Guest Editors' Words

• Published date: 01 November 2023
• Author: Haoyuan Ding,Shu Lin,Xiaohu Wang,Zhiwei Xu
• Date: 01 November 2023
• DOI: http://doi.org/10.1111/cwe.12507

China & World Economy / 1–3, Vol. 31, No. 6, 20231

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Guest Editors’ Words

Haoyuan Ding, Shu Lin, Xiaohu Wang, Zhiwei Xu*1

This special issue focuses on the challenges facing the Chinese economy and the

global economy in a changing environment. These challenges include trade confl icts,

financial instability, geopolitical risks of international investment, monetary policy

spillovers, and innovations. The general theme is that policymakers should adjust to this

new environment to better cope with the risks and challenges. Moreover, international

cooperation has become particularly important in this new era. This special issue

consists of eight papers addressing these challenges and the policy choices.

In a paper on the displacement effect of Chinese exports, Elleby et al. (2023)

investigate how the growth of China’s exports to the East African Community (EAC)

countries aff ects their exports from the European Union (EU). Using a gravity model

approach that accounts for “multilateral resistance,” they fi nd no evidence that Chinese

exports have displaced exports from other countries, including those from the EU. Their

findings suggest that competition in the EAC market has not been a zero-sum game

among diff erent exporting countries.

In a paper on the macroeconomic consequences of foreign asset-freezing sanctions,

Song and Wang (2023) investigate the repercussions of these sanctions on an open

economy using a monetary dynamic general equilibrium model with a cash-in-

advance constraint. The paper fi nds that foreign asset-freezing sanctions may lead to a

sharp recession and currency crisis. To quantify the impact, the authors calibrate their

quantitative model to capture the unique structures of the Russian economy. Their

counterfactual exercises suggest that a higher elasticity of import substitution and a

lower elasticity of export substitution could alleviate the impact of foreign sanctions.

At the same time, a more aggressive monetary policy may have positive but limited

stabilization effects. The policy implication derived from the analysis is that the

monetary authority must navigate a trade-off between stabilizing output and managing

infl ation resulting from the cash-in-advance channel.

In a paper studying institutional investors and fi nancial stability, Chen and Nie (2023)

employ an event study approach to analyze the stock market responses to the issuance

*Haoyuan Ding, Professor, College of Business, Shanghai University of Finance and Economics, China. Email:

ding.haoyuan@mail.shufe.edu.cn; Shu Lin, Professor, Department of Economics, The Chinese University of

Hong Kong, China. Email: shulin@cuhk.edu.hk; Xiaohu Wang, Associate Professor, School of Economics,

Fudan University, China. Email: wang_xh@fudan.edu.cn; Zhiwei Xu, Professor, School of Economics,

Fudan University, China. Email: xuzhiwei09@gmail.com.