Index
Collection of Abstracts
Return to The 21st ACESA Annual Conference
Concurrent Session 1: Agricultural and rural development
1. An Agro-economic Model to Analyse Climate Change Impacts on Farmers’ Income
Qiang Jiang, Australian National University
The increasing interests in climate change heighten the need for an agro-economic model to analyse climate change impacts on farmers’ incomes. Many researchers have turned to crop yield response models to estimate farmers’ yield and income loss. A classic method used by economists to establish yield response models is to build up the statistic relationship between historical yield changes and climate change through regression models. However, without comprehensive experimental data from each region such as crop yields response to CO2 concentration, these crop-yield response models may provide misleading predications. An alternative approach is the use of crop biophysical simulation models.
Based on biophysical model agricultural production systems simulator (APSIM), we develop an agro-economic model, WATER-BIOMASS DYNAMI, to simulate the change of crop yields and farmers' income affected by varied climate change scenarios and other economic factors. We used the WATER-BIOMASS DYNAMIC model to analyse the agricultural economic impacts of four climate change scenarios in the Australian Wagga Wagga wheat production area.
2. Impact of Population Aging on Income Inequality in the Developing Country: Evidence from Rural China
Hai Zhong, Central University of Finance and Economics (China)
Population aging is an emerging issue in developing countries. In this paper, we investigate the relationship between population aging and income inequality in rural China using China Health and Nutrition Survey (CHNS) data. We find that a significant portion of the sharp increase of income inequality at the beginning of this decade can be attributed to population aging. As the result of the one-child policy implemented from 1979, fewer young adults reached working age during this period. At the same time, the generation born in the first baby boom in China (the 1950s) may begin to quit from labour force due to the heavy reliance of jobs in the rural areas on physical functional status and strength. In the CHNS data, we find that mean household labour ratio falls considerably from 1997 and 2006, which is in line with the observation of labour shortage occurred in this period. Inequality decomposition shows that labour shortage and expansion of industrialization significantly increase the return of higher labour ratio to household income while the distribution of labour ratio becomes more and more unequal. The interaction of two effects significantly increased income inequality in rural China.
3. Why Do Farmers Quit from Grain Production in China: Causes and Implications
Yanrui Wu, University of Western Australia
Xiaohui Zhang, Ministry of Agriculture (China)
Zhangyue Zhou, James Cook University
Chinese farmers are quitting from grain production. According to a national survey of rural households, in 1995, about 90% of rural households were engaged in grain production. By 2005, this proportion dropped to 79% - a fall by 11 percentage points. The exit of farmers from grain production raises a number of questions. Why do farmers quit from grain production? Is this phenomenon universal across all regions? What are the potential impacts on China’s grain production and supply? Answers to these questions have important implications for China’s future policies regarding grain production. This study attempts to gain some insight into these questions by analysing a comprehensive data set at the farm-level. The findings are then used to draw policy implications.
Concurrent Session 2: Public sector reform and corporate governance
4. The Ownership and Ownership Concentration? The Impact on the Performance of China’s Listed Firms
Shiguang Ma, University of Wollongong
Tony Naughton, RMIT University
Gary Tian, University of Wollongong
This paper investigates the impact of ownership and ownership concentration on the performance of China’s listed firms. By recognizing the differences between ownership and ownership concentration and between total ownership concentration and tradable ownership concentration, we conduct simplex, interactive and joint analyses. We find that ownership concentration is approximately associates with higher firm performance. Ownership concentration is more powerful than any category of ownership in determining firm performance. Firm performance is better when the state is the largest of the top shareholders and/or institutions dominate ownership among the top tradable shareholders. Our results support the theory that high ownership concentration mitigates the agency problem.
5. Managerial Ownership, Capital Structure and Firm Value: Evidence from China’s Civilian-run Firms
Wenjuan Ruan, University of Wollongong
Gary Tian, University of Wollongong
Shiguang Ma, University of Wollongong
The conflicts of interest between managers and shareholders remind us of the necessity of an appropriate level of managerial ownership that ensures management decisions align with the benefit of shareholders. Managerial ownership influences decision-making of a firm which in turn potentially impacts on the firm performance. Prior evidence has demonstrated associations between managerial ownership, financial decision and firm value. Some research investigates the direct relationship between managerial ownership and firm value and display a nonlinear relationship between these two variables. Some other studies find that managerial ownership influences firm value through the intermediate financial decisions such as investment. This paper extends prior research by examining the influence of managerial ownership on firm performance through capital structure choices using an example of Chinese listed firms from 2005 to 2007.
