Survey Explores Symbiotic Relationship between China's Nonofficial Finance and SMEs

Domestic and foreign studies have revealed the existence of an interactive development relationship between nono cial nance and small and medium-sizedenterprises.Based on the empirical findings of a Hangzhou case study,this article substantiates the existence of a very strong symbiotic relationship between China’s nono cial nance and small and medium-sized enterprises(SMEs).This symbiotic relationship is an equilibrium outcome among three market players:formalnance,nono cial nance and SMEs.Meanwhile,it is also a rational choice and suboptimal equilibrium point reached under the existing institutional spaceconstraints.In our empirical study,we found that formal nance failure left a space for symbiosis to survive in two ways:the comparative advantages of nono cialnance created an institutional basis for symbiosis to grow,and immense SME fund shortages created a market space for symbiosis to thrive.In this article,we alsoput forward some recommendations for further development of such a symbiotic relationship.

Financialization of the Economy and Income Inequality in China

The income gap between the financial sector and other sectors has been widening since the mid-1990s. Why do financiers in China earn more than others? We analyze this issue against the background of financialization of the economy. The year 1993 was a watershed year, in which China began the process of rapid financialization. Since 1993, the financial sector has become increasingly powerful, overshadowing other sectors. Evidence shows that the high income levels that exist in the financial sector are related to this process of financialization in China. Financialization influences income distribution in China through two channels: money issuance and liquidation of social capital. The labor market equilibrium of the financial sector and wage level determination are not naturally formed but constructed. The increasing income inequality between the financial sector and other sectors is a consequence of financialization of the economy in China.

The Renminbi Exchange Rate Reform and the Rebalancing of China's Growth Model

This paper posits that a proper way to estimate the Renminbi(RMB) exchange rate is to base the evaluation on the Balassa-Samuelson effect, and that the optimal way to facilitate China's growth model transformation is gradual RMB internationalization and capital account liberalization. Regression estimates show that the gross domestic product per capita growth rate, or the productivity growth rate, has strong explanatory validity when estimating the RMB exchange rate. The findings further assert that, as the growth of gross fixed capital formation slows, and the growth of household consumption speeds up, China's economic growth will be sustained. The RMB exchange rate regime is one in which gradual reforms must yield to interest rates levels and hence should only be revalued conditionally.

The Reform of State-owned Commercial Banks in China: A Political Economy Perspective

This paper analyzes the logic of the reform of state-owned commercial banks during 1997-2006 from a political economy perspective, mainly by discussing three fields of the reform: shareholding system reform, marketization, and financial restructuring. It also points out the existing problems in each field. The conclusion is that although the reform is heading in the right direction and has already made great progress, it has largely been conducted at the technical level and the Government has avoided dealing with the core issue of the reform. More importantly, the consequences of the Government's policy—pursuing short-term objectives, like improving the short-term financial status of banks—puts the entire system in danger by accumulating long-term risks. This paper also provides some policy proposals and points out potential directions for further studies.

The Numeric Characteristics of Chinese A-Share Market Index Volatility,Model Simulation,and Forecasting

This study investigates the basic numeric characteristics of Chinese A-share market index volatility (i.e.,the clustering,heteroscedasticity,and jumps) from the perspective of data mining.It presents a theoretical-empirical model based on these three major characteristics and conducts a maximum likelihood estimation to study Chinese A-share market return data empirically.Results show that,in full-sample or special periods,this model calibrates the A-share index volatility well and simulates in-sample volatility better than the four major empirical models adopted to study volatility.In out-of-sample forecasts,this model performs better than the other four models on the value-at-risk dates,which are the volatile days.This model can also decompose and explain the volatility of the Chinese A-share index.On the basis of GARCH,this study revises the volatility model proposed by Maheu and extends Engle’s research framework.Thus,this model is of theoretical significance.This model’s simulation and forecast functioning can contribute to regulatory expectation management and investment portfolio construction.

Foreign Asset Management Firms in China's Market:Current Landscape,Competitive Edge,and Future Prospects

The Central Financial Work Conference has emphasized the need to promote highlevel financial openness and safeguard national financial and economic security.As such,it is imperative to encourage both inbound and outbound financial activities,expand institutional opening-up,streamline cross-border investment and financing,and attract international financial institutions and long-term capital to stimulate China's economy.

Asymptotic Marginal Tax Rate of Individual Income Tax in China

This paper examines the asymptotic marginal rate of individual income tax which maximizes China's social welfare through numerical simulation based on the elasticity of China's labor supply, income distribution and the social objectives of redistribution in accordance with the optimal direct taxation theory. Taking advantage of the optimal direct taxation model with consideration of the income effect, it comes to the conclusion that combined with China's reality, the asymptotic marginal rate of individual labor income tax in China should be between 35% and 40%.

South China Sea Territorial Disputes and Sino-Philippine Trade

As political factors affect trade activities greatly, this paper considers whether a series of political events have had a negative impact on Sino-Philippine trade relations. Of particular concern is the influence on bilateral relations and the Philippines' domestic economy from political and diplomatic tensions between China and the Philippines caused by territorial disputes in the South China Sea. Political events are divided into two levels, general conflicts and serious conflicts, which are analyzed from the perspectives of both overall level and product level to present their final impact on trade. This research finds that territorial disputes between the two countries deteriorated trade, as the volume of trade usually decreased distinctly after conflicts. The negative impact on trade generated by serious conflicts usually occurred more rapidly and on a larger scale. The effect of trade deterioration caused by political events weakened over time. Furthermore, after serious conflicts, although the volume of trade of certain products decreased temporarily, it rebounded quickly or even increased soon. However, industrial equipment or industrial raw materials trade activities between the two countries were basically independent of the conflicts' impact.