Lawrence J. Lau

The Chinese University of Hong Kong | CUHK · Department of Economics

The provision of more and better public goods is part of the Chinese efforts to emphasize the quality rather than the quantity of economic growth. Provision of public goods such as education, public health, elderly care, environmental preservation, protection, and restoration, basic research, infrastructure, social safety net, and alleviation of po...

The COVID-19 pandemic has been around since December 2019. In this study, the experiences of the Group-of-Seven Countries (G-7 — Canada, France, Germany, Italy, Japan, the UK and the US) and the BRICS Countries (Brazil, Russia, India, China and South Africa) are compared in terms of the numbers of confirmed cases and deaths and the infection and mo...

Objective To generate rankings of 35 countries from all continents (except Africa) on performance against COVID-19. Design International time series, cross-sectional analysis. Selected countries Countries having 5500 or more cases (collectively including 85% of the world’s cases) as of 16 April 2020 and that had reached 135 days into their pandem...

China is currently in the midst of the novel coronavirus (COVID-19) epidemic, which originated in Wuhan, the capital of the Province of Hubei, in early December 2019. The cumulative total number of confirmed coronavirus cases on the Mainland of China reached 68,500 as of midnight of 15 February, out of which 56,249 cases, or 82 percent, were in Hub...

The long-term economic growth of a nation can be attributed to the growth of measured factor inputs, such as physical capital, labor, and human capital, and to technical progress (including improvements in efficiency). The growth of the capital input and technical progress have been found to account for a major proportion of economic growth, especi...

The immediate and the real impacts of the China-U.S. trade war on the Chinese and U.S. economies are assessed. It is shown that while the impacts are negative and significant, they are smaller in both absolute terms and relative to GDP for the U.S. than for China, but manageable by both economies. However, the economic and technological competition...

As of October 2018, almost half of US imports of goods from China are subject to new US tariffs at various rates, mostly at 10% until the year-end of 2018, when the rates were scheduled to be raised to 25%. These tariff rates will prove to be prohibitive for most if not all of the US imports from China. Assuming that US imports from China will be r...

The “new era”, a term introduced by President Xi Jinping, may also be identified as the Xi era, during which China will be transformed from a moderately well‐off to a strong and wealthy nation. In the new era, the Chinese Government will deepen economic reform, widen economic opening and enhance the quality of economic growth. / Our projections sho...

China has made tremendous progress in its economic development since it began its economic reform and opened to the World in 1978. It is currently the fastest growing economy in the World—averaging 9.72% per annum over the past 36 years. What are the sources of this Chinese economic growth? Chinese economic growth since 1978 may be attributed to th...

The objective of this paper is to identify the common factors that enable East Asian economies to become developed in the post-World War II period. East Asian economies have been able to take advantage of the open global economy. They all have sound economic fundamentals – a high domestic savings rate, the existence of abundant surplus labour, and...

What are the impacts of the ongoing China-U.S. trade war on the Chinese economy? As of October 2018, almost half of U.S. imports from China are subject to new U.S. tariffs at various rates, mostly at 10 percent until the year end of 2018, when the rates will be raised to 25 percent. These tariff rates will prove to be prohibitive for most if not al...

China has made tremendous progress in its economic development since it began its economic reform and opened to the world in 1978. It is currently the fastest growing economy in the world—averaging 9.7% per annum over the past 36 years (even though it has begun to slow down, to around 7% year-on-year growth). It is, however, historically unpreceden...

The “New Era,” a term introduced by President XI Jinping, may also be identified as the XI Era, during which China will be transformed from a moderately well-off to a strong and wealthy nation. In the new era, the Chinese Government will undertake to deepen economic reform, widen economic opening, and enhance the quality of economic growth. It is a...

The “New Era,” a term introduced by President XI Jinping, may also be identified as the XI Era, during which China will be transformed from a moderately well-off to a strong and wealthy nation. In the new era, the Chinese Government will undertake to deepen economic reform, widen economic opening, and enhance the quality of economic growth. It is a...