The empirical results of OLS regressions on civilian-run listing firms replicate the nonlinear relationship between managerial ownership and firm value. Managerial ownership also drives the capital structure into a nonlinear shape, but with an opposite direction to the shape of managerial ownership on firm value. The results of simultaneous regressions suggest that managerial ownership impacts capital structure, which in turn, affects firm value. We also prove the endogeneity of managerial ownership and capital structure in Chinese civilian-run listing companies.
6. Related Lending：Evidence of Tunnelling and Propping in China
Fei Guo, Curtin University of Technology
Shiguang Ma, University of Wollongong
We investigate tunnelling and propping between Chinese listed firms and their relevant parties from 2001 to 2005. Our evidences show that controlling shareholders engage in tunnelling and propping through related lending, although tunnelling lending predominates propping lending in both frequency and magnitude. Pyramidal controlling ownership structure increases the level of tunnelling lending, while the presence of large non-controlling shareholders resists tunnelling lending. State ownership doesn’t seem to be detrimental to the firms as some previous research indicates. The firms in financial distress have experienced either more tunnelling lending or more propping lending with controlling shareholders. High debt ratio is likely concomitant with tunnelling lending.
Concurrent Session 3: Economic growth and social harmony
7. Reducing Regional Disparities in China: An Evaluation of Alternative Policies
Anping Chen, Jinan University (China)
Nicolaas Groenewold, University of Western Australia
Regional disparities in output per capita and income in China are large and persistent. They have been the subject of considerable concern to policy-makers at the highest level for decades. While the factors driving disparities have been the subject of extensive empirical analysis, little is known about the effectiveness of various alternative policies which may be used to combat them. In this paper we make some contribution to filling this gap in our knowledge by analysing the effectiveness of a range of policies by both regional and central governments. We do this within the framework of a small model in which we capture various features of the Chinese economy. The model distinguishes two regions (the interior and the coast), two industries (agriculture and manufacturing) and allows for internal migration although subject to migration costs imposed by the hukou system of household registration. It also captures important features of the Chinese tax and expenditure system. The model is calibrated to Chinese regional data and simulated to analyse the effects of a number of policies on a range of variables but focussing on per capita output disparities and welfare. We find that a policy reducing internal migration costs is effective in reducing the per capita output gap but does so at a substantial cost to the coast. Policies which improve agricultural productivity in the interior region are most likely to both reduce the gap and make both regions better off. Standard fiscal policies, on the other hand, are less effective and have their effectiveness reduced by migration.
8. Health Investment and Economic Growth in China: A Time-Series Analysis of Public-Private Role
Gang Chen, Monash University
Gordon G. Liu, Peking University (China)
As a cornerstone of human capital, health has been widely recognized as a major source of economic growth. This research investigates the relationship between governmental, social and personal health investment and economic growth in China by including different sources of health expenditure in a human capital extended Solow model. Considering the problems of endogeneity and the lag effect of health expenditure, the vector error correction methodology is used in this study. The results from the innovation accounting revealed that social health expenditure has the largest effect on economics a mong the three health expenditure components, followed by government and personal health expenditure. Besides, the Granger causality tests show a bilateral causality between (government and social) health expenditure and GDP.
9. Policy Analysis of Energy‐related Environmental Pollution in China
Yan Yang, Australian National University
Warwick McKibbin, Australian National University
Chinese economic growth and industrialization has been spectacular over the past thirty years. This growth has been fuelled by energy use, especially from fossil fuels, which have had serious environmental impacts on both China and the world. China’s energy related environmental issues such as the emissions of carbon dioxide (CO2), sulphur dioxide (SO2), nitrogen oxides (NOx), and total suspended particulates (TSP), etc have attracted increasing concern in recent years. Questions arise as to what the optimal way will be to control the emissions and how China’s economic performance will be affected by the alternative policies. While there are a number of studies in the literature, most of them ignore the feedback effects of environmental damages on the economy or the benefits to the economy from environmental improvements.
