Essays on China's Integration into the Global Economy and Financial Markets

No Thumbnail Available
Journal Title
Journal ISSN
Volume Title
School of Business | Doctoral thesis (article-based)
Degree programme
14 + app. 124
Aalto University publication series DOCTORAL THESES, 66/2023
This PhD thesis consists of three essays, studying the Chinese economy from the viewpoints of development, financial, and international economics. The first essay focuses on China's onshore bond market and the drivers of non-resident net portfolio flows into Chinese debt securities. It studies China's bond market development by reviewing the main characteristics of the onshore market and important liberalization steps. It also describes recent trends in debt portfolio investment flows into China by non-resident investors. A theoretical model for push and pull factors is derived, functioning as a starting point for the empirical analysis on the drivers of bond flows into China. Both static and time-varying models are estimated to help explain the importance of various push and pull factors in the Chinese bond market context. The findings point to China's continued bond market deepening and integration with the rest of the world. The second essay studies countries' economic dependence on China. As China will continue to integrate more deeply into the global economy and financial markets over the coming years, measuring and identifying other countries' economic exposure to developments in China is becoming increasingly relevant. The essay builds a tool to measure and compare countries' exposure to the Chinese economy through trade channels, using principal component analysis. The resultant China Trade Exposure Index ranks countries based on their economic dependence on trade with China. The essay further shows that the China Exposure Index is significant in explaining countries' cyclical economic growth co-movement with China, with a higher ranking implying a stronger real GDP growth correlation. The third essay studies the characteristics of the bilateral economic relationship between China and Latin America since the beginning of the millennium, covering such aspects as trade of goods, direct investment, and lending. The relationship is uneven, both in terms of its economic importance and the composition of trade and investment, with China seemingly in a more dominant position. The essay analyses China's and Latin American countries' trade intensities, complementarities, comparative advantages, and competition dynamics, revealing that the Latin American economies cannot be considered alike. The countries' existing and potential ties with China are varied due to the nations' individual characteristics. Therefore, a collective regional approach to doing business with China may not be the optimal way forward, yet there are opportunities to strengthen the individual bilateral relationships further in a way that would result in mutual benefits.
The author has not given permission for Aaltodoc -publishing.
Supervising professor
Haaparanta, Pertti, Prof. Emeritus, Aalto University, Department of Economics, Finland
Thesis advisor
Korhonen, Iikka, Dr., The Bank of Finland Institute for Emerging Economies, Finland
economics, financial markets, China
Other note
  • [Publication 1]: Tuuli McCully: Drivers of Portfolio Flows into Chinese Debt Securities Amidst China’s Bond Market Development. Unpublished manuscript
  • [Publication 2]: Tuuli McCully: China Trade Exposure Index. Unpublished manuscript
  • [Publication 3]: Tuuli McCully: China-Latin America Economic Relationship. Unpublished manuscript