CHINA LINKING MARKETS FOR GROWTH

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1 CHINA LINKING MARKETS FOR GROWTH

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5 Contents Tables Figures Symbols Abbreviations Contributors Acknowledgments vi viii xi xii xiv xvi 1 Linking markets for Chinese growth 1 Ross Garnaut 2 Mature Chinese growth leads the global Platinum Age 9 Ross Garnaut and Yiping Huang 3 Marketisation in China: progress and contribution to growth 30 Xiaolu Wang, Gang Fan and Hengpeng Zhu 4 Facing protectionism generated by trade disputes: China s post WTO blues 45 Wing Thye Woo and Geng Xiao 5 Component trade and China s global economic integration 71 Kunwang Li, Ligang Song and Xingjun Zhao 6 Service sector reform options: the experience of China 95 Christopher Findlay, Mari Pangestu and Roy Chun Lee 7 Integrating China s agricultural economy into the global market: measuring distortions in China s agricultural sector 118 Jikun Huang, Yu Liu, Will Martin and Scott Rozelle 8 Regional labour market integration since China s WTO entry: evidence from household-level data 133 Fang Cai, Yang Du and Changbao Zhao 9 How much have the wages of unskilled workers in China increased? Data from seven factories in Guangdong 151 Xin Meng and Nansheng Bai 10 Domestic market integration and inter-regional growth spillovers 176 Jane Golley and Nicolaas Groenewold 11 Foreign direct investment in China: trends and characteristics 197 after WTO accession Chunlai Chen 12 China s demand for energy: a global perspective 225 Ligang Song and Yu Sheng

6 13 Crouching bull, hidden bear: the Chinese equities markets in fat years and lean years 248 Ted Rule 14 How effective are China s capital controls? 267 Guonan Ma and Robert N. McCauley 15 Reforming China s exchange arrangements: monetary and financial sovereignty, sequencing and the foreign exchange market 290 Huw McKay 16 China s real exchange rate 316 Jane Golley and Rod Tyers 17 An externally dependent economy and real estate bubbles 344 Lijian Sun and Shengxing Zhang 18 Economic opening and domestic market integration 369 Min Chen, Qihan Gui, Ming Lu and Zhao Chen 19 Stepping stones to market integration: the role of economic and technological development zones 394 Wei Zhang 20 The implications of China s economic transformation for modern economics 415 Justin Yifu Lin Index 442 Tables 2.1 Wages by province, Average annual wage rates for agriculture, manufacturing, construction and finance, Estimation results Growth accounting: factor contribution to economic growth 40 A3.1 NERI index of marketisation for China s provinces, A3.2 The structure of the NERI index of marketisation The distribution of the global labour force, 1990 and China s trade in parts and components, Shares of component imports trade in China, by region, Share of exports of parts and components from China, by region, Unit labour costs across different countries, Estimation results of Equation 1: imports 89 vi

7 5.6 Estimation results of Equation 1: exports Estimation results of Equation 2: export shares in total manufacturing exports Examples of restriction categories of trade in telecommunications services 98 A6.1 Telecommunications index components 116 A6.2 Telecom index, 1998, 2004 and Rural retail, urban retail and farm-gate sales prices of rice and wheat in China, Nominal rates of assistance (NRA) and nominal rates of assistance for farmers (NRAf) in the cereal sector in China, Nominal rates of assistance for farmers (NRAf) for soybean, cotton and sugar crops in China, Nominal rates of assistance for farmers (NRAf) for livestock and horticultural sectors in China, A7.1 Raw numbers for exchange rate analysis, China, Migrant workers in the urban labour market, Income inequality measures, Inequality decomposition by provinces: general entropy, Regression results of linear wage equation, Theil decomposition based on regression Industry, region, and size distribution of the sample factories Industry distribution of the data, Wage structures of the sample factories Monthly and hourly real wages and hours worked, Comparison of wages and incomes Earnings equations for the total sample and the sample of production workers 168 A9.1 City level CPI Summary of spillover effects FDI inflows into China, FDI inflows into China, by province, FDI inflows into China, by sector, Total assets of foreign-invested and domestic firms in the manufacturing sector, 2001 and Future growth of China s economy, energy consumption and CO2 emissions, and Leading international IPOs, IPO activity in Asia, vii