This paper is a first step at integrating environmental damages from energy use into a dynamic intertemporal general equilibrium model of the world (the G-Cubed model) with a focus on the Chinese economy. The goal of the paper is to estimate how the feedback effects affect the economic performance and to evaluate the 2economic and environmental impacts of various policies at sectoral and national level.
Under a business as usual projection, CO2, SO2 and TSP emissions caused by energy use in China and the related environmental damages are estimated to continue to rise in the coming decades.
In the carbon tax and emissions target scenario, it is found that whether to consider the feedback effects does change the simulation results under various environmental policies. The negative effects of lower investment and lower GDP due to a carbon tax policy are overestimated if feedback effects are neglected. To attain a certain carbon emissions target, the optimal carbon tax required is between 2-5% higher in various years in the feedback scenario than in the non feedback scenario.
Environmental policy has important economy-wide general equilibrium effects that are ignored when only focussing on partial equilibrium effects. Whether to consider environmental damages on the economy and the economic benefits of pollution abatement or not does affect the prediction of economic variables under various environmental policies. Our results suggest that more stringent policies for pollution control can be beneficial for the Chinese economy.
Concurrent Session 4: Aspects in monetary and external economics
10. The Causes of China’s Surging Trade Surplus after RMB Appreciation
James Xiaohe Zhang, University of Newcastle
Despite of appreciation of the Renminbi (RMB) for about 20% in nominal terms against the US dollar between 2005 and 2008, Chinese trade surplus continues to surge. As a result, the Chinese foreign exchange reserves increased tremendously to hit a historical record of US$1.7 trillion by March 2008. Since this phenomenon is not comfort with both theoretical prediction and practical expectations, it deserves attentions not only for academic researchers but also for business people and policy makers.
A huge trade surplus along with currency appreciation seems not only counterintuitive, but also contradictory to economic theory. The conventional international trade theory maintains that as long as the Marshall-Lerner Condition holds, an appreciation would reduce rather than increase the country’s current account surplus. Since there are sufficient evidences showing that the Chinese exports are price elastic thus the Condition does indeed held, the surging of Chinese current account surplus after the RMB appreciation seems paradoxical.
Based on a brief review of the theoretical relationship between real exchange rate and current account balance, two issues are particularly discussed. Firstly, what are the key causes of the surging trade surplus in China after a nominal appreciation of the RMB? Secondly, what sort of domestic policy package should be implemented to relieve the pressures on trade imbalance between China and its major trading partners? Through intensive discussions on the causes of China’s huge trade surplus and testing of several theoretical hypotheses, this paper attempts to find alternative ways to relieve the pressure of China’s huge trade surplus.
11. China’s Outward FDI and Chinese SOEs’ Strategies for Cross-border M&A
Sixin Sheng, UNSW
The globalization of Chinese enterprises is a quite compelling phenomenon these years, and it generally takes the form of cross-border merger and acquisition (M&A). This paper argues for a more rational approach to China’s Outward FDI (OFDI) and cross-border M&A, and posits that China’s OFDI and cross-border M&A actually can be fully explained by the existing OLI paradigm without new theories created by other studies. This paper also tries to reveal the major institution surrounding SOEs’ cross-border M&A, i.e., how SOEs, government, and market interact on each other from the perspective of SOE reform. This paper finds that there is a strong tension between the market liberalization and the government control in the SOE reform. This tension not only influences Chinese SOEs’ strategies for cross-border M&A, but also brings Chinese SOEs an important dilemma: SOEs have to obey the government orders and leaderships on M&A, while they must also convince foreign stakeholders that their decision on M&A is totally independent from the government’s influence.
12. Managing China’s Exchange Reserves Accumulation: Is the PBC Bill an Effective Instrument of Sterilisation?
Lilai Xu, RMIT University
KB Oh, La Trobe University
China’s huge holdings of US dollars render it vulnerable to taking most of the RMB used to buy dollars out of the financial system. This process, known as sterilisation, is what the People’s Bank of China (PBC), China’s central bank, attempted in 2003 when the PBC bill was issued in the interbank market, with an initial maturity of three months. Only five years after the first flotation of the PBC bill, this financial instrument has now become one of the monetary policies used by the PBC to adjust base money growth and an important tool within open market operations. This paper examines the net effect and sterilisation costs of the PBC bill and discusses the alternatives for managing China’s reserves holdings in the future.