What are the impacts of the current China-U.S. trade war on the Chinese economy? An analysis shows that while the immediate direct impacts on the Chinese economy are certainly negative, they are small in real terms, affecting less than 0.5 percent of Chinese GDP, and quite manageable. The full impact, including both direct and indirect effects of a...

Reducing the U.S.-China trade deficit through the imposition of tariffs on Chinese exports to the U.S. risks retaliatory tariffs by China. The net result may be an involuntary reduction of trade between them which lowers the aggregate welfare in both countries. It will be lose-lose. Moreover, the most likely net outcome of these new country-specifi...

Reducing the U.S.-China trade deficit through the imposition of tariffs on Chinese exports to the U.S. risks retaliatory tariffs by China. The net result may be an involuntary reduction of trade between them which lowers the aggregate welfare in both countries. It will be lose-lose. Moreover, the most likely net outcome of these new country-specifi...

The objective of this study is to estimate the extent of the benefits to U. S. consumers that may be attributable to access to imported consumer goods from China. Imported consumer goods can keep the levels and rates of increases of the prices of consumer goods in the U.S. low, thus benefitting the U.S. consumers. The focus is on the effects of imp...

The objective of this paper is to identify the common factors that enable the East Asian economies to become developed in the post-World War II period. The East Asian economies have been able to take advantage of the open global economy. They all have sound economic fundamentals --– a high domestic savings rate, the existence of abundant surplus la...

• It is in the long-term interests of both the EU and China to encourage innovation collaboration. Transnational innovation networks or ecosystems can boost innovation outcomes for both sides. • European and Chinese leaders should encourage an open mindset among policy makers, businesses, researchers and the public at large. This requires moving be...

There are both global and local challenges for Taiwan during the next several decades. Taiwan must think, plan, and act long-term. It must adopt a rational and sustainable strategy that takes into account changes in the world (for example, the rise of the Mainland), focuses on its own long-term best interests, and transcends short-term domestic pol...

The “New Era,” a term introduced by President Xi Jinping, may also be identified as the Xi Era, during which China will be transformed from a moderately well-off to a strong and wealthy nation. In the new era, the Chinese Government will undertake to deepen economic reform, widen economic opening, and enhance the quality of economic growth. It is a...

What are the impacts of the current China-U.S. trade war on the Chinese economy? An analysis shows that while the immediate direct impacts on the Chinese economy are certainly negative, they are small in real terms, affecting less than 0.5 percent of Chinese GDP, and quite manageable. The full impact, including both direct and indirect effects, may...

The Chinese economy is in the midst of a process of transition to a ‘New Normal’, with slower growth of real GDP, international trade and investment. China has a very high domestic saving rate and hence significant excess savings. Its outward direct investment surpassed its inward foreign direct investment (FDI) in 2014. Reasons for Chinese outward...

Significant differences exist between official Chinese and U.S. trade statistics on the magnitudes of the China-U.S. trade balance in goods as well as in goods and services. These differences arise from a number of factors. First, the convention that exports of goods are measured on an FOB (free on board) or FAS (free alongside ship) basis and impo...

避免系统性的金融风险，跟一个金融机构怎么避免它所面对的风险，是两个不同的概念，最重要的考虑是系统性金融风险里包含着的“溢出效应”（spillover effect）。本文讨论中国现时面对的几种金融风险：资产价格泡沫的风险，不良贷款的风险，金融衍生产品的风险，以及汇率过度波动性的风险。

The Chinese economy is in the midst of a process of transition to a ‘New Normal’, with slower growth of real GDP, international trade and investment. China has a very high domestic saving rate and hence significant excess savings. Its outward direct investment surpassed its inward foreign direct investment (FDI) in 2014. Reasons for Chinese outward...

