Regional capital mobility in China: 1978–2006

Abstract

We examine cross-region capital mobility in China and track how the degree of mobility has changed over time. The effects of fiscal and redistributive activities of different levels of government in China on private capital mobility are taken into account. Our results indicate that there is a significant improvement in capital mobility over time in China, particularly for private capital in the more developed regions. The central and provincial governments, via their taxation, spending, and transfers, loosen the relationship between private saving and investment and appear to promote capital mobility, particularly for less developed regions. There are considerable differences between more and less developed regions in terms of the degree of capital market integration and the improvement in capital mobility over time. The results have important policy implications on global re-balancing as well as regional development gap and risk-sharing within China. JEL code: C22, C23, F21

Do bank loans and local amenities explain Chinese urban house prices?

“…Household-level data and the mortgage loan data, when become available, should be used to confirm our tentative conclusion. Since there has been evidence of improved regional capital mobility in China as the economy develops (Chan et al, 2011), future research could also investigate whether there exists spatial spillover among regional housing markets, and what role does regional capital flow play in such spillover effect.…”

Saving–investment Association and Regional Capital Mobility in China: A Nonparametric Panel Approach

“…Parametric models such as those in Chan et al . (2011a,b) generally find an improvement of capital mobility after the mid‐1990s. The magnitude of the improvement in the present paper, however, is smaller than that found in other studies, especially in terms of private capital mobility.…”

“…Under a parametric framework, the panel cointegration technique has been applied to this topic (e.g. Chan et al (2011b). However, cointegration analysis under nonparametric estimation is yet to be developed, theoretically and empirically, and represents another potential direction for future work.…”

“…Chan et al . (2011b), using a panel cointegration model with cross‐sectional dependence, estimate the capital mobility in China during 1978–2006. Table summarizes and compares the empirical findings of these studies.…”

“…4 For the above reasons, in the present paper, we follow the recent advances in nonparametric panel data econometrics to provide an alternative estimation. Our work allows variations of the savings retention rate over time without losing 1978-2001 1978-1989 1990-2001 0.525 0.300 0.599 Chan et al (2011b) 1978-2006Panel cointegration with cross-sectional dependence 1978-20061978-19921993-2006 0.968 0.883 0.213 Chan et al (2011a) 1970-2006Panel 1970-20061983-19941995-2006 any information or assuming any improper functional form for the savingsinvestment relationship. Moreover, the nonparametric panel data model has two salient features in our application that are largely absent in the existing literature.…”