Concurrent Session 5: China’s economic growth and global financial and economic crisis
13. Impact of FDI on Domestic Firms’ Export in China
Chunlai Chen, Australian National University
Yu Sheng, Australian National University
Using firm-level census data of manufacturing industry during the period of 2000-2003, this paper examines the impact of foreign direct investment (FDI) on domestic firms’ export in China. After dealing with some econometric problems (i.e. the endogeneity problem, the reverse causality problem, the truncated dependent variable and so on), we found that FDI has positive impact on domestic firms’ export through backward and forward industrial linkages, but has negative impact on domestic firms’ export in the same industry due to competition for international market.
14. Flying Geese within Borders: How Does China Sustain Its Labour Intensive Industries?
Qu Yue, China Academy of Social Sciences (China)
In explaining how the current financial crisis happened, most studies are looking for the root causes in the prevailing financial institutions and credit system. And, since the crisis broke out in the United States and was channelled to other countries’ financial systems and the real economy through financial, industrial and trade links, most countries have chosen to claim this crisis as an external shock imposed on their economies. Viewing the current crisis through the lens of economic history, however, we can see that the impacts of economic crises diff er among countries, among regions and sectors within a country and even among enterprises within a sector. Whereas a crisis can be said to result from external sources, the degree of the shocks will be dependent on certain domestic conditions such as the pattern of growth, the state of the industrial structure, the stage of development and the technological structure and operational mechanisms of enterprises. In this regard, one needs to go beyond the framework by which the business cycles are explained simply by the operation of the monetary and credit systems and seek to find the root causes of crises from the point of view of the real economy, looking especially at what happens to the industrial structure. As one of a few economists who made a contribution to the interpretation of the business cycle from the angle of the real economy, Schumpeter (1961:Ch.6) pointed out that there were some real opportunities for economic development in an economic crisis.
15. Moving towards Low-carbon Economic Growth
Jinjun Sue, Nagoya University (Japan)
Deng Xiaoping famously proclaimed that "it doesn't matter if a cat is black or white, so long as it catches mice." This rejection of ideological purity and embrace of pragmatism became the basis of China's new development model. The new approach led to 30 years of rapid economic growth, directing China toward a new place in the global economy. This development has not been without cost however. The environmental impact of China's rapid industrialisation has been particularly severe. Deng may not have been concerned with the colour of the cat, but we might now be concerned if the mouse is blackened by pollution. This chapter analyses the potential for environmental issues to act as a constraint on economic growth. A growth model that displays characteristics of an Environmental Kuznets Curve (EKC) is developed to assess the most recent data.
The EKC derives from long run empirical observations across countries. It is observed that environmental degradation associated with economic growth increases most rapidly at low levels of per capita income. As income grows, the additional degradation due to each successive economic gain slows until it eventually peaks. As per capita income continues to grow, degradation eventually diminishes.
An implication of the EKC is that environmental degradation may act as a constraint on future economic growth. This chapter develops a theoretical model for incorporating environmental constraints on economic growth, but allowing for the possibility of innovation in environmental technologies as well as government policies that fortify the environment. A modified EKC is then estimated for China.
Concurrent Session 6: Stock market and efficiency of capital
16. Is a Superpower More Important than a Neighbour?—An Application to China’s Stock Market
Yi Zheng, Southwestern University of Finance and Economics (China)
This paper investigates the bilateral cointegration relations between China’s and US stock markets, and between China’s and Hong Kong stock markets. Research on cointegration among stock markets has important practical implications for portfolio management considering the increasing globalization among international financial markets. Due to economic and geographical considerations, US and Hong Kong are closest stock markets to China, thus understanding the integration between China and these two markets could have important implications for policy makers as well as investors. Because usual vector error correction model (VECM) may overlook the long memory feature of cointegration residual series which may biases resulting inferences, in this paper, we employ fractionally integrated VECM (FIVECM) to investigate the cointegration relations binding China’s stock market to the other two stock markets in the long run. Additionally, by augmenting the FIVECM with multivariate GARCH model, the return transmission and volatility spillover between market return series are revealed simultaneously. Our empirical results show that there are fractional cointegration relations or long-run equilibrium between China’s and US stock markets as well as between China’s and Hong Kong stock markets. However, according to the estimates, only China’s market appears to be bound by the cointegration relations; the other two markets do not make adjustments in response to the deviations from the equilibrium. The US and Hong Kong markets are also found to lead China’s market in first conditional moments; that is, there are return transmissions running from both US and Hong Kong markets to China’s market. These findings are expected, as US and Hong Kong are more developed and mature markets, investors on China’s stock market are likely to trail after where their counterparts have moved at the other two markets. However, volatility spillover effect is shown by estimates to flow from China market to Hong Kong market; put differently, there is information transmission from mainland to Hong Kong market. This may well be due to the heavy dependence of the economy of Hong Kong on mainland, China and the increasing number of cross-listed companies on both markets.
