the 1980s, the government experimented with decentralizing state enterprises to boost productivity. By decade's end, China's state enterprises had become more market-oriented, and the structure of enterprise property rights had changed dramatically. The author examines how China's government and state enterprises partitioned property rights -how the government and enterprises decided about incentives, financial arrangements, and control rights. The author assumes that the government is risk-neutral and the enterprise manager is risk-averse; that the government's goal is to increase revenue (or profitability), to retain control of the firms (by bailing outfirms in financial trouble and collective heavier taxes on high-performing firms). The enterprise manager and employees, on the other hand, have an informational advantage over the government that allows them to earn a rent; that advantage leads to suboptimal efforts. Among the author's findings: (1) The ways the government and enterprises partitioned property rights were consistent with the prediction of the principal-agent model based on the above assumption. (2) Many of the changes in property rights reflected the government's attempt to cope with managerial informational advantage. (3) The government, in striving for equality, rewards inefficient firms while penalizing efficient ones (the so-called ratchet effect). Efficient firms are unwilling to reveal their true efficiency. They pretend to be inefficient by slacking, so they can get more transfers. So, there are inherent conflicts between two of the government's goals: profitability and equality. And the government's desire to control state enterprises prevents many of them from becoming decentralized and improving their productivity.Labor Policies,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,International Terrorism&Counterterrorism,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies,National Governance,Municipal Financial Management

Performance Issues in U.S.–China Joint Ventures

Based on an in-depth study of U.S.-China joint ventures, this article offers some insights into the performance of such international business relationships. While the conventional literature treats government as an amorphous aspea of the political-legal environment, in this case government is an active participant and influence in the performance of international joint ventures (UVs). It has both a constraining and enabling effect on LJV structure, strategy, and performance. For example, limits can be placed on ownership shares of joint ventures and on prices of the output. At the same time, government can cooperate with LJVs and foreign parent companies by creating partners for foreign parent companies, acting as major customers, and improving financial performance by lowering taxes

Falling behind or catching up? Developing countries in the era of globalization

Globalization improves the prospects for developing countries (DCs) to catch up economically with industrialized countries. But not all DCs will automatically benefit from globalization. Some DCs even face the risk of being delinked from the international division of labor. Differences in DC economic policies ultimately determine whether there will be a deepening divide between rich and poor countries in the world economy. Many observers draw an overly pessimistic picture of the perspectives of DCs in the era of globalization because of missing institutionalized links to regional integration schemes in Europe and North America, a low level of interfirm technology cooperation between industrialized countries and DCs, and a high concentration of foreign direct investment (FDD flows on only a few DC hosts. However, such concerns are largely unfounded: Asian DCs are most successful in globalization although they have remained outside institutionalized integration schemes, while ACP countries have not made much progress despite their preferential access to EU markets. Technology transfers between industrialized countries and DCs mainly occur through FDI and trade in capital goods, rather than through interfirm technology cooperation. Recent trends in FDI and international trade strongly support the proposition that DCs have become closely integrated into globalization strategies. A high concentration of FDI flows on a few DC hosts does not imply that new attractive locations cannot compete for international capital. Admittedly, it is true that between two thirds and three quarters of total FDI flows to DCs have persistently been absorbed by ten host economies. But the country composition of this group has changed over time. Globalization implies an increase in international investment cooperation. Case studies for selected DC industries show that FDI prevails in industries applying sophisticated technologies, whereas licensing and subcontracting are favored when production processes are standardized. Policy interventions may limit the choices open to investing foreign firms and, thereby, cause substitution effects between different forms of globalization or hinder globalization at all. The quality of DC economic policies determines whether these countries will succeed in joining the globalization club. The experience of the frontrunners among DCs suggests some basic policy conclusions: Openness towards world markets is a precondition for becoming involved in globalization strategies of transnational corporations. Liberalizing all forms of international investment cooperation and removing barriers to international trade should rank high on the policy agenda of DCs. Under conditions of globalized production, DC governments are increasingly constrained in pursuing policies of their own liking. Those DCs characterized by pronounced macroeconomic instability are relatively unattractive locations for international investors. Investment in physical and human capital plays a crucial role in enabling DCs to participate in globalization. Economic policies that discourage domestic saving and investment must be avoided. Financial market reforms are needed in DCs characterized by financial repression and inefficient intermediation between savers and investors. A better education of the workforce is required for a successful application of new technologies that become available through globalization. --

