Economics

China and the World Economy Virtual Issue (English)

China and the World Economy

Over the last few years there has been a striking increase in the number of papers written using Chinese data or case studies drawn from China's unique experience of economic development, reflecting the country's ever-increasing importance in the world economy. This is particularly true since the Asian Financial Crisis in 1997-98, and the most recent global crisis, which originated in the US subprime crisis of 2008, but still continues to trouble Europe and the rest of the world today.

Although there are numerous explanations as to why the impact of these crises has been so large, one possible factor is that China's rapid emergence as a major economic force has posed a critical challenge to the Western industrialised world.

China has used its massive comparative advantages of cheap labour, initial low level of development, strong government, and its ability to export large quantities of goods and services to the advanced economies to full effect, thus making the latter suffer a large current account deficit for over a decade. Some analysts have also argued that China has persistently undervalued its currency and used export subsidies to gain unfair advantages over its major trade partners, exacerbating the latter's vulnerability. In fact, a culture of hard work, high savings and investments, rapid accumulation of human capital, institutional reforms, and so on, have all contributed to China's economic miracle.

In the meantime many scholars have tried to find evidence to support their own particular hypotheses, seeking clearly identifiable reasons for the crisis and appropriate remedies for a quick and sustainable recovery. The most frequently asked research questions include, inter alia, (1) How important are trade and investments for China's economic growth? (2) Has China undervalued its currency to gain unfair comparative advantages against its competitors? (3) Why has China been so successful in the last three decades compared to other similar developing nations? (4) What are the main challenges that the West has faced and will continue to face given China's rapid re-emergence as a world economic superpower? (5) What will be the environmental impact if China continues to expand its industrial production in a break-neck pace?

The following 16 papers, all freely available online, have been carefully selected from a broad range of economic journals. All the papers have large numbers of downloads and citations, but they share a common focus of interest: China and the World Economy from an Investment and Trade Perspective. I trust these papers will feed and enrich our understanding of China and its investment as well as trade relationship with other countries in the world.

Professor Shujie Yao
Head of School of Contemporary Chinese Studies, University of Nottingham, UK.

To read the Chinese version of this introduction, please click here. The articles listed below are all freely available online, simply click on the article title to access the full papers.

Renminbising China’s foreign assets
Yin-Wong Cheung, Guonan Ma and Robert N. McCauley

Measuring the gains from trade under monopolistic competition
Robert C. Feenstra

The theory of interstellar trade
Paul Krugman

Firm heterogeneity and the labour market effects of trade liberalization
Hartmut Egger and Udo Kreickemeier

Endogenous Financial and Trade Openness
Joshua Aizenman and Ilan Noy

The Rise of China and East Asian Export Performance: Is the Crowding-Out Fear Warranted?
Prema-chandra Athukorala

China's Exchange Rate Policy, Its Current Account Surplus and the Global Imbalances
W. Max Corden

Impact of the Global Financial Crisis on China: Empirical Evidence and Policy Implications
Ligang Liu

Resource abundance and regional development in China
Xiaobo Zhang, Li Xing, Shenggen Fan and Xiaopeng Luo

Recent regional agreements: Why So Many, Why So Much Variance in Form, Why Coming So Fast, and Where Are They Headed?
John Whalley

Ownership Reform, Foreign Competition and Efficiency of Chinese Commercial Banks: A Non-parametric Approach
Shujie Yao, Zhongwei Han and Genfu Feng

Why is China So Competitive? Measuring and Explaining China's Competitiveness
F. Gerard Adams, Byron Gangnes and Yochanan Shachmurove