17. Cross-listing, Corporate Governance, and Firm Performance an Empirical Test on Bonding Hypothesis
Lixian Liu, RMIT University
Tony Naughton, RMIT University
Applying the principle of the bonding theory, this study examined the relationship between corporate governance practice and performance of Chinese firms that are listed in the major international stock exchanges, including NASDAQ, New York, Hong Kong, Singapore and London AIM markets, and further investigated whether the Chinese firms that adopted the corporate governance mechanisms of the stock exchanges where they are listed would outperform those of firms listed locally in the Chinese stock exchange that operates in a weak enforcement mechanism environment. Hypotheses are tested using cross sectional data. The empirical tests show a mixed result. The cross-listings in New York and NASDAQ (dual-listing is excluded) exhibit bonding premium, while those non-cross-listed Chinese firms demonstrated better firm performance that those listed in London, Singapore, and Hong Kong. Further, the study shed some lights on the relative importance of various corporate governance mechanisms in enhancing the firm performance in the context of the dominance of state-owned-enterprises in the market. The results reveal that different market has different corporate governance mechanisms under its different macro-environments.
For the overall Chinese listings, the second largest shareholder of a firm could play a role as an effective corporate governance mechanism in increasing the firm’s performance. A negative relationship between the size of the board and the corporate governance was found. For those cross-listed Chinese firms, by adopting the stringent financial disclosure and the famous auditing firms could increase the firm performance, but not good enough comparing to these non-cross-listed Chinese firms. Meanwhile, controlling shareholder has negative effect on firm performance for the cross-listed Chinese firms. The study suggests that merely borrowing corporate governance mechanism does not guarantee the improvement of corporate governance (further to its firm performance), rather, firm’s own background and country effects also matter.
18. Investment Efficiency and Its Determinants in China’s Regional Economies
Yanrui Wu, University of Western Australia
Due to both high domestic savings and a large inflow of foreign funds, China’s investment as a ratio of GDP has been one of the highest in the world. China has also accumulated the largest foreign reserve which is mainly invested in the low-yield foreign government bonds. Has capital been utilized efficiently in this rapidly growing economy? To answer this question, this paper proposes a stochastic frontier approach to investigate the efficiency of capital using panel data of China’s regional economies. The determinants of regional variation are also explored. The findings thus can help shed light on regional development policies in the near future.
Concurrent Session 7: FDI and investment environment
19. Impact of Foreign Entry on China’s Banking System: Foreign Strategic Investment
Ying Xu, Australian National University
Since the World Trade Organization (WTO) accession in 2001, China has seen a large inflow of foreign investment to its banking sector in the form of foreign strategic investment. Distinguished from traditional investment forms - foreign direct investment (FDI) and international portfolio investment, foreign strategic investment (FSI) implies ‘medium-to-long term’ foreign investment through minority equity participation with agreements on transfer of know-how. This study tests whether FSI has exerted effective impacts on banking performance in China as the authorities expected. Employing data on 86 Chinese commercial banks over the period 1999-2006, we apply a stochastic frontier approach to examine the impact of FSI on cost efficiency of the Chinese banking industry. Our results indicate a strong significant correlation between the presence of foreign board members, one component of FSI, and local bank cost efficiency improvements, whereas foreign equity participation fails to deliver such impact. The results confirm the existence of efficiency spillovers from FSI to China’s banking industry through managerial cooperation over the study period.
