{"title":"A Structural Measurement of the Valuation Effect of China's External Assets: Method and Application","authors":"Guowei Cai, Xiaowei Chen, Xun Wang","doi":"10.1111/cwe.12527","DOIUrl":null,"url":null,"abstract":"<p>Existing research on the measurement of the valuation effect mainly follows the residual method proposed by Lane and Milesi-Ferretti (2001). This cannot be used to perform structural decomposition. We propose an aggregation approach rather than the residual method to measure structurally the investment flow and valuation effect of China's external assets. The results indicate that the valuation effect of China's external assets has been highly volatile and it was negative during the pandemic period. The structural decomposition shows that portfolio investment and direct investment made the main contributions to the valuation effect. The impact of exchange rates on the valuation effect has generally been higher than that of asset price in terms of direct investment and total external assets but the opposite has been true for portfolio investment. China's outward investments are currently more inclined to Asian countries and a few European countries but inflows to China still mainly come from developed countries.</p>","PeriodicalId":51603,"journal":{"name":"China & World Economy","volume":"32 2","pages":"97-124"},"PeriodicalIF":2.9000,"publicationDate":"2024-03-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"China & World Economy","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/cwe.12527","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Existing research on the measurement of the valuation effect mainly follows the residual method proposed by Lane and Milesi-Ferretti (2001). This cannot be used to perform structural decomposition. We propose an aggregation approach rather than the residual method to measure structurally the investment flow and valuation effect of China's external assets. The results indicate that the valuation effect of China's external assets has been highly volatile and it was negative during the pandemic period. The structural decomposition shows that portfolio investment and direct investment made the main contributions to the valuation effect. The impact of exchange rates on the valuation effect has generally been higher than that of asset price in terms of direct investment and total external assets but the opposite has been true for portfolio investment. China's outward investments are currently more inclined to Asian countries and a few European countries but inflows to China still mainly come from developed countries.
期刊介绍:
The bi-monthly China & World Economy was launched in 1993 by the Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS). It is the only English-language journal in China devoted to the topic of the Chinese economy. The journal aims to provide foreign readers with an objective, impartial, analytical and up-to-date account of the problems faced and progress made by China in its interaction with the world economy. Among its contributors are many distinguished Chinese economists from both academic and government circles. As such, it has become a unique window on China and is essential reading for all those concerned with China"s development.