nep-cna New Economics Papers
on China
Issue of 2006‒04‒22
sixteen papers chosen by
Zheng Fang
Fudan University

  1. China's Economic Development and the Prospect for China-Korea Economic Relation By Justin Yifu Lin
  2. China and the World Bank - How a Partnership Was Built By Pieter Bottelier
  3. China’s Emergence and the Reorganisation of Trade Flows in Asia By Guillaume Gaulier; Francoise Lemoine; Deniz Unal-Kesenci
  4. Who Pays China’s Bank Restructuring Bill? By Guonan Ma
  5. Do Population Control Policies Induce More Human Capital Investment? Twins, Birthweight, and China's 'One Child' Policy By Mark R. Rosenzweig; Junsen Zhang
  6. Rapid Rise of China's Dairy Sector: Factors Behind the Growth in Demand and Supply, The By Frank H. Fuller; Jikun Huang; Hengyun Ma; Scott Rozelle
  7. Dairy Markets in Asia: An Overview of Recent Findings and Implications By John C. Beghin
  8. Case Study of China's Commercial Pork Value Chain, A By Jacinto F. Fabiosa; Dinghuan Hu; Cheng Fang
  9. Impact of Ownership Structure on the Performance of China's Feed Mill Sector, The By Jacinto F. Fabiosa
  10. Development Strategies and Regional Income Disparities in China By Justin Yifu Lin; Peilin Liu
  11. US, China and the economics of climate negotiations By Carlo Carraro; Barbara Buchner
  12. Chronic and Transient Poverty: Measurement and Estimation, with Evidence from China By Jean-Yves Duclos; Abdelkrim Araar; John Giles
  13. Grassroots Democracy and Local Governance: Evidence from Rural China By Shuna Wang; Yang Yao
  14. Outlook for Asian Dairy Markets: The Role of Demographics, Income, and Prices, The By Fengxia Dong
  15. Capital Budgetting Practices: A comparative Study of the Netherlands and China By Hermes, N.; Smid, P.; Yao, L.
  16. The Chinese Yuan after the Chinese Exchange Rate System Reform By Eiji Ogawa; Michiru Sakane

  1. By: Justin Yifu Lin (China Center for Economic Research, Peking University)
    Abstract: In this paper I will breifly review the economic performance of China's economic reform starting in 1978, followed by my personal views on the experiences of Korea's economic development and lessons for China's economic reform. In the third section I will explore the prospect of China's future development. I will then review the China-Korea economic relationship since the establishment of diplomatic relations and discuss its future propect. Finally, I would like to share with you my personal feelings for the centennial anniversary of Korea University and the friendship between our two nations.
    Keywords: China, Korea, development, economic reform,
    JEL: O11 O53 O19
    Date: 2005–07
  2. By: Pieter Bottelier (World Bank)
    Abstract: The World Bank played an important role in China's economic transformation since the late 1970s. China used the World Bank well and the Bank was responsive to China's needs. The Bank did not recommend early or comprehensive market liberalization or learning-by-doing - approach to economic reform. It pushed at the margin for critical institutional and policy reforms, presenting perspective based on international experience, while providing technical assisstance in numerous areas, often through Bank-supported projects. As the Chinese gained expertise, confidence and access to international capital markets, the role of the Bank in China inevitably shrank. China now uses the Bank mainly for selective technical, institutional and conceptual innovations for development. China and the World Bank both gained from their interaction.
    Keywords: World Bank, China, innovations, institutional reform, market liberalization , learning-by-doing
    JEL: O19 O11
    Date: 2006–03
  3. By: Guillaume Gaulier; Francoise Lemoine; Deniz Unal-Kesenci
    Abstract: The emergence of China has intensified the international segmentation of production processes within Asia, but has not created an autonomous engine for the region’s trade, as Asia still depends on outside markets for its final goods exports. The reorganisation of production has weakened the position of the advanced economies (Japan and the US) in Asia’s trade, but up to now has not severely affected the position of the emerging Asian economies (Malaysia, Philippines, Thailand). However, the surge of China’s exports and the decline of its export prices, suggest the risk of a downward spiral of cost-competition, while the deterioration of China’s terms of trade raises the question of the sustainability of its recent growth strategy.
