Journal of Chinese Economic and Foreign Trade Studies

Publisher:: Emerald Group Publishing Limited
Publication date:: 2021-02-01

ISBN:: 1754-4408

Issue Number

No. 18-1, January - January - December - November - November 2025

Latest documents

Financial inclusion and bank stability: evidence from capital buffer and capital adequacy ratio
Purpose: This study aims to examine the effect of financial inclusion on bank stability, and the effect of bank stability on financial inclusion from 2011 to 2020. Design/methodology/approach: This study analyses 33 countries which are divided into Asian countries, African countries, European countries and countries in the region of the Americas and using the panel regression method. Findings: The analysis for the impact of financial inclusion on bank stability shows that high levels of financial inclusion have a significant positive impact on bank stability. The regional results show that financial inclusion improves bank stability in African countries and in countries in the region of the Americas while financial inclusion impairs bank stability in European countries. The analysis for the impact of bank stability on financial inclusion shows that bank stability has a significant effect on financial inclusion. The regional analysis shows that greater bank stability decreases financial inclusion in European and African countries while greater bank stability increases financial inclusion in countries in the Americas region. The results suggest that the effect of financial inclusion on bank stability, and the effect of bank stability on financial inclusion, depends on how financial inclusion and bank stability are measured and the region examined. Originality/value: Existing studies have not examined the effect of financial inclusion on capital-based measures of bank stability and have not examined the effect of capital-based measures of bank stability on the level of financial inclusion.
Influence of oil price fluctuations on inflation uncertainty
Purpose: The purpose of this study is to achieve a comprehensive understanding of how the intricate interconnections between oil price fluctuations, supply chain disruptions and shifting demand patterns collectively shape inflation dynamics within the Chinese economy, especially during critical periods such as the Covid-19 pandemic and geopolitical events like the Russia–Ukraine conflict. The importance of assessing the impact of oil price volatility on China’s inflation becomes particularly pronounced amidst these challenging circumstances. Design/methodology/approach: This study uses the Markov Regime-Switching generalized autoregressive conditional heteroskedasticity (MRS-GARCH) family of models under student’s t-distributions to measure the uncertainty of oil prices and the inflation rate during the period spanning from 1994 to 2023 in China. Findings: The results indicate that the MRS-GJR-GARCH-in-mean (MRS-GARCH-M) models, when used under student’s t-distributions, exhibit superior performance in modeling the volatility of both oil prices and the inflation rate. This finding underscores the effectiveness of these models in capturing the intricacies of volatility dynamics in the context of oil prices and inflation. The study has identified compelling evidence of regime-switching behavior within the oil price market. Subsequently, the author conducted an analysis by extracting the forecastable component, which represents the expected variation, from the best-fitted models. This allowed us to isolate the time series of oil price uncertainty, representing the unforecastable component. With this unforecastable component in hand, the author proceeded to estimate the impact of oil price fluctuations on the inflation rate. To accomplish this, the author used an autoregressive distributed lag model, which enables us to explore the dynamic relationships and lags between these crucial economic variables. The study further reveals that fluctuations in oil prices exert a noteworthy and discernible influence on the inflation rate, with distinct patterns observed across different economic regimes. The findings indicate a consistent positive impact of oil prices on inflation rate uncertainty, particularly within export-oriented and import-oriented industries, under both of these economic regimes. Originality/value: This study offers original value by analyzing the impact of crude oil price volatility on inflation in China. It provides unique insights into the relationship between energy market fluctuations and macroeconomic stability in one of the world’s largest economies. By focusing on crude oil – a critical but often overlooked component – this research enhances understanding of how energy price dynamics influence inflationary trends. The findings can inform policymakers and stakeholders about the significance of energy market stability for maintaining economic stability and guiding inflation control measures in China.