The real GDP of Hong Kong, a city with no natural resources, grew more than fourfold, from US$12.6 billion in 1961 to US$63.7 billion in 1980 (in 2015 prices), within a short period of just twenty years, at an average annual rate of growth of 8.5 percent, to the great surprise of the world at the time. Hong Kong achieved developed economy status in...

The Renminbi surprised the World markets by its unexpected devaluations first in August 2015 and then in January 2016. Will the Renminbi devalue again? In this paper, the questions of whether the Renminbi is over-valued, whether the level of Chinese official foreign exchange reserves is adequate, and whether a devaluation is in the best interests o...

Chinese Abstract: 「對沖」是一個具有爭議性的問題。遣散費、長期服務金和強制性公積金計劃，因為設立在不同的時段，難免有些重叠性。它們都含有退休生活保障的元素。除了退休保障功能之外，遣散費實質上是一種失業保險，而長期服務金則是向在職期間因傷殘（disability）而無法繼續工作的僱員提供的補助。假如能引進失業保險和傷殘保險，再加上強制性公積金的存在，遣散費及長期服務金的原來保護僱員的目的，都將能完全滿足。因此，沒有需要讓遣散費或長期服務金繼續存在。如果這兩項計劃都不再存在的話，「對沖」的問題也就自然完全消失了。English Abstract: The question of “offsetting” is controversial. Because severance p...

China has made tremendous progress in its economic development since it began its economic reform and opened to the World in 1978. It is currently the fastest growing economy in the World—averaging 9.72% per annum over the past 36 years. What are the sources of this Chinese economic growth? Chinese economic growth since 1978 may be attributed to th...

One important indicator of national economic strength, in addition to real GDP, is its innovative capacity. Sustained investment in research and development (R&D) is essential for the occurrence of innovation in an economy. The stock of real R&D capital, defined as the cumulative past real expenditure on R&D, less depreciation of ten percent per ye...

In the aftermath of the failure of political reform, Hong Kong needs to try to mitigate the negative long-term economic consequences of the failure and launch new initiatives that will ensure its long-term economic prosperity. Hong Kong was at one time indispensable to the Mainland economy, but this is no longer the case. Hong Kong must try to laun...

This paper examines the evolution of income inequality over the past half a century and considers whether economic globalisation has been responsible for the rising degree of income inequality. It is argued that the minimisation of the degree of income inequality cannot and should not be the sole objective of the economic policy makers and that the...

In this paper, various new ideas for the enhancement of the world trade and investment systems are proposed. The first idea is a proposal for feasible transitional compensatory taxes which can enable the compensation of losers by the winners caused by the expansion of trade in a given country in a two-good world. These feasible transitional compens...

This paper considers the costs and benefits, if any, of short-term cross-border capital flows. It argues that short-term capital flows may be regulated with the introduction of a Tobin tax that applies to both inbound and outbound capital flows but not flows associated with current account transactions. It is shown that with such a Tobin tax, the “...

China has made tremendous progress in its economic development since it began its economic reform and opened to the World in 1978. It is currently the fastest growing economy in the World — averaging 9.72% per annum over the past 36 years. What are the sources of this Chinese economic growth? Chinese economic growth since 1978 may be attributed to...

One important indicator of national economic strength, in addition to real GDP, is its innovative capacity. Sustained investment in research and development (R&D) is essential for the occurrence of innovation in an economy. The stock of real R&D capital, defined as the cumulative past real expenditure on R&D, less depreciation of ten percent per ye...

This paper examines the evolution of income inequality over the past half a century and considers whether economic globalisation has been responsible for the rising degree of income inequality. It is argued that the minimisation of the degree of income inequality cannot and should not be the sole objective of the economic policy makers and that the...

This paper considers the costs and benefits, if any, of short-term cross-border capital flows. It argues that short-term capital flows may be regulated with the introduction of a Tobin tax that applies to both inbound and outbound capital flows but not flows associated with current account transactions. It is shown that with such a Tobin tax, the “...