20. Fair Value Accounting and Chinese Capital Markets
Ying Zhang, University of Wollongong
Jane Andrew, University of Wollongong
Kathleen Rudkin, University of Wollongong
Fair value accounting (FVA) has been largely incorporated into contemporary accounting practices of Chinese listed companies since China harmonised its accounting standards with the International Financial Reporting Standards (IFRSs) in 2006. This paper examines the implementation of FVA in a Chinese context. The specific standard investigated is “Accounting Standards for Business Enterprises” (ASBEs) No. 22 Recognition and Measurement of Financial Instruments which is equivalent to IAS 39 Financial Instruments: Recognition and Measurement. The requirement of measuring all financial instruments at fair value has substantially enhanced the profit volatility reported by Chinese listed companies. This paper reveals the challenges of adopting FVA in a Chinese environment where most of the fundamentals of a well-functioning economic market, such as transparent financial information exchange, a well-defined legal system, and accountable regulatory agencies, are unique. The paper argues, due to the contextual influences such as substantial state intervention in the capital markets and the ongoing reforms of state-owned shares in China, the implementation of FVA would actually produce a result which is divergent from the initial purpose of providing more relevant accounting information for decision making. Institutional Theory and a World System approach help theorise the decoupling between the theoretical expectation and the real practice of FVA in China.
21. An Analysis on Cross-border Tax Competition and Distribution: Mixed-strategy Games Initiated by a Chinese Border Case Study
Xin Liu, Chongqing University (China)
A casual observation over the border between bordering countries (e.g. China and Vietnam) could lead to a significant tax rate difference. In order to interpret this phenomenon around the sovereign border (rather than ‘market’ border) of China, this paper sets up a price game to study the cross-border shopping initiated commercial tax competition. In the classical models of commodity tax competition two countries may differ in population density and land mass, synthesizing earlier contributions where pure strategy equilibria existed, and where the bigger (larger population) country set the higher tax. In our more general setting, pure strategy equilibria may not exist, but we compute a mixed strategy equilibrium, which offers probabilistic alternatives to the empirically questionable “big country-high tax” correlation; the bigger country may have a lower expected tax rate, and may be more likely to be the low tax country.
Concurrent Session 8: Innovation, venturing and marketing
22. Rethinking Innovation – Learning and Doing
Peter Sheldrake, RMIT University
Innovation is assuming increasing importance in the economies of both Australia and China. This paper will examine what we can learn from the experience of Australian companies in developing a more innovative approach, and how this can be applied in China. In particular, it will focus on enterprise innovation and venturing, and the strategies that will need to be considered in the next few years.
23. Institutional Barriers in Developing the Real Estate Investment Trusts (REITs) in China
Beibei Zhang, China Merchants Group (China)
History of REITs has more than a century in some economic entities with highly attraction of real estate developers and investors. Although China has put an eye on this kind of products since the year 2000, it didn’t have any substantiality progress in the practice field. This article aims to probe the institutional barriers in China’s development of REITs by analysing the trial development of REITS in China; and to study and analyse the opportunities of developing REITs in China from a deeper level.
24. Have You Eaten Yet? China’s Changing Household Income and Savings Profile: Implications for the Marketing of Financial Services
Xuebin Chen, Fudan University (China)
Kok Boon Oh, La Trobe University
Geoffrey R. Durden, La Trobe University
This paper reports certain findings of an on-going research study into the recent growth and development of the Chinese financial services market currently being undertaken by the authors. More specifically, it describes and analyses the relationship between recent changes in demographic and associated household income and savings patterns in China, and overall economic growth, wealth creation and demand for personal and household financial services. Both primary and secondary data are used, including interview and survey data from key stakeholder groups and that abstracted from China’s National Bureau of Statistics. The paper concludes with a commentary on likely future trends in the development of financial services marketing in China.
Concurrent Session 9: Urban economy and sustainable development
25. Sustainable Transportation Planning: A Tool and Policy Impact Assessment
Jianling Li, University of Texas (U.S.)
Steven Mattingly, University of Texas (U.S.)
Transportation infrastructure is the backbone of economy and an important part of people’s daily life. How to develop and maintain a financially, socially, and environmentally sustainable transportation infrastructure is a challenge facing transportation professionals around the globe and especially those in developing countries. Previous experience has demonstrated that the success of building and maintaining a sustainable transportation system depends largely on adopted transportation financing and operating/management (O&M) policies. Hence, to facilitate policy making it is critical to develop tools that can assess impacts of these policies.
