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  • Author: Saori N. Katada
  • Publication Date: 05-2016
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: In 2015, two mega-initiatives took shape that will affect economic relations in the Asia-Pacific region: the US-promoted Trans-Pacific Partnership (TPP) trade agreement and the China-led Asian Infrastructure Investment Bank (AIIB). Although they address different needs, both are expected to have profound effects on Asia's economic governance in the near future, and will shape economic norms in the Asia Pacific and beyond. Japan has joined the TPP but stayed out of the AIIB, decisions that might seem counterintuitive considering its history of resisting trade liberalization and of promoting infrastructure investment. Is Japan simply favoring its US ally over rival China? Or is it that Japan's position on the TPP and AIIB aligns with its own economic priorities, and enhances its geo-economic advantage? With a US-China competition over economic ideas and regional strategies, Japan occupies a unique position that may allow it to influence the direction of Asia-Pacific economic governance, which is now being battled out by the two "titans."
  • Topic: Economics, International Trade and Finance, Political Economy, Treaties and Agreements
  • Political Geography: China, Asia
  • Author: Saul P. Limaye, Tsutomu Kikuchi
  • Publication Date: 01-2016
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: Until recently, Southeast Asia had not been a region of sustained focus for the US-Japan relationship. But the situation is changing. The international relations of the Asia-Pacific is becoming more "multipolarized." This requires the US and Japan to think about the future of the region beyond the issue of US-China relations, which has preoccupied past discussions. A number of nations and institutions in the Asia-Pacific region will substantially affect the region's future. Southeast Asian nations and the Association of Southeast Asian Nations (ASEAN) are among them. A new era of more coordinated, sustained, and combined commercial and security involvement by the US and Japan in Southeast Asia may be at hand. In light of these changes, the East-West Center in Washington (EWCW), in collaboration with the Japan Institute of International Affairs (JIIA), and through the support of the Sasakawa Peace Foundation (SPF), initiated a dialogue with Southeast Asians about their perspectives on how the US-Japan relationship and alliance could or should approach cooperation with the region.
  • Topic: Security, Economics, Markets, Peacekeeping
  • Political Geography: United States, Japan, China, Asia-Pacific
  • Author: Dieter Ernst
  • Publication Date: 03-2016
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: This paper explores what we know about possible employment effects of the 10-year plan, issued by the State Council on May 19, 2015, entitled Made in China 2025. MIC2025 was designed to address China’s emerging labor shortage challenge. To achieve this goal, the plan seeks to boost labor productivity through an increased use of robots and through network-based upgrading of the entire industrial value chain and related services. How might the projected increase in labor productivity affect the creation and quality of jobs in China? Will China’s push into advanced manufacturing now move the country’s manufacturing employment closer to the pattern of “employment de-industrialization” observed in the US and other industrialized countries? How China will cope with the advanced manufacturing challenge for employment will have major implications not only for the US and other industrialized countries, but also for emerging economies and, most importantly for the majority of developing countries that are still struggling as latecomers to labor-intensive industrial manufacturing. The paper lays out objectives of the MIC 2025 plan and highlights a failure of Chinese policy makers to take into account employment effects and other labor market issues when they design their grand visions of industrial policy. The paper finds that until 2014, manufacturing has acted as an employment absorber in China. However new data on unemployment, labor force participation and income inequality signal that China may now be moving towards an “employment de-industrialization” pattern, unless enough knowledge-intensive service jobs will be created in China’s growing information economy. The paper concludes with implications for policy and further research.
  • Topic: Economics, International Political Economy, Markets, Labor Issues
  • Political Geography: China
  • Publication Date: 01-2015
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: China, the world's leading exporter of electronic products, faces a fundamental dilemma. It is the largest and fastest-growing market for semiconductors, the core component of those electronics products. Yet, at least 80 percent of the semiconductors used in China's electronics products must be imported. As a result, China's trade deficit in semiconductors has more than doubled since 2005 and now exceeds the huge amount it spends on crude oil imports. To correct this unsustainable imbalance, China's new strategy to upgrade its semiconductor industry seeks to move from catching up to forging ahead in semiconductors. The strategy calls for simultaneously strengthening advanced manufacturing and innovation capabilities in China's integrated circuit (IC) design industry and its domestic IC fabrication, primarily through foundry services. Drawing on policy documents and interviews with China-based industry experts, this study takes a close look at the objectives, strategy, and implementation policies of China's new push in semiconductors and examines what this implies for China's prospects in this industry. The study shows that China's new policy resorts to private equity investment rather than subsidy as the tool of industrial policy. The government participates in equity investment and claims it will do so without intervening in management decisions. This policy is expected to reduce the cost of investment funds for a selected group of firms, which is to form a "national team" in the semiconductor industry. China's new policy to upgrade its semiconductor industry through innovation does not represent a radical break with its deeply embedded statist tradition. Within these boundaries, however, the study detects important changes in the direction of a bottom-up, market-led approach to industrial policy. In response to the rising complexity and uncertainty of today's semiconductor industry, the government seems more open to experimentation with new approaches to investment finance and flexible, bottom-up policy implementation, based on multilayered industrial dialogues with private firms. China's policies to forge ahead in semiconductors, thus, provide an interesting example of its current efforts to move from investment-driven catching up to an innovation-driven development model.