Economic complexity in Africa: the role of Chinese FDI and trade
Purpose: This study aims to examine the effect of Chinese foreign direct investment (FDI) and trade on economic complexity in Africa. Design/methodology/approach: Panel data from 34 African countries between 2003 and 2022 are used. This study analyzes the data using a two-stage least square proposed by Lewbel (2012) and Driscoll and Kraay (1998) estimator based on robust standard errors and panel quantile regression via moments proposed by Machado and Silva (2019). Findings: The results show that Chinese FDI and trade effectively upgrade economic complexity in Africa. Also, there is an inverted-U-shaped relationship between Chinese trade and economic complexity, thus revealing evidence of the trade Laffer curve. Originality/value: Despite the intense debate on the Chinese-African economic relationship, to the best of the authors’ knowledge, no known study has examined the implications of Chinese FDI and trade on economic complexity in Africa. Therefore, this study fills this lacuna found in the literature and suggests that Chinese FDI and trade are veritable tools for technology diffusion and innovation, which are capable of upgrading economic complexity in Africa. However, the Chinese-African trade relationship should be complemented with sound trade policies for the sustainability of the beneficial effect of Chinese trade on economic complexity in Africa.
Is the country’s preparedness for epidemics and pandemics an FDI location factor? An empirical analysis using panel data
Purpose: This study aims to validate the hypothesis that a country’s preparedness for epidemics and pandemics, as measured by the GHS Index, significantly influences inward FDI inflows. By examining panel data from 2019 to 2021, the research seeks to elucidate the impact of heightened epidemic and pandemic preparedness on investment behavior, thereby highlighting the importance of health resilience and preparedness in attracting foreign investment and fostering economic growth and development. Design/methodology/approach: The study uses panel data spanning 181 countries from 2019 to 2021 and uses logarithmic regression models to analyze the impact of a country’s preparedness for epidemics and pandemics, as measured by the Global Health Security (GHS) Index, on inward Foreign Direct Investment (FDI) inflows. Auxiliary variables including GDP, labor supply, openness rate, inflation rate and political stability are incorporated. Robust weighted least squares estimation techniques are used to account for potential heterogeneity and panel data characteristics. Findings: The study reveals a consistent and statistically significant positive relationship between a country’s GHS score and inward FDI, indicating that destinations with robust health systems are more attractive to investors. Higher GHS scores correlate with reduced investment risk, improved business continuity during health crises and enhanced health-care infrastructure, leading to a healthier and more productive workforce. Research limitations/implications: While the study provides valuable insights into the relationship between epidemic and pandemic preparedness and inward FDI inflows, several limitations exist. The analysis relies on cross-sectional data from a relatively short timeframe (2019–2021), limiting the ability to capture long-term effects. Additionally, the study focuses on the GHS Index as a measure of preparedness, overlooking other potential determinants of FDI attractiveness. Future research could explore a broader range of health security indicators and incorporate longer-term data to provide a more comprehensive understanding of the relationship. Originality/value: This study contributes to the literature by examining the previously underexplored relationship between a country’s epidemic and pandemic preparedness, as measured by the GHS Index and inward FDI inflows. By using panel data analysis and robust econometric techniques, the research provides empirical evidence supporting the positive impact of robust health systems on FDI attractiveness. The findings underscore the importance of prioritizing public health initiatives and epidemic preparedness as integral components of attracting and retaining foreign investment, thereby fostering economic resilience and sustainable development in host countries.
Evaluating India’s FDI as a nonparticipant in the Belt and Road Initiative: synthetic control method analysis
Purpose: The Belt and Road Initiative (BRI) was launched in 2013 and implemented the following year, marking 11 years since its inception. During this time, numerous research papers have been published that analyse the initiative’s objectives, targets and potential outcomes. This study aims to assess India’s resilience in joining the BRI by examining its net foreign direct investment (FDI) compared to a counterfactual scenario involving participation in the initiative. Design/methodology/approach: The synthetic control method (SCM) will be used using a panel of 27 countries from 1990 to 2021. Findings: The findings reveal that India’s FDI trajectory has decreased compared to that of synthetic India constructed from BRI member countries. Research limitations/implications: This research outcome can assist India and other nations that are contemplating joining the BRI to systematically evaluate the potential political and economic risks and benefits associated with the initiative. This evaluation can guide individual decision-making processes regarding the BRI on a case-by-case basis and with other outcomes that are deemed viable to each country. Originality/value: This research is distinct from other studies because it uses a novel SCM analysis, which is a quasi-experimental technique that assesses actual outcomes rather than predicting them, as in conventional regression models. In addition, previous research has primarily focused on the political aspects of the initiative; however this study focuses on the economic aspect of the BRI by evaluating its impact on FDI.