Transfer of financial risk in emerging eastern European stock markets: A sectoral perspective

With the rise of interconnected global financial systems, there is an increased risk that a financial crisis in one country may spread to others. The contagion effects of the 2008 global financial crisis hit advanced economies fast and hard while sparing less developed and less integrated financial systems. The present study focuses on the contagion effects at Eastern European stock markets and changes in their interconnections after EU accession in 2004. Specifically, we investigate the relationship among the stock market sectors of Poland, Hungary and the Czech Republic during 19982009 and their exposure to on-shored financial risk. The evidence suggests direct linkages between different stock market sectors with respect to returns and volatilities with increased equity-shock transmission between markets after EU accession in 2004. Of particular note is the intra-industry contagion in emerging Europe. Our findings have implications for asset pricing and portfolio selection for international financial institutions and financial managers.GARCH-BEKK; international risk transfer; emerging Eastern Europe; spillovers; intra- and inter-industry contagion

The Political Economy of Industrial Policy in China: The Case of Aircraft Manufacturing

Since 1960, only one new country, Brazil, has succeeded in delivering more than one civil jet per month. Otherwise, all the countries now offering world-class planes were established in aviation by the end of World War I. This being said, low-cost producers within several of the newly emerging markets have already acquired front-end manufacturing expertise as a direct result of industrial offset contracts and/or other forms of technology transfer. In all such cases, government intervention, notably through state ownership, has been predominant, but failures have been numerous in view of the difficulty of aligning ownership structure to financial, managerial, and technological requirements and of garnering the support of domestic interest groups. In this paper the focus is China’s efforts to build a world-class aircraft manufacturing industry. In the first half of the 1990s the potential of the Chinese industry to mount a competitive challenge to Western aircraft builders was largely discounted. Nowadays, as China strives to bear the ARJ-21 project to execution and even considers entering the market for wide-bodies, the threat is taken more seriously. The growth in the Chinese air transport market has reinforced the bargaining power of national aircraft producers and authorities are giving priority to building science and technology capacity in this area. Progress in creating military/civilian synergies has proven much more modest – especially when compared to the shipbuilding industry – and better coordination in the overall industry comes a distant fourth in the explanations’ peaking order.http://deepblue.lib.umich.edu/bitstream/2027.42/40165/3/wp779.pd

Abstracts : policy research working paper series - numbers 2197 - 2261

This paper contains abstracts of Policy Research Working Paper series Numbers 2197-2261.Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Health Economics&Finance,Health Monitoring&Evaluation

Framing China: Transformation and Institutional Change

The paper offers a frame for investigating the extent to which decentralisation, and subsequent locally chosen institutions shape private organisational and institutional innovation. To include the numerous locally based “economic regimes†matters as the resulting business system reflects political institution setting and private organisational innovation. Such a frame is a necessary first step for empirical studies attempting to explain the heterogeneity of China’s business systems, the emergence of hybrid organisations, and last but none the least, the different growth rates that can be observed across China.Transition Economy;Institutional Change in China;Private Business Sector

Policies for Industrial Learning in China and Mexico: Neo-developmental vs. Neo-liberal approaches

Abstract Previous work has shown that the results of both China and Mexico’s export-led market reforms over the past quarter century have been strikingly different. In contrast to China, Mexico has not managed to increase the value added of its exports of manufactured goods and has subsequently had a difficult time competing with China in world markets. Building on this previous work, in this paper we conduct a comparative analysis of the role of government policies in industrial learning and the development of capabilities of indigenous firms in Mexico and China in order to shed light on why China is so outperforming Mexico. We find that Mexico and China have had starkly different approaches to economic reform in this area. Mexico’s approach to reform has been a “neo-liberal” one, whereas China’s could be described as “neo-developmental.” Mexico’s hands-off approach to learning has resulted in a lack of development of endogenous capacity of domestic firms, little transfer of technology, negligible progress in the upgrading of industrial production, and little increase in value added of exports. By contrast, China has deployed a hands-on approach of targeting and nurturing domestic firms through a gradual and trial and error led set of government policies.International trade, development, competitiveness, value added, government policy, assembly operations