  • Topic: Economics, International Trade and Finance, Oil, Science and Technology, Financial Markets
  • Political Geography: China
  • Author: Christopher McNally, Boy Lüthje
  • Publication Date: 09-2015
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: The global financial crisis of 2008-09 led to a policy consensus in China that its socioeconomic development model needed rebalancing. China's rapid development has been based on extensive growth reliant on exports, low wages, environmental exploitation, and the manufacturing of cheap products. China's current plans identify paths to economic rebalancing through intensive growth driven by rising investment in new technologies and manufacturing processes, improved wages and skills, and improved worker and environmental protections. Two industries, automotive and information technology, demonstrate the experience of and opportunities for rebalancing. Both offer improved employment conditions with better wages, but continue to incorporate large swaths of low-wage employment with little protection for workers' health and the environment. Economic rebalancing in China, therefore, has so far only appeared in pockets. Institutional safeguards for wages and labor standards remain constrained by powerful alliances among multinational corporations, Chinese state-owned/private enterprises, and the Chinese state.
  • Topic: Economics, Markets, Science and Technology, Labor Issues, Financial Crisis
  • Political Geography: China
  • Author: Dieter Ernst
  • Publication Date: 10-2014
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: China's new strategy to upgrade its semiconductor industry (outlined in the "Guidelines to Promote National Integrated Circuit Industry Development," June 24, 2014), seeks to move from catching-up to forging ahead in semiconductors, by strengthening simultaneously China's integrated circuit (IC) design industry and domestic IC foundry services.
  • Topic: Economics, Globalization, Industrial Policy, Markets, Science and Technology
  • Political Geography: China, Asia
  • Author: Dieter Ernst
  • Publication Date: 02-2012
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: For its proponents, America's voluntary standards system is a "best practice" model for innovation policy. Foreign observers however are concerned about possible drawbacks of a standards system that is largely driven by the private sector. There are doubts, especially in Europe and China, whether the American system can balance public and private interests in times of extraordinary national and global challenges to innovation.
  • Topic: Democratization, Economics, Globalization, International Trade and Finance, Markets, Governance
  • Political Geography: United States, China, Europe
  • Author: Barry Naughton, Dieter Ernst
  • Publication Date: 08-2012
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: The paper examines the role of global technology sourcing, and its drivers and impacts in China's integrated circuit (IC) design industry. IC design is one of the priority targets of China's innovation policy, as codified especially in the ―Strategic Emerging Industries‖ initiative. At the same time, however, China's IC design industry is deeply integrated into the vertically disintegrated global semiconductor industry, through markets, investment and technology. The paper highlights a fundamental challenge for China's innovation strategy: How can China reconcile its primary objective of strengthening indigenous innovation with the benefits that it could reap from its deep integration into international trade and into global networks of production and innovation?
