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on China |
| By: | Ming Su; Quanhou Zhao |
| Abstract: | China has experienced more than 25 years of extraordinary economic growth. Underlying this growth has been a decentralized fiscal system, in which provinces and large cities are given the freedom to make infrastructure investments to stimulate local development, and are allowed to retain a large part of the fiscal revenues that are generated from economic activity. Although successful as a growth strategy, this policy created two problems for national fiscal management. First, it significantly reduced the central government ' s share of fiscal revenues, which fell from 34.8 percent in 1980 to 22 percent in 1992. Second, it widened economic and fiscal disparities between the rapidly growing urban coastal region and the rest of the country. Rapid growth in subnational debt (which rose 23-fold in a decade) and subnational nonperforming loans (estimated by the authors to range between US$100 billion and US$150 billion) has placed pressure on China ' s financial system. Traditionally, China has favored bank lending as a source of finance because the banking system has provided a vehicle for central political control over local debt. But as China ' s financial system matures, creditworthiness standards must become more important. The authors recommend greater use of the revenue streams from infrastructure assets as a financing source, and gradual relaxation of central political control over subnational debt. One step in this direction would permit leading cities to issue municipal bonds based on objective financial standards. |
| Keywords: | Banks & Banking Reform,Urban Economics,Public & Municipal Finance,Municipal Financial Management,Intergovernmental Fiscal Relations and Local Finance Management |
| Date: | 2006–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4051&r=cna |
| By: | Jan Lemmen |
| Abstract: | The possible undervaluation of the renminbi is evaluated. A survey of the literature concludes toward a renminbi undervaluation of about 25% in real effective terms. This undervaluation is not expected to disappear any time soon. |
| Keywords: | China; exchange rates; outlook |
| JEL: | F31 O24 O53 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:memodm:166&r=cna |
| By: | Xing, Yuqing (BOFIT) |
| Abstract: | This paper examines the FDI-exchange rate nexus in the context of one FDI source and two host countries. It focuses on the effect of exchange rates on relative FDI inflows between the two host countries. The theoretical analysis shows explicitly that relative FDI inflows are a function of relative real exchange rates. In particular, if one host country devalues its currency against that of the source country more than the other does, FDI into the former country will be expected to increase relative to the other country. The theoretical inference is examined with Japanese FDI in manufacturing industries of China and ASEAN-4 (Indonesia, Malaysia, the Philippines and Thailand). The empirical results generally support the theoretical conclusion, suggesting that the real devaluation of the Chinese Yuan undercut FDI into the ASEAN-4. |
| Keywords: | FDI; exchange rate; China; ASEAN-4 |
| JEL: | F14 F23 F31 |
| Date: | 2006–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2006_015&r=cna |
| By: | Dinopoulos, Elias; Segerstrom, Paul |
| Abstract: | This paper develops a dynamic general equilibrium model of North-South trade and economic growth. Both innovation and imitation rates are endogenously determined as well as the degree of wage inequality between Northern and Southern workers. Northern firms devote resources to innovative R&D to discover higher quality products and Southern firms devote resources to imitative R&D to copy state-of-the-art quality Northern products. The steady-state equilibrium and welfare implications of three aspects of globalization are studied: increases in the size of the South (i.e., countries like China joining the world trading system), stronger intellectual property protection (i.e., the TRIPs agreement that was part of the Uruguay Round) and lower trade costs. |
| Keywords: | economic growth; globalization; North-South trade; trade costs; welfare |
| JEL: | F12 F43 O31 O34 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5887&r=cna |
| By: | Peterson, George E. |
| Abstract: | Municipal land sales provide one option for financing urban infrastructure investment. In countries where land is owned by the public sector, land is by far the most valuable asset on the municipal balance sheet. Selling land or long-term leasing rights to land use while investing the proceeds in infrastructure facilities can be viewed as a type of portfolio asset adjustment. This paper shows that in China many municipalities have financed more than half of their high rates of infrastructure investment from land sales, for periods of 10 to 15 years. Much of the remaining investment has been financed by municipal borrowing against the collateral of land values. Other countries also have turned to land sales and leasing for infrastructure finance. From a local perspective, land sales have the advantage that they typically are free from the intergovernmental restrictions that require higher-level approval for increases in local tax rates or user fees and that restrict local government borrowing. However, financing municipal infrastructure investment through land sales creates special risks that are not recognized in most intergovernmental fiscal frameworks. One danger involves the use of proceeds to finance operating budgets. Risk exposure is exaggerated by the highly volatile nature of urban land markets and evidence that in some countries urban land values in 2006 reflected a real estate bubble. In the past, Hong Kong, a jurisdiction that has relied heavily on land-leasing to finance its infrastructure budget, has seen land sales fall to zero at the bottom of the real estate cycle. The greatest financial sector risk stems from municipal borrowing based on inflated land values offered as collateral to banks. Sound intergovernmental fiscal management will require tighter regulation of municipalities ' financial leveraging of land assets to avoid excessive risk taking by local governments. |
| Keywords: | Public Sector Economics & Finance,Municipal Financial Management,Public Sector Management and Reform,Regional Governance,Urban Governance and Management |
| Date: | 2006–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4043&r=cna |