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2862. Government Connections and Financial Constraints: Evidence from a Large Representative Sample of Chinese Firms
- Author:
- Robert Cull, Bo Sun, and Lixin Colin Xu
- Publication Date:
- 01-2015
- Content Type:
- Commentary and Analysis
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- We examine the role of firms’ government connections, defined by government intervention in CEO appointment and the status of state ownership, in determining the severity of financial constraints faced by Chinese firms. We demonstrate that government connections are associated with substantially less severe financial constraints (i.e., less reliance on internal cash flows to fund investment), and that the sensitivity of investment to internal cash flows is higher for firms that report greater obstacles to obtaining external funds. We also find that those large non-state firms with weak government connections, likely the engine for innovation in the coming years in China, are especially financially constrained, due perhaps to the formidable hold that their state rivals have on financial resources after the ‘grabbing-the-big-and-letting-go-the-small’ privatization program in China. Our empirical results suggest that government connections play an important role in explaining Chinese firms’ financing conditions, and provide further evidence on the nature of the misallocation of credit by China’s dominant state-owned banks.
- Topic:
- Privatization, Governance, Business, Fiscal Policy, Innovation, and Banking
- Political Geography:
- China and Asia
2863. The Belt and Road initiative: connecting China and Central Europe
- Author:
- Xiao Fang
- Publication Date:
- 12-2015
- Content Type:
- Journal Article
- Journal:
- International Issues: Slovak Foreign Policy Affairs
- Institution:
- Slovak Foreign Policy Association
- Abstract:
- China and Central Europe have experienced similar transitions over time and have a constructive role to play in the international system, taking on responsibility for development. Cooperation between China and Central and Eastern European Countries is conducted via the “16+1” mechanism, the Silk Road Economic Belt and 21st century maritime Silk Road, known as the “Belt and Road initiative.” Central European countries are EU member states and emerging economies. They are located at a geographically strategic juncture and form part of the East Asia–Transatlantic value chain. The 16+1 mechanism is helping China and Central European countries establish high level annual meetings and is encouraging the private sector, business, people-to-people exchanges. The Belt and Road initiative is providing new financing facilities, and a dialogue with the European Commission on investment plans is being launched. Studies and working groups are emerging to help set strategies, build mechanisms, allocate resources and implement policies. This article argues that the Chinese approach, i.e. the 16+1 mechanism and Belt and Road initiative, is platforms paving the way for China–Central Europe cooperation.
- Topic:
- Development, Economics, Politics, and Geopolitics
- Political Geography:
- China and Central Europe
2864. China’s engagement in Central and Eastern Europe: regional diplomacy in pursuit of China’s interests
- Author:
- Pleschova. Gabriela
- Publication Date:
- 12-2015
- Content Type:
- Journal Article
- Journal:
- International Issues: Slovak Foreign Policy Affairs
- Institution:
- Slovak Foreign Policy Association
- Abstract:
- The purpose of this study is to discuss the motivations and challenges associated with China’s enhanced cooperation with Central and Eastern Europe (CEE). It perceives China’s partnership with CEE as a product of the regional diplomacy approach China also uses in relations with the rest of the world. The study concludes that China is increasingly active in shaping the foreign relations of other countries and is a more influential actor in the international arena. Therefore, a platform which unites 16 CEE countries may prove too weak to advance these countries’ interests vis-à-vis China. A more effective solution would appear to be to replace the 16+China mechanism with the more powerful EU platform.
- Topic:
- Foreign Policy, Diplomacy, Regional Cooperation, and European Union
- Political Geography:
- China and Central Europe
2865. Future of trade relations within the 16+1 group: risks and opportunities
- Author:
- Vilem Semerak
- Publication Date:
- 12-2015
- Content Type:
- Journal Article
- Journal:
- International Issues: Slovak Foreign Policy Affairs
- Institution:
- Slovak Foreign Policy Association
- Abstract:
- The paper provides an overview of stylized facts on current trends in trade between the PRC and the 16 Central and Eastern European (CEE) countries. The potential effects of the “One Belt, One Road” initiative are discussed as are policy recommendations for the CEE countries. Trade with China is seen as complementary to trade with the core of the EU (and with the mutual trade of the CEE region,) once the international fragmentation of value chains is taken into account. Multilateral and plurilateral (e.g. EU-based) approaches to relations with China are likely to generate fewer risks compared to isolated solutions based on national interest pursued individually by CEE countries.