  • Topic: Economics, Industrial Policy, International Trade and Finance, Science and Technology
  • Political Geography: China, Israel
  • Author: Peter A. Petri, Michael G. Plummer, Fan Zhai
  • Publication Date: 10-2011
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: Two emerging tracks of trade agreements in the Asia-Pacific—one based on the proposed Trans-Pacific Partnership (TPP) agreement and an Asian track—could consolidate the “noodle bowl” of current smaller agreements and provide pathways to a Free Trade Area of the Asia-Pacific (FTAAP). We examine the benefits and strategic incentives generated by these tracks over 2010-2025. The effects on the world economy would be small initially but by 2025 the annual welfare gains would rise to $104 billion on the TPP track, $303 billion on both tracks, and $862 billion with an FTAAP. The tracks will be competitive but their strategic implications are constructive: each would generate incentives for enlargement. Over time, strong economic incentives would emerge for the United States and China to consolidate the tracks into a region-wide agreement. Each track would bring a different template to such consolidation and can be viewed as defining a “disagreement point” in the Asia-Pacific bargaining game. The study is based on an analysis of 48 actual and proposed Asia-Pacific trade agreements and models impacts on variables including sectoral trade, output, employment and job shifts in 24 world regions.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States, China, Israel, Asia, Australia/Pacific, Asia-Pacific
  • Author: ZhongXiang Zhang, Lei Zhu, Ying Fan
  • Publication Date: 11-2011
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: This paper applies real options theory to establish an overseas oil investment evaluation model that is based on Monte Carlo simulation and is solved by the Least Squares Monte-Carlo method. To better reflect the reality of overseas oil investment, the model has incorporated not only the uncertainties of oil price and investment cost but also the uncertainties of exchange rate and investment environment. These unique features have enabled the model to be best equipped to evaluate the value of oil overseas investment projects of three oil field sizes (large, medium, small) and under different resource tax systems (royalty tax and production sharing contracts). In the empirical setting, China was selected as an investor country and Indonesia as an investee country as a case study. The results show that the investment risks and project values of small sized oil fields are more sensitive to changes in the uncertainty factors than the large and medium sized oil fields. Furthermore, among the uncertainty factors considered in the model, the investment risk of overseas oil investment may be underestimated if no consideration is given of the impacts of exchange rate and investment environment. Finally, as there is an important tradeoff between oil resource investee country and overseas oil investor, in medium and small sized oil investment negotiation the oil company should try to increase the cost oil limit in production sharing contract and avoid the term of a windfall profits tax to reduce the investment risk of overseas oil fields.
  • Topic: Development, Economics, Energy Policy, International Trade and Finance, Oil
  • Political Geography: China, Indonesia, Israel
  • Author: ZhongXiang Zhang
  • Publication Date: 11-2011
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: China's capital-intensive, export-oriented, spectacular economic growth since launching its open-door policy and economic reforms in late 1978 not only has created jobs and has lifted millions of the Chinese people out of poverty, but also has given rise to unprecedented environmental pollution and CO2 emissions. While estimates of the embedded CO2 emissions in China's trade differ, both single country studies for China and global studies show a hefty chunk of China's CO2 emissions embedded in trade. This portion of CO2 emissions had helped to turn China into the world's largest carbon emitter, and is further widening its gap with the second largest emitter. This raises the issue of who should be responsible for this portion of emissions and bearing the carbon cost of exports. China certainly wants importers to cover some, if not all, of that costs. While China's stance is understandable, this paper has argued from a broad and balanced perspective that if this is pushed too far, it will not help to find solutions to this issue. On the contrary it can be to China's disadvantage for a number of reasons. However, aligning this responsibility with China does not necessarily suggest the sole reliance on domestic actions. In that context, the paper recommends specific actions that need to be taken internationally as well as domestically in order to effectively control the embedded CO2 emissions in China's trade.
  • Topic: Climate Change, Economics, Industrial Policy, International Trade and Finance
  • Political Geography: China
  • Author: Jiajian Chen, Robert D. Retherford, Minja Kim Choe, Li Xiru, Cui Hongyan
  • Publication Date: 05-2009
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: This paper examines Guangdong's fertility decline between 1975 and 2005 and analyzes how it has been influenced by both fertility policy and economic development. Guangdong's economic development has been very rapid and has attracted huge numbers of migrants from other provinces. The effect of this migration on Guangdong's fertility is an important part of the story. Measures of fertility and nuptiality employed in the analysis include the total fertility rate, parity progression ratios, mean age at first marriage, mean age at first birth, and mean closed birth interval between first and second birth. These measures are calculated from birth histories reconstructed from data from China's 1990 and 2000 censuses and 2005 mini-census. An overlapping-trend analysis provides indications of the accuracy of the estimates.
  • Topic: Demographics, Development, Economics, Migration
  • Political Geography: China, Israel
  • Author: Christopher A. McNally, Hong Guo, Guangwei Hu
  • Publication Date: 08-2007
  • Content Type: Working Paper
  • Institution: East-West Center
  • Abstract: Since the mid-1990s the Chinese government has rapidly liberalized the environment facing domestic private firms. As a consequence, many private firms have clarified their ownership relations and acquired stronger organizational boundaries. However, despite this formalization of private sector institutions, informal guanxi networks remain a key component in firm success. Most significant among these guanxi networks are political networks that connect private entrepreneurs with actors in China's political sphere.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: China, Israel