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A study of a middle-income trap has become enormously popular as China, the second largest economy across the globe, starts to show a sign of its weakening economy. Within these years, there have been many articles about the middle-income trap were published from the international institutions, like the World Bank and Asian Development Bank as well as from international periodicals, such as The Economist and TIME. Academically, well-known professors, such as Barry Eichengreen and Jeffrey Sachs, have published the middle-income-related articles. Interestingly, all of those publications are connected to today’s Chinese economy. “Can China escape from the middle-income trap” has become an intriguing question among economists. As more empirical evidence starts to back up this middle-income trap study, many economists have found out that middle-income countries need to move up the technological ladder in order to get out of the trap. This paper reviews some recent literatures about the middle-income trap and find out the causes of the trap as well as basic solutions to avoid the trap. <Continue to read - click here>
In the past three decades, China’s economy skyrocketed to the second largest economy in the world and to the largest economy in Asia. There were multiple factors, which must have been involved to this spectacular growth since the 1978 economic reform. The notable economic event in the recent China’s history was its accession into the World Trade Organization (WTO) in 2001. The anticipation of China’s entry into the WTO had pushed its economic growth in 1990s and further growth in 2000s after its entry. While the event of the WTO accession, China has been known as an export-led economy thanks to lower labor cost and it was the first developmental stage for China to earn foreign hard currencies. In the meantime, China has attracted record-high of Foreign Direct Investments in past decades.
However, China’s economy would not have grown so fast without a rise in saving rates. Saving is like fuel that becomes an energy source for China’s powerful economic engine. Thus, a rapid growth in its saving rates must have led to China’s fast economic growth over the past three decades. In addition, a rise in saving means investment to grow. The remarkably high national saving has supported China’s high-investment, export-led growth model.[1] Importantly, in China, the investment is largely domestically financed while in the other Asian countries it is financed through foreign capitals.[2] That said, the China’s investment is purely derived from its aggregate domestic saving. <Continue to read - click here>
The Behind China’s Stock Market in 2000s: Its Performance and Inefficiency December 20, 2012 Akira Kondo
Abstract
The goal of this research paper is to discover the unreasonable performance in the China’s stock market in 2000s. China’s stock markets are relatively young with slightly more than 20 years in history but China’s A-shares market is, in fact, already the fifth biggest market in the world. An increase in liquidity and market participants along with its fast economic growth in 2000s should have created favorable market condition and returns. However, my finding shows that the decline of price-to-earnings (PE) multiple from 59.7 in 2000 to 15.4 in 2005 indicates the inefficiency of Chinese stock market: moving from overpricing to underpricing. In addition, the correlation between real interest rates in China and its PE multiple were positive, indicating unusual outcome. Since lower the interest rates, in general, businesses become profitable, and then earnings grow and stock prices start to lift along with the multiple. On the other hand, the inverse relationship exists during the second half of 2000s while China’s stock market was said to have experienced the bubble in 2007. Throughout these periods, the inefficiency in its market condition has distorted the market performance in 2000s, which this paper explains in details.
China's Fast Economic Growth over the Past 30 Years: The Engine of the National Saving December 21, 2012 Akira Kondo
Abstract
China’s fast economic growth over the past three decades was driven by many different economic factors, such as the growing inward foreign direct investment (FDI), unstoppable exports led by low cost of labor, and a massive capital investment. These all factors were the ones that have made China the second largest economy in the world in a past year; however, the behind of China’s real fast economic growth, I believe, was led by its high saving rate. Without China’s high saving rate, China would have not grown faster in the past three decades and in fact, the saving was the key factor to increase China’s standard of living. However, its massive growing saving in the past has become the trigger of global imbalances. In this essay, I will focus every detail on China’s saving and divide into three components of saving: household, government, and company to unveil its fast economic growth in the past three decades.
China-Japan financial cooperation and integration: The Insights, Benefits, and Outcomes of Necessary Convergence for the Two Biggest Economies in Asia April 26, 2013 Akira Kondo
Abstract
China and Japan are now two of the biggest economies in Asia and two of the world’s largest economies after the United States. While lessons from the Asian financial crisis had brought the importance of regional financial cooperation in Asia, the bilateral financial cooperation of China-Japan has now emerged the center stage for the future economic development in both economies as well as the region. With 80 percent of the total ASEAN+3 outputs hailed from China and Japan nowadays, their financial cooperation is extraordinary not only between the countries, but also in the Asian region itself. Although their stance toward the Asian region is intact, China and Japan together should mutually achieve further cooperation in the areas of finance to continue to promote trade and investment. My finding shows that the impact of the financial cooperation between China and Japan on their economic outputs is affirmative. Ongoing bilateral cooperation starts to show benefits in mitigation of exchange risks, diversification of assets, and cost of transactions. Therefore, China and Japan should cooperate and integrate further in the universal field of finance, including cross-border transactions, currency exchanges, and securities markets. This thesis describes and argues the importance of the financial developments between China and Japan in every detail along with the implications for the future development.
Chinese Library Classification Code: F276.6
Why did not Chinese stock market respond to its fast economic growth in 2000s? June 22, 2012 Akira Kondo
Abstract
The goal of this research paper is to find out the reasons behind that the Chinese stock market did not perform well during the 2000 period while its economy grew around 10 percent annually in the same period. China’s stock markets are relatively young with slightly more than 20 years in history but China’s A-shares market is, in fact, already the fifth biggest market in the world. An increase in liquidity and market participants along with its fast economic growth in 2000s should have created favorable market condition and returns. However, my finding shows that the decline of price-to-earnings (PE) multiple from 59.7 in 2000 to 15.4 in 2005 indicates the inefficiency of Chinese stock market: moving from overpricing to underpricing. In addition, the correlation between real interest rates in China and its PE multiple were positive, indicating unusual outcome. Since lower the interest rates, in general, businesses become profitable, and then earnings grow and stock prices start to lift along with the multiple. On the other hand, the inverse relationship exists during the second half of 2000s. Throughout these periods, the inefficiency in its market condition has distorted the market performance in 2000s, which this paper explains in details.
Coffee Culture, Not Tea:The Emergence of Starbucks Coffee and Its Impact on Chinese Culture June 6, 2012 Akira Kondo
Abstract
In the past decades, the Chinese have acquired many modern functional products, such as flat-screen televisions, Western-style sofas, washing machines, and personal electronic goods, such as laptops, digital cameras, and iPhones along with its fast economic growth. In the meantime, Western restaurants have joined this growing market with confidence of success in their businesses in the future. McDonald’s and Yum! Brands’ Pizza Hut and Kentucky Fried Chicken (thereafter KFC) are typical winners in the Chinese market. The Chinese consumers nowadays enjoy their Western food, such as sandwiches, fries, pizza, and mashed potatoes, that they have not had chance to eat at home or even outside until they had appeared in the market. With less than two decades, these Western signs have appeared everywhere in walking distance from their homes, typically in the big cities. All those modern products and Western food have now been in the daily life in China, mixing both Chinese and Western culture.