The objectives of this study are two-fold: (1) to introduce a planning tool that can assist transportation policy makers and operators to make decisions on financing and operating managed lanes, a type of highway facility that provides travellers with options; and (2) to analyse the potential impacts of selected policy scenarios on revenue, transport system performance, and air quality using the tool and data from Dallas and Houston in Texas, USA. The tool was developed on the basis of the price elasticity concept and traffic theories. The results of impact assessment indicate that transportation financing and O&M policies influence outcomes tremendously and that there are tradeoffs in policy objectives. Policy options with an objective of maximizing revenue may be achieved at the expense of other policy objectives. Practical implications of the findings to transportation sustainability will be discussed.
26. FAFH Meat Consumption in China: An Empirical Study
Hongbo Liu, James Cook University
The remarkable economic development occurring within the People’s Republic of China since 1978 has resulted in striking alteration in food consumption patterns. Some marked changes are the increasing meat consumption and food-away-from-home (FAFH) consumption. FAFH meat consumption has become an important component when studying meat consumption because very little formal research has been directed towards it. Moreover, it may be more important than it seems, and under-recording of FAFH consumption could partly explain the widening gap in official statistics between China’s livestock production and meat consumption.
This paper concentrates on FAFH meat consumption, aiming to provide a deeper insight into the changing meat consumption patterns in China. Data were collected in 2005 from two separate consumer surveys--one urban and one rural. A Tobit model for FAFH expenditure and especially FAFH beef consumption, and a system of multivariate Tobit equations were estimated. This enabled an examination of the links between at-home and away-from-home meat consumption. The results show that the rapid increase of FAFH demand, which is driven by higher incomes, is changing consumption patterns in China’s post-reform urban economy.
27. Alternative Pension Paradigm in China’s Economic Development: Efficient and Equity Issue
Xin Yi, UNSW
John Piggott, UNSW
Peter Robertson, UNSW
This paper uses a computable Overlapping Generation (OLG) model to examine the Chinese pension reform. The research involves two steps: calibrating an OLG model for the Chinese economy; and undertaking policy evaluations. Model calibration involves choosing a set of parameters to capture the key features of the Chinese economy with pension system. Policy evaluation involves using the calibrated model to compare economic variables under alterative pension policies.
The major pension policy focus is a comparison of Pay-As-You-Go (PAYG) and full funded pension designs. The paper examines the effect of pension reform on the economy from economy-wide and inter-generational perspective. On economy-wide variables, the paper finds that economic output would eventually increase substantially if the pension system switched to full-funding from PAYG scheme. This outcome mainly results from the difference in capital stock under alterative pension schemes. The inter-generational results suggest that if pension reform occurred, household wages would be much higher, as would lifetime income and household saving. The paper also finds that consumption initially declines at the time of reform, but recovers to a higher level. Finally the paper concludes that the utility of the generation born just before pension reform would fall, but the utility of future generations would eventually increase.
Based on the simulation results the paper argues for two conclusions. Firstly, China’s economic output would increase if the pension reform occurred, as the capital stock under full funded scheme is higher than under PAYG scheme. Secondly, the paper finds that the losers are the older generation at the time of the pension reform but that all other generations would benefit from the reform.
Concurrent Session 10: Aspects in economics theory
28. Geographical Proximity and FDI Spillovers: Chinese Evidence
Sizhong Sun, James Cook University
It is widely documented that the foreign direct investment (FDI) has played an important role in the economic development of host countries. FDI inflows contribute to physical capital accumulation, help to boost domestic employment, and may increase domestic competition, particularly in the short run. In addition, it is argued that FDI can positively affect domestic industries and firms, namely that there exist positive spillovers to domestically owned industry from FDI. Thus empirically testing the technology spillover of the FDI has been attracting a few attentions. The foreign firms often have some advantages (usually technological superiority) to offset their disadvantages compared with local firms, these advantages will inevitably benefit their local counterparts, either through the backward and forward linkage, demonstration effect, or though the competition effect. Nevertheless, the results are somewhat mixed in the sense that some find positive spillovers while others find negative spillovers. In China, fortunately researchers have found much more consistent positive spillovers from FDI.