- Topic:
- Economics, International Trade and Finance, Politics, and Multilateral Relations
- Political Geography:
- China, Eastern Europe, and Central Europe
2866. Coming out of the shadows: the Polish perspective on China–Central and Eastern Europe relations
- Author:
- Justyna Szczudlik
- Publication Date:
- 12-2015
- Content Type:
- Journal Article
- Journal:
- International Issues: Slovak Foreign Policy Affairs
- Institution:
- Slovak Foreign Policy Association
- Abstract:
- In the last two decades, Central and Eastern Europe (CEE) have not played an important role in China’s foreign policy and vice-versa. EU membership did not change China–CEE relations remarkably. The situation started to change once the global financial and economic crisis hit. CEE began to notice that China is an economic and political partner to be reckoned with. Meanwhile, despite the crisis, the PRC started to look at CEE as a stable region – especially in economic terms. At the beginning China decided to strengthen bilateral ties with CEE countries. But in mid-2011 Beijing took the first step to launch cooperation with CEE as a region,
- Topic:
- Foreign Policy, Economics, Politics, and Bilateral Relations
- Political Geography:
- China and Central Europe
2867. Blowing from the East
- Author:
- Agnes Szunomar
- Publication Date:
- 12-2015
- Content Type:
- Journal Article
- Journal:
- International Issues: Slovak Foreign Policy Affairs
- Institution:
- Slovak Foreign Policy Association
- Abstract:
- China is increasingly perceived in Central and Eastern Europe as a country which could bring economic success to the countries of the region through the development of trade relations and the growing inflow of Chinese investment. Within the region, Hungary is regarded as occupying a prominent position by Chinese people and the government for several reasons. Chinese relations have historically been good: over the past decade Hungarian governments have committed themselves to developing the relationship. This trend was further confirmed after the global economic crisis of 2008, when Hungary started looking for new opportunities in its recovery from recession. The “Eastern opening” policy was initiated after the crisis and partly because of it. Officially, this policy puts more emphasis on further developing Chinese–Hungarian relations than was previously the case, including increasing trade and investment. However, the outcomes of the policy – such as the construction of the Budapest–Belgrade railway line – can be evaluated in different ways.
- Topic:
- Development, Economics, International Trade and Finance, and Politics
- Political Geography:
- China and Central Europe
2868. Migration from China to Slovakia
- Author:
- Peter Ondris
- Publication Date:
- 12-2015
- Content Type:
- Journal Article
- Journal:
- International Issues: Slovak Foreign Policy Affairs
- Institution:
- Slovak Foreign Policy Association
- Abstract:
- While numerous specialist studies about Chinese communities have been published in other countries in the region, this is not the case in Slovakia. Therefore there is a general lack of information about the Chinese community in Slovakia. The objective of this study is, at least partially, to fill this gap. While in many cases, i.e. in Central and Eastern Europe, businesses run by Chinese migrants have contributed to the economic stabilization of the region, including in Slovakia. It should be noted that the number of Chinese people in Slovakia has in the last ten years decreased as a percentage of the foreigners living legally in Slovakia. One could assess this as being a consequence of Slovakia’s EU membership and its adoption of European legislation. The Slovak government has adopted policies to try to change the nature of Chinese migration to Slovakia and attract more educated people and businessmen.
- Topic:
- Development, Economics, International Trade and Finance, European Union, and Multilateral Relations
- Political Geography:
- China, Eastern Europe, Hungary, Central Europe, and Slovakia
2869. China’s Hidden Obstacles to Socioeconomic Rebalancing
- Author:
- Boy Lüthje and Christopher A. McNally
- Publication Date:
- 10-2015
- Content Type:
- Policy Brief
- 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, Political Economy, Labor Issues, and Financial Crisis
- Political Geography:
- China
2870. From Catching Up to Forging Ahead: China’s Policies for Semiconductors
- 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, and Financial Markets
- Political Geography:
- China