Emerald | Journal of Chinese Economic and Foreign Trade Studies

Impact of financial liberalisation on stock market liquidity: experience of China

Jess K.-Y. Lee, Alfred Y.-T. Wong — 2012-02-03 00:00:00.0

Abstract

Purpose – The purpose of this paper is to assess the impact of the recent financial reforms in China. Following the country's accession to the World Trade Organization, financial liberalisation has picked up considerable momentum. Wide-ranging reforms introduced encompass deregulation in the banking sector and refinements in various financial markets, as well as allowing more freedom for Chinese and foreign investors to participate and interact domestically and overseas. Design/methodology/approach – Compared to other studies on financial liberalisation, this study uses a panel data regression model to analyse a relatively narrower aspect of financial reforms, namely, the impact on stock market liquidity. Findings – Using a data set drawn from the Shanghai stock market, the authors find a positive and significant liquidity impact associated with the recent round of measures. Originality/value – The result reflects not only an improvement in capital allocation efficiency in China's equity market but, from a financial stability point of view, also a reduction in its vulnerability. The finding also provides evidence on one of the important channels in which financial liberalisation can be transformed into economic growth over time.

China-Germany commodity trade and the S-curve

Mohsen Bahmani-Oskooee, Dan Xi — 2012-02-03 00:00:00.0

Abstract

Purpose – Impact of currency depreciation or devaluation on the trade balance is not instantaneous. Indeed, because of adjustment lags favorable effects of depreciation is only realized in the future. This short-run dynamics of the trade balance is summarized by the S-Curve phenomenon. The purpose of this paper is to test this phenomenon by using commodity level data between China and Germany. Design/methodology/approach – The methodology is based on cross-correlation function. Findings – Out of 62 industries studied, only 22 support the S-Curve or enjoy improvement in their trade balance in the future. The list included small and large industries as well as durable and non-durable goods. Originality/value – No study in the literature has considered commodity level trade between China and Germany.

The limits of guanxi from the perspective of the Israeli diamond industry

Ron Berger, Ram Herstein — 2012-02-03 00:00:00.0

Abstract

Purpose – Recognizing the significant impact of guanxi (the Chinese network of reciprocal business relations) and its influence on everyday dealings in China is important for Western firms. Researchers argue that social capital has limits and is not a commodity that has a place in China aspiring to be a global business hub. Accordingly, the purpose of this paper is to deal with the question of whether guanxi still matters in the Chinese business arena, and if so, to what extent. Design/methodology/approach – To illustrate the evolutional direction of the Chinese institutional system, the authors compare it to a similar system that went through the evolutionary cycle from a social to a rational institutional base of exchange and discuss what one can learn from the institutional evolution process of the global diamond industry and its implications for the current evolution of Chinese institutions. The authors compare two similar cultures/religions, Judaism and Confucianism. Findings – This study found parallels between the evolution of the Israeli diamond industry, dominated by Orthodox Jews, from a social exchange mechanism to a transactional mechanism and the present ongoing rationalization of the Chinese economy, dominated by the Confucianism culture from a social to a transactional business mechanism. Originality/value – Despite the vast efforts of researchers in the area of guanxi, there is very little published knowledge about its limitations and its usefulness in today's changing business environment. This paper contributes to the existing literature on the future aspects of guanxi from a unique perspective – the evolution of the Israeli diamond industry.

Exports, imports and economic growth in China: an ARDL analysis

Qazi Muhammad Adnan Hye — 2012-02-03 00:00:00.0

Abstract

Purpose – The purpose of this paper is to investigate the export-led growth, growth-led export, import-led growth, growth-led import and foreign deficit sustainability hypothesis in the case of China, using annual time series data from 1978-2009. Design/methodology/approach – For estimation evidence this study employs the Phillips Perron unit root tests to examine the level of integration and the autoregressive distributed lag (ARDL) approach is employed to determine the long run relationship, and the direction of long run and short run causal relationship is examined by using modified Granger causality test. Findings – The results confirm the bidirectional long run relationship between the economic growth and exports, economic growth and imports, and exports and imports. These findings guided the authors to conclude that the exports-led growth, growth-led exports, imports-led growth and growth-led imports hypothesis is valid, and foreign deficit is sustainable for China. The long run elasticities are as follows: the elasticity of economic growth with respect to exports is 0.591, and elasticity of exports with respect to economic growth is 1.635. The elasticity of economic growth with respect to imports is 0.621, and elasticity of imports with respect to economic growth is 1.392. Further more the elasticity of exports with respect to imports is 1.322, and imports elasticity with respect to exports is 0.975. Originality/value – This study utilizes the relative new cointegration method of ARDL approach. The empirical findings of this study are vital for policy makers of China in the formulation of trade policies.

Effects of outward FDI on home-country export competitiveness: The role of location and industry heterogeneity

Yan Chen, Wen-Chung Hsu, Chengqi Wang — 2012-02-03 00:00:00.0

Abstract

Purpose – The purpose of this paper is to examine the effects of outward foreign direct investment (O-FDI) on the competitiveness of home-country export. Design/methodology/approach – This paper employs a six-year data set from Taiwanese manufacturing data for 15 industries over the period between 1991 and 2007. Findings – The authors find that exports in Taiwan are positively associated with O-FDI by Taiwanese firms. This finding supports the view that outward FDI complements home country exports and concurs with the majority of earlier empirical findings which focus on developed home countries. The authors also find that such effect is stronger for Taiwanese FDI in China than in other countries and in traditional sectors than in modern sectors. Originality/value – These findings suggest that location-and industry-specific characteristics moderate the strength of the relationship between O-FDI and home country exports.

2011 Awards for Excellence

2012-02-03 00:00:00.0