Doing business in China, while lucrative, can be a minefield to the uninitiated. This regular column by Deloitte will provide specific information to give businesspeople the tools they need to facilitate this process.
In this study, we expanded upon the current benchmark model of external adjustment and dissected the concept of international financial adjustment into two distinct components: valuation effect and investment income. ...In this study, we expanded upon the current benchmark model of external adjustment and dissected the concept of international financial adjustment into two distinct components: valuation effect and investment income. Our enhanced model, which we refer to as “tri-channel model,” incorporates three key elements: trade balance, valuation effect, and investment income. Using a consolidated quarterly dataset that encompassed China's balance of payments and international investment positions from 1998 to 2020, we estimated the relative importance of the three newly introduced adjustment channels to China's cyclical external imbalance. We found that the trade balance channel played a major role, accounting for approximately 76 percent of cyclical external adjustment. The contribution of the investment income channel to cyclical external adjustment (21 percent) was much greater than that of the valuation effect channel (3 percent). These findings imply that policy responses to the cyclical external imbalance in China should focus more on the trade balance and investment incomes channels rather than exploiting the valuation effects.展开更多
文摘Doing business in China, while lucrative, can be a minefield to the uninitiated. This regular column by Deloitte will provide specific information to give businesspeople the tools they need to facilitate this process.
基金Wangyin Hu is grateful for financial support from Fundamental Research Funds for Central Universities,University of International Relations(No.3262024T23)Guangtao Xia thanks the Peak Strategy of Discipline Construction of the Chinese Academy of Social Sciences(No.DF2023YS41)the Laboratory of World Economic Forecasting and Policy Simulation of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences(No.2024SYZH003)for their financial support.
文摘In this study, we expanded upon the current benchmark model of external adjustment and dissected the concept of international financial adjustment into two distinct components: valuation effect and investment income. Our enhanced model, which we refer to as “tri-channel model,” incorporates three key elements: trade balance, valuation effect, and investment income. Using a consolidated quarterly dataset that encompassed China's balance of payments and international investment positions from 1998 to 2020, we estimated the relative importance of the three newly introduced adjustment channels to China's cyclical external imbalance. We found that the trade balance channel played a major role, accounting for approximately 76 percent of cyclical external adjustment. The contribution of the investment income channel to cyclical external adjustment (21 percent) was much greater than that of the valuation effect channel (3 percent). These findings imply that policy responses to the cyclical external imbalance in China should focus more on the trade balance and investment incomes channels rather than exploiting the valuation effects.