Chinese Abstract: 中國自從1978年改革開放之後，它的經濟以年平均9.72%的速度增長，是現時世界上增長最快的國家。中國經濟增長的動力，主要是來自於有形資本的累積與勞動力的投入，再加上規模報酬的貢獻。中國的儲蓄率是世界最高的，另外它還有幾乎無限的剩餘勞動力。中國從中央計劃經濟過渡到社會主義市場經濟，與前蘇聯和東歐的原社會主義國家比較，是非常平穩與順利的。中國能夠平穩過渡，是因爲中國實行“沒有輸家的改革”。往後中國要增加縂需求，主要是有三大方向：第一是公共設施的投資；第二是公共消費，例如環保，教育，衛生，醫療，養老，節能減排等等；第三是家庭消費，但是中國現在家庭可支配收入佔到整體GDP的比重還是低於50%，所以中國暫時還不能單單倚賴家庭消費來帶動GDP。中國經濟增長在接下來幾...

The existence of economic slack or inefficiency is a common phenomenon of economies that operate under mandatory central planning. It implies that the economy operates in the interior of its set of production possibilities and not on its frontier. It also implies that output can be increased without any increase in the inputs if the constraints whi...

In the aftermath of the failure of political reform, Hong Kong needs to try to mitigate the negative long-term economic consequences of the failure and launch new initiatives that will ensure its long-term economic prosperity. Hong Kong was at one time indispensable to the Mainland economy, but this is no longer the case. Hong Kong must try to laun...

The late Mr. Lee Kuan Yew was the founding father of the nation of Singapore. He was also a philosopher king in the mold of Plato’s Republic, a grand strategist, an incorruptible czar, and the ultimate pragmatist. In every century, one can find only a handful of people like him — who had a vision for his country and was also able to achieve it, lea...

China has made tremendous progress in its economic development since it began its economic reform and opened to the World in 1978. It is currently the fastest growing economy in the World—averaging 9.7% per annum over the past 37 years (even though it has begun to slow down, to around 7% year-on-year growth). It is, however, historically unpreceden...

We develop an input-output methodology to estimate how Chinese exports affect the country’s total domestic value added (DVA) and employment for 1995 and 2002. Total DVA generated by exports is obtained by subtracting all direct and indirect imported intermediate goods from the gross value of exports, and total employment is obtained by adding all d...

Chinese Abstract: 王道文化是泛指儒家認為君主統治應該施行仁政的思想，而仁政意則是以道德與仁義為基礎，來貫徹治國之理念。因此當國家在執政者的帶領之下，能夠體諒人民，以人民為本，使人民溫飽之餘，更思考如何教化人民，改變人民的價值觀，使人民不再單以自身利益為優先考量，而考量整體的長遠利益，這乃是整個儒家經濟思想的精神所在。可是在王道文化之下，從生產到消費，都有外部性，單靠市場機制，就不能保證整體經濟能夠達到最高的效率。因此市場機制與政府監管，如同看得見的手與看不見的手，必須手攜手合作才能達到最高的經濟效益。要推行王道文化，需要從改變整個社會的基本價值觀做起。 English Abstract: The “Wangdao” culture generally refers to...

This paper assesses the effects of education and health on economic growth by partitioning the reasons for cross-country variation in income levels into three components: (i) persistent factors influencing the level of output; (ii) time-varying factors influencing the level of output (e.g., levels of health and education); and (iii) persistent fact...

In this paper we construct an extended non-competitive input-occupancy-output model that captures China's processing trade and also develop a methodology to estimate the domestic value-added and employment generated by each unit of total exports, of exports by sector, and of exports by commodity, respectively. We also prove mathematically that the...

China and East Asia have survived the global financial crisis of 2007-9 reasonably unscathed. China has achieved a real rate of growth of 9.1 percent in 2009 and 11.1 percent year-over-year in the first half of 2010. Other economies in East Asia, such as Singapore, South Korea and Taiwan, have also begun to recover. India has also performed well. H...

