Yang Cuihong, a Chinese social economist who specializes in modelling the economy, has won the 2020 TWAS-Siwei Cheng Award in Economic Sciences.
Yang is a leading expert in the field of economic modelling. Her insightful work has helped both China and its trade partners understand the dynamics of today’s international trade relationships, and has been hailed by prominent international trade organisations.
China also uses her models to study a wide range of important economic issues, including water conservation to the grain market. Her research on global value chains has been influential all over the world. “Global value chains” is a technical term referring to how different countries take on different roles in the process of producing valuable goods for the market. The Organisation for Economic Co-operation and Development (OECD), the World Trade Organization (WTO), and Asia-Pacific Economic Cooperation (APEC) are among the major international organizations that have adopted her research.
“It’s a great honour to win the award,” Yang said. “It also helps our prestige in this area. Another thing is that it’s a big encouragement to our colleagues who do very similar research. I am very happy that it acknowledges our contribution.”
She added: “For me it makes me more confident about solving such issues not only for China but also for some other developing economies, even developed economies.
When it comes to global value chains, Yang’s research focuses on a concept called “processing trade.” Processing trade describes China’s role as a major manufacturer in the global market. China has to import a large amount of basic materials – raw materials such as wood and metals, but also component parts such as chips – from other countries or regions. Then, China assembles finished products from those materials and exports them for sale on markets all over the world. The downside is that China becomes dependent on imports for those basic materials and component parts.
“Our main mission is to grasp the major economic problems not only in China but also other countries,” Yang said. “Our first research project was to assess the importance of the difference between processing and non-processing trade. The consequences were to develop a new model that captured the difference, which traditional models could not capture.”
The reason understanding processing trade is important, is that it’s an alternative to looking at gross trade statistics, which only provide a one-dimensional picture of the international economy. By understanding China’s role as an assembler of sorts in the production process, a more-detailed picture emerges of how China adds value to commercial goods.
Yang and her collaborators’ model on processing trade has produced information that is vital to China and its trade partners. For example, one result projected that China-to-U.S. trade surplus would drop 40 to 50% if measured in value added obtained by their new model. Their models also captured the benefits that Japan, Korea and China could share by diversifying their roles in economic production and trade.
Her work also supported the policy development of the Chinese government. This won her a position with China’s Ministry of Commerce where she leads a group of 30 researchers who study the effects of trade. The OECD and WTO have also recommended her approach to member economies, especially those with similar roles in international trade to China.
Modelling key resources
Yang also developed a new model for estimating the benefits and costs of water conservation in the developing world.
After a nation-wide series of floods in 1998, she explained, China needed a wide-scale water conservation project to protect its natural water resources and ensure the provision of healthy water to people. So she was hired to conduct a research project for China’s Ministry of Water Resources. Yang’s job was to determine the breadth of the needed expenditure in a long-term, resource heavy project.
“They needed to understand the cost – local and national,” Yang said. “What we did was construct an optimization model to determine the fixed investment in water conservation, for the expenditure of the central government.”
Since 2011, Yang and her colleagues have also worked to predict China’s grain output in major production areas, providing China with yearly policy reports. “We have suffered from grain shortages in past years,” she said. “We have constructed a model to make a projection of China’s grain output not only for the nation, but for major production areas such as wheat and maize.”
Their project was accurate enough that China’s Ministry of Agriculture used their reports to plan to balance grain production, consumption, imports and exports. The average error rate of the models for major production areas from 2011 to 2017 was only 1.5%.
She has also done research on energy consumption, complementing what in 2005 was the Chinese government’s plan to reduce energy consumption in the country by 25% by the end of 2010.
Sean Treacy