Despite the relatively large amount of FDI spillover studies, there is one dimension of FDI spillovers that remain less touched, that is the role of geographical proximity between domestic firms and FDI invested firms in the occurrence and magnitude of the spillovers. Conceptually the closer domestic firms are to foreign firms, the more likely spillovers will occur, as the demonstration and competition effect and backward and forward linkage will be more effective. We test the impact of geographical proximity on the FDI spillovers in the Chinese context. Using a comprehensive firm level data set in China's manufacturing sector from 2005 to 2007, we investigate what impact a domestic firm being close to a FDI invested firm, an upstream FDI invested firm, or a downstream FDI invested firm has on the existence and scale of spillovers it receives. Our findings will present significant policy implications to not only Chinese government but also other developing countries.
29. China’s Output Growth Volatility – How Important Is the Business Cycle?
James Laurenceson, University of Queensland
Danielle Rodgers, University of Queensland
Richard Bean, University of Queensland
The existing literature that discusses the non-trend aspects, or volatility, of China’s output growth during the reform period does so with overwhelming reference to the business cycle. However, the business cycle is only a sub-set of volatility that occurs within a particular frequency band. In this paper we decompose China’s output growth volatility by frequency and find that considerable volatility occurs at lower than business cycle frequencies. This suggests that in order to understand the nature of China’s output growth volatility and its causes it is necessary to move beyond the construct of the business cycle and shocks to aggregate demand.
30. China’s Great Moderation: Output Growth Volatility and Its Effects on Mean Output Growth
James Laurenceson, University of Queensland
Danielle Rodgers, University of Queensland
Richard Bean, University of Queensland
The volatility of China’s output growth has declined considerably over the reform period. A similar reduction in volatility has been observed in numerous economies, most notably in the US, and has been labelled The Great Moderation. This paper begins by documenting the scale of the volatility reduction in the case of China and also considers whether a structural break in the volatility generating process has occurred. It then discusses insights provided by the existing literature into likely causes of the reduction in volatility. Finally, it uses a GARCH-M model to analyse the effects of output growth volatility on mean output growth.
Plenary Session 3: Integration of China in the world economy
31. Has Australia Become a Sino-economy?
James Laurenceson, University of Queensland
Kam Ki Tang, University of Queensland
It has traditionally been regarded that when the US sneezes, Australia catches a cold. However, in the 2000s, a common perception has arisen that Australia’s economic fortunes are now just as significantly determined by developments in China (perhaps even more so). This paper considers the extent to which movements in Australia’s real GDP growth and output gap have become synchronized with China’s. The results suggest that Australia’s real GDP growth and output gap continue to be more closely associated with developments in the US than with developments in China. Several explanations are offered for why Australia might be less dependent on developments in China than common perception holds.
32. Linkages between Exchange Rate, Stock Market, and Trade Balance: Empirical Evidence from China-Australia Bilateral Trade
Xin Gu, James Cook University
A.B.M. Rabiul Alam Beg, James Cook University
China has an excessively large trade surplus with the rest of the world. However, China has a trade deficit with Australia. Earlier studies provided some insights into the determinants of China’s trade balance. Most of them used aggregate trade data to examine and concluded that real depreciation has no long-run impact on China’s trade balance. Given the differences in the trade balance across countries and over time, especially in the current global financial situation, it is essential to re-examine the main factors influencing the trade balance between China and Australia.
Using quarterly data from 1993 to 2008, this study attempts to establish linkages among variables including exchange rate, stock market prices, inflation rate, money market prices and GDP per capital. VAR/VEC techniques are used. It is expected that the equity market prices will have greater impact for trade balance between China and Australia.
33. Fluctuations of Prices in the World Grain Market: Policy Responses by the Chinese Government
Weiming Tia, China Agricultural University (China)
Zhangyue Zhou, James Cook University
During 2007-08, there were vast price fluctuations in the world grain market. Huge fluctuations in international grain prices have significant ramifications on the management of food economies of countries such as China, where food security is an on-going concern. Examining Chinese government’s responses to the erratic grain price fluctuations can help to reveal strengths and weaknesses of policy measures undertaken by the Chinese government and facilitate discussions about what the government should do to prepare for future price variations. In this paper, we analyse what led to the price hikes in the international grain market. We then survey what policy measures were undertaken by the Chinese government and evaluate their efficacy. We also delineate issues to which attention should be given in order to better prepare China for any future erratic price movements in the world grain market.