The objective of this study is twofold: first: to develop a methodological framework for the estimation of the increases in domestic value-added (or equivalently, GDP) and employment in a country in response to increases in its exports, in the aggregate as well as disaggregated by commodity and by destination; and second, to apply this empirical me...

What are the principal reasons for the highly successful Chinese economic reform that began in 1978? One may say that they are the strong Chinese economic fundamentals-surplus labor, abundant savings, huge domestic market, etc. But the strong fundamentals have always been there, at least since the 1950s. Why did the Chinese economy not take off ear...

This is an English version of an article originally published in Chinese in Social Sciences in China (Zhongguo Shehui Kexue), 2007, no. 5, pp. 91-103. In this article we construct an extended non-competitive input-occupancy-output model that captures China’s processing trade and also develop a methodology to estimate the domestic value-added and em...

Large differences exist between the official United States and Chinese data on trade balances between the two countries. In this paper, four adjustments are made to the export and import data of the two governments: (i) freight along side (f.a.s.)-free on board (f.o.b.) and cost, insurance and freight (c.i.f.)-f.o.b. conversions; (ii) re-exports th...

The U.S.-China bilateral trade balance in 2005 in terms of gross values of exports has been estimated by the U.S. Government to be US$201.6 billion, by the Chinese Government to be US$114.2 billion, and by Fung, Lau and Xiong (2006) to be US$172.3 billion in China’s favor. However, the U.S.-China bilateral trade balance in 2005 in terms of total (d...

This paper investigates the effects of health indicators such as adult survival rates (ASR) on GDP growth rates at 5-year intervals in several countries. Panel data were analyzed on GDP series based on purchasing power adjustments and on exchange rates. First, we developed a framework for modeling the inter-relationships between GDP growth rates an...

This paper is the first to apply a nested logit model to measure the probabilities of speculative attacks and the probabilities of successful defences by the central banks. This model allows us to predict the probability not only of speculative attacks but also of successful defences, given attacks. It also provides a framework for analysing the de...

While human capital is a clear determinant of economic growth, only recently has health's role in this process become a focus of serious academic inquiry. By marrying the separate fields of health economics and growth theory, this groundbreaking book explores the explicit mechanisms by which a population's individual and collective health status af...

The objective of this study is twofold: first: to develop a methodological framework for the estimation of the increases in domestic value-added (or equivalently, GDP) and employment in a country in response to increases in its exports, in the aggregate as well as disaggregated by commodity and by destination; and second, to apply this empirical me...

Technical progress – the generation or adoption of new technologies – underpins long term economic growth yet the empirical growth literature has devoted surprisingly little attention to two key questions: How much of the (huge) cross-country variation in growth rates results from differences in rates of technical progress? And, second, what factor...

In a series of papers (, and ), we have argued that neither the U.S. nor the Chinese bilateral trade balance data are accurate. In this paper, we utilize the most up-to-date information and provide more accurate estimates. The adjustments include f.a.s.–f.o.b. and f.o.b.–c.i.f. conversions, re-exports via Hong Kong, re-export markups of Hong Kong m...

Abstract Kim and Lau (1994a, 1994a) found that the postwar economic growth of the East Asian newly industrialized economies (NIEs)—Hong Kong, South Korea, Singapore and Taiwan--was mostly the result of the ,growth ,of tangible ,inputs--tangible capital ,and labor--and not technical progress or equivalently the increase in total factor productivity....

This paper investigates the effects of health indicators such as adult survival rates (ASR) on GDP growth rates at 5-year intervals in several countries. Panel data were analyzed on GDP series based on purchasing power adjustments and on exchange rates. First, we developed a framework for modeling the inter-relationships between GDP growth rates an...

This paper investigates the effects of health indicators such as adult survival rates (ASR) on GDP growth rates at 5-year intervals in several countries. Panel data were analyzed on GDP series based on purchasing power adjustments and on exchange rates. First, we developed a framework for modeling the inter-relationships between GDP growth rates an...

