nep-cna New Economics Papers
on China
Issue of 2007‒02‒10
seven papers chosen by
Zheng Fang
Ohio State University

  1. Comparing China and India: Is dividend of economic reforms polarized? By Sudip Ranjan Basu
  2. Urban income inequality in China revisited (1988–2002) By Sylvie Demurger; Martin Fournier; Shi Li
  3. Determinants of the Profitability of Japanese Manufacturing Affiliates in China and Other Regions: Does Localization of Procurement, Sales, and Management Matter? By ITO Keiko; FUKAO Kyoji
  4. Economic changes and afforestation incentives in rural China By Sylvie Demurger; Weiyong Yang
  5. Die Aussenhandelspolitik der EU gegenüber China - "China-Bashing" ist keine rationale Basis für Politik By Ansgar Belke; Julia Spies
  6. The international financial integration of China and India By Lane, Philip R.; Schmukler, Sergio L.
  7. Fiscal Decentralization in China and India: Competitive, Cooperative or Market Preserving Federalism? By Singh, Nirvikar

  1. By: Sudip Ranjan Basu (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: The paper develops a new measure of development, namely, development quality Index (DQI), to compare performance of China and India. The results show that national level development quality grew three times faster in China than in India. Conversely, the health quality grew three times as fast in India than China over the period 1980-2004. The overall regional development quality level improved in both countries, but polarization widened in China. The sign of inter-regional polarization in China indicates a rising concentration of development gains from economic reform policies, while in recent years there are trends of polarization in economic dimension of DQI in India.
    Keywords: Development, Inequality, Polarization, China, India
    JEL: C43 D63 O18
    Date: 2007–01
  2. By: Sylvie Demurger (HIEBS - Hong Kong Institute of Economics and Business Strategy - [The Hong Kong University]); Martin Fournier (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Shi Li (School of Economics and Business - [Beijing Normal University])
    Abstract: Using newly available spatial price deflators, this paper shows that inequality evaluations in the literature<br />overstate the magnitude of inequality and inequality changes in China, as well as the role played by regional differences in the recent inequality rise.
    Keywords: Inequality; China; Spatial price deflators; Inequality decomposition
    Date: 2007–01–30
  3. By: ITO Keiko; FUKAO Kyoji
    Abstract: Does localization of procurements, sales, and management contribute to the profitability of overseas affiliates? This study examines this question by analyzing the performance of Japanese multinationals' manufacturing affiliates in China using a comprehensive affiliate-level dataset for the period from 1989 to 2002 collected by the Ministry of Economy, Trade and Industry (METI). We find that even though foreign multinationals often seem to enter China for the local market potential, affiliates with a higher local sales ratio tend to be less profitable - a pattern that is conspicuously different from that observed for Japanese affiliates in other regions such as the USA or the ASEAN-4, where local sales orientation has a positive impact on profitability. On the other hand, we find that Japanese affiliates' profitability was positively associated with their local procurement ratio. Using the coefficients of the profit function estimated from data on all Japanese manufacturing affiliates around the world, we can calculate the effect of localization (local sales and local procurements) on profitability by country, controlling for the level of GDP and per-capita GDP. In the case of China, the localization effects are positive following the country's accession to the WTO, suggesting that both local procurement and sales expansion contribute to higher profitability in China.
    Date: 2007–01
  4. By: Sylvie Demurger (HIEBS - Hong Kong Institute of Economics and Business Strategy - [The Hong Kong University], GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Weiyong Yang (University of International Business and Economics (Beijing) - [University of International Business and Economics (Beijing)])
    Abstract: This paper uses provincial macro-data from the mid 1980s onwards to investigate the determinants of land-use choice in rural China, by paying particular<br />attention to the decision to plant trees as competing with agriculture. The evidence supports the importance of economic motivations in the afforestation decision. A profitseeking behavior is found to be at stake in the decision to plant trees, which is made according to both the relative profitability of forestry against agriculture, and their relative risks. Afforestation is also found to strongly depend on the pressure upon land as well as<br />on household wealth.
    Keywords: afforestation incentives; rural China
    Date: 2007–01–30
  5. By: Ansgar Belke; Julia Spies
    Abstract: Mit der Verabschiedung einer handelspolitischen Strategie gegenüber China Ende Oktober 2006 richtet sich die Europäische Union (EU) in einem veränderten globalen Wettbewerbsumfeld neu aus. Erstmals wird mit dem Einsatz von Schutzmaßnahmen gedroht, sollte China die multilateralen Vereinbarungen der Welthandelsorganisation (World Trade Organization – WTO) nicht vollständig umsetzen. Doch hat auch die EU ihre "Hausaufgaben" in den vergangenen Jahren nicht immer erledigt. Auf die Einfuhrschwemme von Textilien und Bekleidung Anfang 2005 reagierte sie durch die Erhebung neuer Quoten. In diesem Papier argumentieren wir, dass nur eine reziproke Marktöffnung eine stabile Partnerschaft bedingt, bei der beide Seiten vom ohnehin nicht aufzuhaltenden Vormarsch Chinas profitieren können.
    JEL: F02 F13
    Date: 2007
  6. By: Lane, Philip R.; Schmukler, Sergio L.
    Abstract: Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China ' s foreign direct investment liabilities), these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are " short equity, long debt. " Third, China and India have improved their net external positions over the past decade although, based on their income level, neoclassical models would predict them to be net borrowers. Domestic financial developments and policies seem essential in understanding these patterns of integration. These include financial liberalization and exchange rate policies, domestic financial sector policies, and the impact of financial reform on savings and investment rates. Changes in these factors will affect the international financial integration of China and India (through shifts in capital flows and asset and liability holdings) and, consequently, the international financial system.
    Keywords: Investment and Investment Climate,Economic Theory & Research,Banks & Banking Reform,Capital Flows,Financial Economics
    Date: 2007–02–01
  7. By: Singh, Nirvikar
    Abstract: This paper provides a comparative assessment of fiscal decentralization in China and India, including the standard components of expenditure and revenue assignments and institutions for intergovernmental transfers, as well as the nature of subnational authorities over general economic activity. In particular, the case of China, where town and village enterprises have been very active, is contrasted with that of India, where local governments remain circumscribed in their authority, despite decentralizing reforms. The implications of differences in decentralization for fiscal outcomes and economic growth are discussed. The characterization of each country in terms of concepts of federalism, i.e., competitive, cooperative and market preserving federalism, is discussed, in attempting to abstract from the two cases to more general lessons for fiscal decentralization.
    Keywords: cooperative federalism; competitive federalism; market-preserving federalism; decentralization; economic development
    JEL: P35 O10 P26
    Date: 2007–01

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