    Keywords: China; Asia; trade; regional integration; specialisation
    JEL: F14 F15 F2
    Date: 2006–03
  4. By: Guonan Ma
    Abstract: This paper addresses the questions related to the cost of China’s bank restructuring and how it has been financed. We first propose a framework for recognising losses. Then, we examine the recent major moves by the Chinese government to repair the country’s bank balance sheets. Finally, we explore the implications of the Chinese ways of funding the bank restructuring. We find that the Chinese government has been decisive in confronting the costly task of bank restructuring. Looking through the elaborate funding arrangements adopted so far, the Chinese taxpayers have paid most of the bill.
    Keywords: Bank restructuring; recapitalisation; non-performing loans; China
    JEL: G21 G28 O53 P34
    Date: 2006–02
  5. By: Mark R. Rosenzweig (Yale University); Junsen Zhang (Chinese University of Hong Kong and IZA Bonn)
    Abstract: In this paper we use a new data set describing households with and without twin children in China to quantify the trade-off between the quality and quantity of children using the incidence of twins that for the first time takes into account effects associated with the lower birthweight and closer-spacing of twins compared to singleton births. We show that examining the effects of twinning by birth order, net of the effects stemming from the birthweight deficit of twins, can provide upper and lower bounds on the trade-off between family size and average child quality. Our estimates indicate that, at least in one area of China, an extra child at parity one or at parity two, net of birthweight effects, significantly decreases the schooling progress, the expected college enrollment, grades in school and the assessed health of all children in the family. We also show that estimates of the effects of twinning at higher parities on the outcomes of older children in prior studies do not identify family size effects but are confounded by inter-child allocation effects because of the birthweight deficit of twins. Despite the evident significant trade-off between number of children and child quality in China, however, the findings suggest that the contribution of the one-child policy in China to the development of its human capital was modest.
    Keywords: family size, birthweight, twins, schooling, China
    JEL: J13 I12 I21
    Date: 2006–04
  6. By: Frank H. Fuller (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Jikun Huang; Hengyun Ma; Scott Rozelle
    Abstract: With the rapid growth in China's dairy industry, a number of recent papers have addressed either the supply or the demand trends for dairy products in China. None, however, presents a systematic explanation for the recent growth in both the supply and demand for dairy products. The goal of this paper is to sketch a more comprehensive picture of China's dairy sector and to assess the nature of the sector's development in the coming decades. Drawing upon several empirical studies, we examine the trends in dairy product consumption to create a composite picture of the factors underlying the recent growth. We also empirically investigate the sources of production gains in milk supply and assess the relative importance of expanding herd size, changes in the nature of production, technological change, and improvements in efficiency to the overall growth of milk production.
    Keywords: China, consumption, dairy, milk supply, stochastic production frontier, total factor productivity.
    Date: 2005–05
  7. By: John C. Beghin (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: This paper is an overview of important findings regarding the ongoing evolution of Asian dairy markets based on a series of new economic investigations. These investigations provide systematic empirical foundations for assessing Asian dairy markets with their new consumption patterns, changing industries, and trade prospects under different domestic and trade policy regimes. The findings are drawn from four case studies (China, India, Japan, and Korea), as well as a prospective analysis of future regional patterns of consumption and a policy analysis of trade liberalization of Asian dairy markets. The overview distills the findings of these new investigations and integrates them in the earlier economic literature; it draws policy implications and identifies lessons for countries outside of Asia, especially for emerging exporters in Latin America.
    Keywords: Asia, China, dairy, India, Japan, Korea, liberalization, trade integration.
    Date: 2005–09
  8. By: Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Dinghuan Hu; Cheng Fang
    Abstract: In China, with the cost of improved technology rising, surplus labor shrinking, and demand for food quality and safety increasing, it will be just a matter of time before the country's hog production sector will be commercialized like that of developed countries. However, even if China's cost of production converges to international levels, as shown in this case study, China may continue to retain some competitive advantage because of the labor-intensive nature of the marketing services involved in hog processing and meat distribution. The supply of variety meats offers the most promising market opportunity for foreign suppliers in China. The market may open further if the tariff rate for variety meats is reduced from 20% and harmonized with the pork muscle meat rate of 12%, and if the value-added tax of 13% is applied equally to both imported and domestic products. The fast-growing Western-style family restaurant and higher-end dining sector is another market opportunity for high-quality imported pork.
