GLEF 4010 China and Global Economy

2020-21 Term 2
Course outline
Class time and location
Time: Wed 14:30-17:15

Instructor
LYU Dan
ELB 911
Email: [email protected]

Teaching assistant
Zhu Zhitao, Email: [email protected]

Mode of Teaching
In view of the risk of the spread of COVID-19, the course will be conducted online
through Zoom including all lectures, and presentations.
To note: face-to-face teaching and assessment may be resumed when the pandemic
stabilizes.

Course overview and learning outcomes

This course is an advanced undergraduate course targeting to students interested in
current theoretical and applied work in China and global economy.

China’s economic growth and integration with the world economy has been an important
and defining economic event of the last twenty-five years. It has been characterized by a
substantial rise in income, a large increase in international trade, persistent and large
trade surpluses, the accumulation of substantial net foreign assets, and important swings
in the real exchange rate. It has also been politically contentious with politicians,
particularly in the US, linking China’s sustained trade surpluses to its trade and
commercial policy.
This course introduces students to the most recent work in China and global economy.
The topics we will cover include: Why countries trade in a global economy and why
China has a huge increase in trade? What are the consequences for the world of trading
with China, and what are the consequences for the rapid growth of China? Why countries
run deficit and surplus? Should we concern by the huge deficit of the US/huge surplus of
China? Would depreciation always lead to more exports? Why China has been growing
very fast? Why are the saving rates so high in China?

This course introduces students to the most recent work in China and Globalization, and
we will also emphasize how the analysis connects to current events. After successfully
completing the course, students should be able to analyze the related issues.

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 GLEF 4010 China and Global Economy
2020-21 Term 2
Course outline
Prerequisites
The materials we will cover are relied on formal economic modeling. It is important that
students be familiar with economic tools that have learned in previous courses
(Intermediate Macro and Microeconomics). I will cover the key macroeconomic concepts
in class, but in a manner that brings us to international applications quickly.

Textbook
This course does not follow a textbook. For some trade topics, I recommend (but do not
require) Paul R. Krugman, Maurice Obstfeld and Marc Melitz, International Economics:
Theory and Policy, 2011(K-O-M). For some macro concepts, I recommend
Macroeconomics, by Stephen D. Williamson. Other readings and notes will be available
online.

Course requirements and grading

Your final grade will be based on
Homework 25%
Open book take-home Midterm 10%
Short presentation in class 15%
Final exam 50%

• Homework. Homework assignments are due at the beginning of the class period.
Late submissions will not be accepted. Homework must be neat and legible. You
must turn in your own work for homework assignment although you can work
together. Identical (or essentially similar) assignments will all receive a grade of
zero.
• Exams. The midterm exam will be an open book take-home exam. Final exam
will be scheduled centrally by the University. No substitute exams will be offered.
Final exam is closed book and you may not use any electronic wireless
receiver/transmitter. Anything mentioned in the notes, in the required readings or
in class is a legitimate subject for an exam question.
• Presentations. Students will form groups to prepare presentations on one of the
topics and issues that related to the courses. Each group consists of 3 students or
less. Group members work together to write a background paper and slides.
Presentation slides are required to be neat and simple, and supplement materials
can be included in the background paper and submit with the slides. The group
will select one person to present in class and group members can help with
answering questions.

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 GLEF 4010 China and Global Economy
2020-21 Term 2
Course outline
Academic honesty
The Chinese University of Hong Kong places very high importance on honesty in
academic work submitted by students and has a policy of zero tolerance on academic
dishonesty. Details on university policy and regulations on honesty in academic work,
and the disciplinary guidelines and procedures applicable to breaches of such policy and
regulations can be found at http://www.cuhk.edu.hk/policy/academichonesty/.
Tentative agenda
Week 1: China and globalization overview: a substantial rise in income, a large increase
in international trade, persistent and large trade surpluses, the accumulation of substantial
net foreign assets, and important swings in the real exchange rate
• Trade flows: Why countries trade with each other? Why China trade so much?
• Comparative advantage

Week 2: What are the effects of China’s growth on other countries?

• Common misconceptions in international economics
• Foreign competition is unfair when is based on low wage? Or trade exploits third
world country?
• Would third world growth hurt first world prosperity?

Week 3: Why China has been having a lot of trade?

• Comparative advantage and H-O Model
• Who are the winners and losers from international trade?
• References: K-O-M Chapter 5

Week 4: Who are the winners and losers from international trade?

Week 5: Inequality and globalization

• Skill premium in developed and developing countries
• Offshoring/Outsourcing and skill premium in China

Week 6: What does a trade deficit or surplus mean?

• International financial flows, current account deficits and the balance of payments

Week 7: Midterm Review

Midterm

Week 8: International borrowing and lending

• Consumption-Saving decision and credit market
• A two-period model of consumption-savings decision
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 GLEF 4010 China and Global Economy
2020-21 Term 2
Course outline

Week 9: Why China run huge surplus and the US run huge deficit?
• Current account deficits and the balance of payments
• China’s foreign asset position. Shall we concern about the large surplus?

Week 10: Why China has been growing very fast?

• Facts on world growth. Economic growth and international convergence
• Catch up growth and openness

Week 11: Growth models and growth accounting

Why are the saving rates so high in China?

Week 12 : Review

Week 13 : Students presentations

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