Fractal momentum investment strategies based on liquidity non-linear fluctuations in Chinese stock market
Purpose: This paper aims to the relationship between liquidity fluctuation trends and stocks’ expected returns. Design/methodology/approach: The authors use the multi-fractal detrended fluctuation analysis to study the liquidity non-linear multi-fractal characteristics of stock market and predict the future volatility trend of market liquidity with the help of potential entropy dimensional model and also consider the non-linear volatility trend of liquidity, construct a fractal momentum strategy under different sorting periods and holding periods, to test the liquidity momentum effects of Chinese stock market and, finally, compare with the traditional price momentum strategy. Findings: The result suggests that: Chinese stock market liquidity has obvious non-linear multi-fractal characteristics; the trend entropy dimensional model can accurately predict the future volatility trend of market liquidity; significant liquidity trend momentum effects persist in the Chinese stock market, while price momentum effects exist only in the short term; a significant liquidity premium exists in the Chinese equity market; the fractal momentum strategy constructed in this paper achieves higher returns and less risk than the price momentum strategy. Originality/value: Based on the above analysis, this paper will further construct a momentum strategy incorporating liquidity trends, i.e. fractal momentum strategy (LMP strategy), with the realistic background that Chinese stock market liquidity has non-linear multi-fractal characteristics – the main contribution of this paper is to overcome the shortcomings of existing momentum strategies, which seldom combine the trend of future liquidity fluctuations with momentum strategies, and to incorporate the real characteristics of the market.
Does the S-curve demonstrate an asymmetrical response to fluctuations in exchange rates?
Purpose: This study aims to examine the asymmetric S-curve between the trade balances of Pakistan and China at the commodity level using disaggregated data. Design/methodology/approach: This study focuses on Pakistan and China bilateral trade based on commodity-level data. This study delves into the S-curve phenomena by examining time series data from 1980 to 2023 across 32 three-digit industries/commodities. Findings: The findings show significant evidence in favor of the “asymmetric S-curve” in 27 out of the 32 industries studied. This study confirms that the devaluation of home currency is not a viable solution always to improve trade balance. Research limitations/implications: This study considers 32 three-digit industries limiting the generalizability of findings. Due to data unavailability, the authors fail to consider other industries. In the absence of quarterly data on industry-level trade between Pakistan and China, annual data from 1980 to 2023 were used in generating the cross-correlation functions. Previous literature frequently resorted to the general consumer price index with its inherent aggregation issues, whereas this study has opted for commodity price indices to overcome the shortcomings in the estimation of S-curves at the commodity level. Practical implications: The findings have practical relevance in guiding policy decisions regarding commodity trade, whereas the industry-wise analysis enriches the understanding of the short-term effects of currency depreciation on trade balance dynamics. Originality/value: The S-curve hypothesis predicts a negative cross-correlation between a country's current exchange rate and its past trade balance and a positive cross-correlation between the current exchange rate and its future trade balance. Previous empirical S-curve studies had the limitation of assuming symmetry in cross-correlation with both current and future trade balance values.
Digital financial inclusion and inclusive development in lower-middle-income countries: the enabling role of institutional quality
Purpose: This study aims to explore how institutional quality links digital financial inclusion to inclusive development in lower-middle-income countries, considering heterogeneities. Design/methodology/approach: The study uses dynamic generalized method of moments to analyze a balanced panel data set of 48 lower-middle- income countries (LMICs) from 2004 to 2022, sourced from various databases. It assesses four variables and conducts checks for study robustness. Findings: The study reveals a positive link between digital financial inclusion and inclusive development in LMICs, confirming theoretical predictions. Empirically, nations with quality institutions exhibit greater financial and developmental inclusion than those with weak institutions, emphasizing the substantial positive impact of institutional quality on the connection between digital financial inclusion and inclusive development in LMICs. For instance, the interaction effect reveals a substantial increase of 0.123 in inclusive development for every unit increase in digital financial inclusion in the presence of strong institutions. The findings provide robust empirical evidence that the presence of quality institutions is a key catalyst for the benefits of digital finance in inclusive development. Originality/value: This study offers significant insights into digital financial inclusion and inclusive development in LMICs. It confirms a positive relationship between digital financial inclusion and inclusive development, highlighting the pivotal role of institutional quality in amplifying these benefits. Strong institutions benefit deprived individuals, families, communities and businesses, enabling full access to digital financial inclusion benefits. This facilitates engagement in development processes, aiding LMICs in achieving Sustainable Development Goals.