    Keywords: commercial, cost structure, imports, pork value chain.
    Date: 2005–08
  9. By: Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: In the decade of the 1990s, China's feed sector became increasingly privatized, more feed mills opened, and the scale of operation expanded. Capacity utilization remained low and multi-ministerial supervision was still prevalent, but the feed mill sector showed a positive performance overall, posting a growth rate of 11 percent per year. Profit margin over sales was within allowable rates set by the government of China at 3 to 5 percent. Financial efficiency improved, with a 20 percent quicker turnover of working capital. Average technical efficiency was 0.805, as more efficient feed mills increasingly gained production shares. This study finds evidence that the increasing privatization explains the improved performance of the commercial feed mill sector. The drivers that shaped the feed mill sector in the 1990s have changed with China's accession to the World Trade Organization. With the new policy regime in place, the study foresees that, assuming an adequate supply of soy meal and an excess capacity in the feed mill sector, it is likely that China will allow corn imports up to the tariff rate quota (TRQ) of 7.2 mmt since the in-quota rate is very low at 1 percent. However, when the TRQ is exceeded, the import duty jumps to a prohibitive out-quota rate of 65 percent. With an import duty for meat of only 10 to 12 percent, China would have a strong incentive to import meat products directly rather than bringing in expensive corn to produce meat domestically. This would be further reinforced if structural transformation in the swine sector would narrow the cost differential between domestic and imported pork.
    Keywords: China, feed mill sector, privatization, trade.
    Date: 2005–04
  10. By: Justin Yifu Lin (China Center for Economic Research, Peking University); Peilin Liu (Development Research Center of the State Council)
    Abstract: In this paper we propose that a flawed development strategy is responsible for the increasing disparities in economic development among provinces in China. Since the founding of the PRC, the government has pushed a "leap forward" strategy emphasizing the development of capital-intensive heavy industries. In most provinces, however, the priority industries under this strategy were inconsistent with the comparitive advantage determined by the factor endowments in those provinces. Many enterprises in the priority industries were not viable in the competitive market and required interventions in the merkets by the government to support and protect them. Consequently, this leap-forward strategy retarded the functions of market, impeded capital accumulation and hindered technology and productivity progress in the provinces. The provinces in the central and western provinces continue to follow the leap-forward strategy and have poor growth performance Therefore, it is imperitive to replace tha comparitive advantage-defying leap-forward strategy with a comparative advantage-following strategy and restructure the existing industries in each province according to the princple of comparitive advantage. This latter strategy would enhance coordinated development among regions and provinces and, in effect, work more effectively to create sustainable national economic development. The regional effects of economic strategies in China are the subject of this paper.
    Keywords: economic strategies, China, regional effects, development, PRC, leap-forward approach, capital-intensive, heavy industries, comparitive advantage
    JEL: R11 R12 R58 O12
    Date: 2005–11
  11. By: Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Barbara Buchner (Fondazione Eni Enrico Mattei)
    Abstract: Despite the entry into force of the Kyoto Protocol, the US decision not to comply with its Kyoto commitments seems to drastically undermine the effectiveness of the Protocol in controlling GHG emissions. Therefore, it is important to explore whether there are economic incentives that might help the US to modify its current decision and move to a more environmentally effective climate policy. For example, can an increased participation of developing countries induce the US to effectively participate in the effort to reduce GHG emissions? Is a single emission trading market the appropriate policy framework to increase the signatories of the Kyoto Protocol? This paper addresses the above questions by analysing whether the participation of China in the cooperative effort to control GHG emissions can provide adequate incentives for the US to re-join the Kyoto process and eventually ratify the Kyoto Protocol. This paper analyses three different climate regimes in which China could be involved and assesses the economic incentives for the major world countries and regions to participate in these three regimes. The main conclusion is that the participation of the US in a climate regime is not likely, at least in the short run. The US is more likely to adopt unilateral policies than to join the present Kyoto coalition (even when it includes China). However, a two bloc regime would become the most preferred option if both China and the US, for some political or environmental reasons, decide to cooperate on GHG emission control. If the US decides to cooperate, the climate regime that provides the highest economic incentives to the cooperating countries is the one in which China and the US cooperate bilaterally, with the Annex B-US countries remaining within the Kyoto framework.