8 14.1 Renminbi US dollar interest rate differential Interbank rate differentials: renminbi US dollar and Hong Kong dollar US dollar Interbank rate differentials: renminbi US dollar and euro US dollar 284 A14.1 Credit default swap rates for People s Republic of China and British Bankers Association s Libor panel banks Estimated Chinese total factor productivity growth, by sector, The balance sheet of the People s Bank of China, ca Regional composition in the global model Estimation of random effect Ranking of segmentation index by region Market segmentation and its determinants Market segmentation and its determinants (instrumental variable estimation) GDP of five SEZs and national total, Establishment of economic and technological development zones, Economic indicators of the first group of 14 ETDZs, 1991, 1996 and Economic indicators of 54 NETDZs, Economic indicators of 54 NETDZs, Main economic indicators of the first group of 14 ETDZs, Average annual changes in GDP share of five CSEZs in the national total High-tech enterprises in 54 NETDZs, Figures 2.1 Quarterly real GDP growth and CPI inflation in China, Contribution of various components to GDP growth, Shares of main components of GDP in China, Growth of retail sales and fixed asset investment in China, Some components of CPI, Monetary conditions index of China, Growth of property prices and Shanghai A-share prices, Profit/asset ratios of selected industries in China, China s trade surpluses, China s current account and trade balances, viii

9 2.11 China s monthly increase in foreign reserves and sum of FDI and trade surplus, Renminbi exchange rates: bilateral rates and real effective exchange rate, Increases in national real wages and labour productivity, NERI index for progress in marketisation in China s provinces, 2001 and Marketisation in China, US China trade deficit: discrepancy between US and Chinese data, China trade account balance, US trade imbalance, China s imports and exports of parts and components, Share of parts and components trade in manufacturing trade, Number of civil aviation airline routes in China, Scale of seaport trade in China, Number of telephones per 1,000 people in China, China s utilised FDI, An illustration of the results from the trade restrictiveness index Options for policy reform China s telecommunications reform Taiwan s telecommunications reform Reform of barriers to trade in insurance services, Monthly and hourly earnings by gender, Income gap among urban workers, migrant workers and rural workers, Tenure earnings profile for migrant production workers Wage growth simulation, hourly earnings, Wage growth simulation, monthly earnings, The six regions of mainland China IRFs for a shock to SE Cumulative IRFs for a shock to SE FDI inflows into China, FDI inflows into China, by source, FDI inflows into China, by region, Share of foreign-invested firms in manufacturing, 2001 and Structural changes of foreign-invested firms in manufacturing, 1995, 2001 and ix

10 12.1 World primary energy consumption, World primary energy consumption structure, by product, World primary energy consumption structure, by country, World primary energy consumption structure, by product, World primary energy consumption structure, by country, World real price of crude oil, International real price of natural gas, Real prices of internationally traded thermal coal, China s primary energy consumption structure, by product, Share of primary energy consumption growth, by product, Comparison of investment shares in primary energy sectors between China and the world average, Production of crude oil, coal, natural gas and electricity in China, China s net imports of crude oil and coal, Estimated average primary energy consumption per capita across different stages of economic development Primary energy consumption intensity in East Asia, Comparison of primary energy consumption intensity between China and the world, Structural change of China s primary energy consumption (CUSUM index), Primary energy consumption efficiency across countries, China s gross cross-border flows, 1982, 1990 and Average absolute onshore offshore yield spreads, and The onshore less offshore renminbi yields, based on three-month CHIBOR, Onshore less offshore NDF-implied yields, Domestic renminbi yields less US dollar yields, Asian foreign exchange turnover, by transaction type, Shares of foreign exchange turnover, by transaction type, Foreign exchange market depth and income level, Foreign exchange market depth and scale, Foreign exchange turnover and real demand,

11 15.6 The triangular dynamics of regime parameters Loophole strategy drives big foreign exchange reserve accretion Sterilisation effort is the price of sovereignty Reserve ratio hikes take the pressure off bond issuance Flexibility has increased, appreciation pace gradual, Outward direct investment still the poor cousin, The financial asset stock in selected countries The circularity of the flexibility argument Banking sector strength and foreign exchange volatility Asian real exchange rates against the United States, Chinese sectoral price indices, China s investment saving and external balances, China s projected population and labour force, Elasticities of the projected real exchange rate to the rate of total factor productivity growth in each sector, Elasticities of the projected real exchange rate to the fertility rate and the skill acquisition rate, Elasticities of the projected real exchange rate to trade openness (penetration rate), the savings rate and interest premium decline, Elasticities of the projected real exchange rate to its key determinants, Growth rate of residents savings, Twin surplus of balance of payments, Comparison of growth rates of M1, M2 and bank loans, Growth rate of real estate prices, Domestic goods market segmentation, Market segmentation index by region, The ratio of dependence on international trade by region, Distribution of state-level ETDZs in China GDP share of five SEZs in the national total, Relative price of production factors and technique choice 420 Symbols used in tables.. not available n.a. not applicable - zero. insignificant xi