CHEER and markets’ integration: evidence from selected East Asian economies
Purpose: This paper aims to investigate markets’ integration using the capital enhanced equilibrium exchange rate (CHEER) model for seven, highly competitive, East Asian countries. Design/methodology/approach: The sample consists of monthly observations, whereas unit root and cointegration techniques with structural shifts have been used. Findings: The evidence shows that the weak form of the CHEER approach holds for Malaysia and Thailand. For China, Japan, Korea, Singapore and Taipei, only the uncovered interest parity condition is validated, implying capital markets integration. In contrast, for these five countries, the results indicate absence of goods’ markets integration. This outcome can be attributed to the impact of quite high non-tariff barriers and the Balassa–Samuelson effect. Originality/value: To the best of the author’s knowledge, this is the first study that investigate markets’ integration in several East Asian economies, using the CHEER approach and more accurate price indices.
COVID-19 pandemic and linkage between stock markets in Middle Eastern countries
Purpose: The purpose of this study is to evaluate the linkage between stock markets in Middle Eastern countries before and during the COVID-19 pandemic by using daily and monthly data sets for the period from 2011 to 2021. Design/methodology/approach: The multivariate BEKK-GARCH model was computed to evaluate the existence of non-linear linkage among Middle Eastern stock markets. A correlation approach was used in this study to determine the type of linear connectivity between Middle Eastern stock markets. The study used monthly and daily data sets covering the years 2011 to 2021 to investigate the linkage between stock returns and the volatility spillover between the stock markets in Palestine, Jordan, Syria and Lebanon, both before and during COVID-19. To understand the types of relationships between markets before and during COVID-19, the daily data set was split into two periods. Findings: Results from the pre-COVID-19 suggest that the Syria stock market is not related to any stock market in the Middle East markets; the Palestine and Lebanon stock markets exhibit a weak relationship, but Jordan and Palestine stock markets are strongly linked. Conversely, results from COVID-19 evince a very strong bidirectional volatility spillover between Middle East stock markets. Overall, the results indicate the existence of increased linkage during the COVID-19. Research limitations/implications: The data collection on a daily and monthly basis, both before and during COVID-19, presents certain limitations for the paper. Another limitation is that the data cannot be generalized to all other Middle Eastern countries; rather, the conclusions drawn can only be applied to these four countries. This is especially true if the scholars collected most of the necessary data but were unable to obtain certain data for various reasons. Practical implications: These findings have implications for risk management, market regulation and the growth of local stock markets. Facilitating the growth of smaller, more specialized markets to improve integration with other Middle Eastern markets is one of the goals of the domestic stock market development policy. To ensure financial stability, Middle Eastern stock market linking policies should consider spillover risk and take steps to minimize it. Enhancing the range of investment opportunities accessible to shareholders and functioning as confidential risk-sharing mechanisms to facilitate improved risk management in Middle Eastern stock markets will not only significantly influence the mobilization of private capital to promote investment and local economic growth but also lay groundwork for integrated market platforms. Originality/value: This paper adds to the body of literature by demonstrating the nature of the connections between these small markets and the larger markets in the Middle East region. Information from the smaller markets provides institutional insights that enhance the body of existing research, guide the formulation of evidence-based policies and advance financial literacy in these markets. This study contributes by comparing data from different stock markets to better understand the type and strength of the link and relationship between Middle Eastern stock markets, as well as any underlying or reinforcing factors that might have contributed to the relationship and the specific types of links that these markets shared prior and during COVID-19.