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Since 2001, foreign investors have been permitted to acquire minority ownership stakes in China's banks. This paper assesses whether there is any evidence of a cost efficiency payoff in those banks that have taken on foreign investment. Data envelopment analysis is first used to generate measures of cost efficiency for China's banks over the period 2001-2006. A second stage regression is then performed to determine whether foreign investment has an impact on cost efficiency. The results indicate a positive relationship, although one that is not statistically significant. Policy implications are discussed. Copyright (c) 2008 The Authors.

Economic theory posits numerous channels through which FDI might create positive spillovers for domestic firms. However, the results of empirical studies that have sought to document these spillovers have been mixed. One explanation for this variation is that the capacity of domestic firms to absorb spillovers might vary. In the present paper, we explore these issues in the case of China. Aside from being one of the world's leading hosts of foreign direct investment, China makes for an interesting case study because its provinces vary greatly with respect to those factors most commonly held to influence absorptive capacity, such as the initial level of technology in domestic firms. This paper begins by empirically establishing that the spillovers from foreign direct investment do indeed vary across provinces. Threshold values for various factors that influence absorptive capacity factors are then estimated and it is found that conditions in many provinces presently fall short of these values. This provides an obvious focus of attention for China's policy-makers. Copyright (c) 2009 The Authors Journal compilation (c) 2009 Institute of World Economics and Politics, Chinese Academy of Social Sciences.

We characterize the cyclical properties of fiscal policy in China along two related dimensions. First, we estimate the sign and size of the fiscal policy multiplier. Second, we assess whether fiscal policy is conducted pro-or counter-cyclically. To account for the challenges posed by China's vast geography, we use data at the provincial level. We find that (i) fiscal policy generally has 'Keynesian' effects, and (ii) fiscal policy is mostly conducted pro-cyclically. This means that fiscal policy is more an element of destabilization than a tool for stabilization.JEL classification: E32, E62, R12.