Decentralization facilitates more efficient use of local information but also can lead to agency problems and commitment failures. This paper develops simple models of a two-tier hierarchy (the center vs. the local) to study the optimal division of lending authority between central and local bank managers. Using a unique data set collected by the a...

The Economic Future of Taiwan: A View from Outside Lawrence J. Lau Abstract The current state pf the economy of Taiwan is reviewed. The sources of past economic growth are distinguished and measured. The role of economic policies is discussed. The transition from tangible to intangible capital-input-based economic growth is described. New global...

The United States and China have vastly different official estimates of the bilateral trade imbalance. The U.S. figures show that the United States had a merchandise trade deficit of US$68.7 billion vis-à-vis China in 1999 whereas the Chinese figures show that China had a merchandise trade surplus of only US$22.4 billion vis-à-vis the United States...

Using revised, updated, and consistent annual post-World War II data from the G-7 countries developed by us, we econometrically estimate and test alternative explanations of the structure of economic growth in a model with three inputs tangible capital, labor, and human capital which permits the identification of the magnitudes of and biases in bot...

The paper examines the adequacy of a central bank's currency reserves for preventing a currency crisis, an critical issue in an era of free capital flow. After modeling the moves of foreign creditors and currency speculators, we identify possible equilibria of the foreign exchange market. We then define an index of the adequacy of the currency rese...

This paper investigates whether Hong Kong manufacturers have been upgrading technology level in the midst of rapid manufacturing relocation. In a translog total factor productivity framework which expresses the growth of manufacturing output in terms of the growth of material inputs, labour, factory space, utilities, and capital, it is found that m...

In this paper we provide direct price-based empirical tests of the Brander-Krugman basic reciprocal dumping model as well as a test for the N-firm version of the model as discussed in Helpman and Krugman (1985). We first explicitly derive testable hypotheses from the basic model concerning how international price differences are generated. We then...

The role of government in East Asian economic development has been a contentious issue. Two competing views have shaped enquiries into the source of the rapid growth of the high-performing Asian economies and attempts to derive a general lesson for other developing economies: the market-friendly view, according to which government intervenes little...

We develop a simple model to analyse the ‘dual-track’ approach to transition to a market economy as a mechanism for implementing efficient Pareto-improving economic reform, that is, reform achieving efficiency without creating losers. The approach, based on the continued enforcement of the existing plan while simultaneously liberalizing the market,...

Jiangsu and Zhejiang are of two of China's most prosperous and dynamic provinces. This paper first presents a factual account of two empirical phenomena: 1) FDI has played a more substantial role in the economic development of Jiangsu than in Zhejiang, and 2) ownership biases against domestic private firms in Jiangsu were more substantial than in Z...

Pareto-improving economic reforms that also simultaneously achieve efficiency can be implemented through a strategy of `dual-track' liberalization. Its success requires the feasibility of the original plan and its continued enforcement by the state. The Chinese experience demonstrates that such a strategy works.

There are huge discrepancies between the official Chinese and U.S. estimates of the bilateral trade balance. The discrepancies are caused by different treatments accorded to re-exports through Hong Kong, re-export markups, and trade in services. Deficit-shifting between China, on the one hand, and Hong Kong and Taiwan, on the other, due to direct i...

This paper provides an up-to-date overview of China's economic relations with its major trade and investment partners, including Hong Kong and Taiwan, the United States, Japan, the European Union and ASEAN. We also discuss other important international issues such as China and the WTO and the status of China's currency and foreign reserves. In 1995...

Assessing the price evolution of houses on the basis of average sales prices, as is current practice in Belgium, might be misleading due to changing characteristics of the houses sold in the periods observed. A hedonic index which takes into account changes in characteristics is more appropriate. We use the budget surveys of the Belgian Statistical...

Exact aggregation of a system of individual expenditure functions with a single, individually variable price is analyzed. It is shown, under summability and homogeneity, that the individual and aggregate expenditure functions must take one of two specific functional forms.