    Keywords: Agreements, Climate, Incentives, Negotiations, Policy
    JEL: C72 H23 Q25 Q28
    Date: 2006
  12. By: Jean-Yves Duclos (Université Laval, CIRPÉE and IZA Bonn); Abdelkrim Araar (Université Laval, CIRPÉE); John Giles (Michigan State University)
    Abstract: The paper contributes to the measurement of poverty and vulnerability in three ways. First, we propose a new approach to separating poverty into chronic and transient components. Second, we provide corrections for the statistical biases introduced when using a small number of periods to estimate the importance of vulnerability and transient poverty. Third, we apply these tools to the measurement of chronic and transient poverty in China using a rich panel data set that extends over approximately 17 years. We find that alternative measurement techniques yield significantly different estimates of the relative importance of chronic and transient poverty, and that precision of estimates is enhanced with simple statistical corrections.
    Keywords: poverty dynamics, transient poverty, chronic poverty, permanent poverty, China
    JEL: C15 D31 D63 I32
    Date: 2006–04
  13. By: Shuna Wang (Department of Economics, University of Virginia); Yang Yao (China Center for economic Research, Peking University)
    Abstract: This paper studies the impacts of village election on the accountability of the elected village committee, local fiscal sharing, and state taxation in rural China using panel data of 48 villages during the period of 1986-2002. Election is found to substantially increase the share of public expenditures in the village budget and reduce the shares of administrative costs and income handed to the township government. This shows that election enhances the accountability of the village committee, but weakens local fiscal sharing, and thus, may hurt public goods provision beyond the village boundary. In addition, election also reduces the amount of tax paid by each person in the village, which means that election does lessen the state's grip on the grassroots society. Finally, no significant evidence is found to support the claim that the role of a more competitive election is different from that of a closed election.
    Keywords: Multinational model, East Asian interdependency, exchange rates, asymmetric shocks
    JEL: C52 F15 F17 F42
    Date: 2006–02
  14. By: Fengxia Dong (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: The paper first presents a 10-year outlook for major Asian dairy markets (China, India, Indonesia, Japan, South Korea, Malaysia, the Philippines, Thailand, and Vietnam) based on a world dairy model. Then, using Heien and Wessells's technique, dairy product consumption growth is decomposed into contributions generated by income growth, population growth, price change, and urbanization and these contributions are quantified. Using the world dairy model, the paper also analyzes the impacts of alternative assumptions of higher income levels and technology development in Asia on Asian dairy consumptions and world dairy prices. The outlook projects that Asian dairy consumption will continue to grow strongly in the next decade. The consumption decomposition suggests that the growth would be mostly driven by income and population growth and, as a result, would raise world dairy prices. The simulation results show that technology improvement in Asian countries would dampen world dairy prices and meanwhile boost domestic dairy consumption.
    Date: 2005–06
  15. By: Hermes, N.; Smid, P.; Yao, L. (Groningen University)
    Abstract: This paper compares the use of capital budgeting techniques of Dutch and Chinese firms, using data obtained from a survey among 250 Dutch and 300 Chinese companies. Our main aim is to analyse the use of capital budgeting techniques by companies in both countries from a comparative perspective to see whether economic development matters. The empirical analysis provides evidence that Dutch CFOs on average use more sophisticated capital budgeting techniques than Chinese CFOs do. At the same, however, our results suggest that the difference between Dutch and Chinese firms is smaller than might have been expected based upon the differences in the level of economic development between both countries, at least with respect to the use of methods of estimating the cost of capital and the use of CAPM as the method of estimating the cost of equity.
    Date: 2006
  16. By: Eiji Ogawa; Michiru Sakane
    Abstract: In this paper, we investigate the actual exchange rate policy conducted by the Chinese government after the Chinese exchange rate system reform on July 21 2005. Also, we investigate long-run effect (Balassa-Samuelson effect) on the Chinese yuan. We found that the Chinese government had a statistically significant but small change in exchange rate policy during our sample period to January 25, 2006. It is not identified that the Chinese monetary authority is adopting the currency basket system because the change is too small in the economic sense. On one hand, higher growth rate of productivity will appreciate the Chinese yuan in terms of the US dollar and the Japanese yen while higher growth rates of productivity in Chinese tradable good sector tend to give the Balassa-Samuleson effect, that is undervaluation bias, to the Chinese yuan.
    Date: 2006–04

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