nep-cna New Economics Papers
on China
Issue of 2007‒08‒18
six papers chosen by
Zheng Fang
Ohio State University

  1. FDI and Technology Spillovers in China By Sea Jin Chang; Jaiho Chung; Dean Xu
  2. Measuring Rural Poverty in China: a Case Study Approach By Xiuqing Wang; Shujie Yao; Juan Liu; Xian Xin; Xiumei Liu; Wenjuan Ren
  3. China as a Reserve Sink: The Evidence from Offset and Sterilization Coefficients By Alice Y. Ouyang; Ramkishen S. Rajan; Thomas D. Willett
  4. Are Japanese Firms Failing to Catch up in Localization? An Empirical Analysis Based on Affiliate-level Data of Japanese Firms and a Case Study of the Automobile Industry in China By Kyoji Fukao; Keiko Ito; Shigesaburo Kabe; Deqiang Liu; Fumihide Takeuchi
  5. Globalization of R&D and China – Empirical Observations and Policy Implications By Lundin, Nannan; Schwaag Serger, Sylvia
  6. Collective Pension Funds: International Evidence and Implications for China's Enterprise Annuities Reform By Yu-Wei Hu; Colin Pugh; Fiona Stewart; Juan Yermo

  1. By: Sea Jin Chang; Jaiho Chung; Dean Xu
    Abstract: Using a database of Chinese firms, we examine the effects of technology spillovers not only between foreign entrants and local firms but also between “modernized” local firms to other local firms. Our results show that the increased presence of foreign multinationals within industries and in their upstream sectors positively affected the productivity of local firms. The positive intra-industry spillover effect from wholly owned subsidiaries becomes evident when the Chinese government’s restriction on foreign ownership was lifted. We also find strong spillover effects among local firms.
    Keywords: foreign direct investment, spillover effects, China
    JEL: F2 O2
    Date: 2007–07
  2. By: Xiuqing Wang; Shujie Yao; Juan Liu; Xian Xin; Xiumei Liu; Wenjuan Ren
    Abstract: This paper measures rural poverty in Hubei Province and Inner Mongolia in China. The poverty lines we derived by Ravallion's method differ from the official Chinese poverty lines. The official pan-country poverty line underestimates rural poverty in Hubei Province and overestimates rural poverty in Inner Mongolia. Poverty determinants are estimated by Logit as well as Probit models. The study notes that factors such as living in a mountainous area, lack of better irrigation conditions, a large family size, few fixed assets, few land owned and sole dependence on agriculture as a livelihood source would make a rural household more vulnerable to poverty. On the other hand, a rural household whose members are either better educated or trained laborers would statistically be less poor. The growth-redistribution decomposition reveals that for all the three FGT indexes in Hubei province, income growth contributed much to the alleviation of poverty, while the redistribution or inequality effects counteracted the growth effects and worsened poverty. The poverty incidence decomposition results reveal that about one third of the growth effects had been counteracted by the redistribution effects. This implies that future anti-poverty programs should pay more attention to solving the inequality problem in China. Poverty dominance analysis also helps us better understand the poverty situation. It reveals that rural poverty in Inner Mongolia is more severe than that in Hubei, and that poverty incidence in Hubei has lessened from 1997 to 2003, which are the same findings as those drawn from deriving poverty lines.
    Keywords: Rural Poverty Line, Poverty Determinants, Growth Redistribution Decomposition, Poverty Dominance, China
    JEL: I32 D33 C43
    Date: 2007
  3. By: Alice Y. Ouyang (Claremont Graduate University); Ramkishen S. Rajan (George Mason University); Thomas D. Willett (Claremont Graduate University)
    Abstract: China has been stockpiling international reserves at an extremely rapid pace since the late 1990s and has surpassed Japan to become the largest reserve holder in the world. This paper undertakes an empirical investigation to assess the extent of de facto sterilization and capital mobility using monthly data between mid 1999 and late 2005. We find that China has been able to successfully sterilize most of these reserve increases, thus making it a reserve sink such as Germany was under the Bretton Woods system. Recursive estimation of offset coefficients, however, finds evidence of increasing mobile capital flows that may undercut China¡¦s ability to continue high levels of sterilization.
    Keywords: Balance of payments, China, Capital Mobility, Reserves, Sterilization
    JEL: E51 E52 E58
    Date: 2007–05
  4. By: Kyoji Fukao; Keiko Ito; Shigesaburo Kabe; Deqiang Liu; Fumihide Takeuchi
    Abstract: This paper analyzes the degree and the current status of localization of Japanese affiliates in China. For this purpose, we (1) compare the localization (measured in terms of the number of expatriates, local sales, local procurement, and local management) of Japanese and U.S. affiliates in China and other major regions; (2) analyze the impact of localization on the profitability of Japanese affiliates in China and in other major regions; and (3) conduct a detailed investigation of inter-firm transactional relationships in China between automobile manufacturers and parts suppliers. We find that compared with U.S. affiliates, Japanese affiliates tend to be less localized. Using a comprehensive affiliate-level panel data set on Japanese multinationals and concentrating on China, we then examine the effect of localization quantitatively and find that Japanese affiliates with higher procurement ratios and/or local CEOs and procurement managers enjoyed high profits. Next, turning to the factors determining trading relationships between assemblers and suppliers of different nationalities in China, our analysis suggests that even when taking various control variables into account, such as suppliers’ productivity level and the distance between assembler and supplier, the transactional relationships of Japanese suppliers are more limited than those of suppliers of other nationalities. Moreover, Japanese automobile assemblers do not choose suppliers based on their current labor productivity level and transactional relationships between assemblers and suppliers are more closed in the case of Japanese firms than in the case of firms of other nationalities. On the other hand, we find that auto parts suppliers dealing with Japanese assemblers see their productivity grow faster regardless of the supplier’s nationality. The results indicate that Japanese assemblers may well be choosing business partners which they expect to realize sustainable productivity increases in the future rather than focusing on present productivity levels. This finding provides evidence of business practices based on a long-term perspective characteristic of Japanese enterprises.
    Date: 2007–02
  5. By: Lundin, Nannan (Research Institute of Industrial Economics (IFN)); Schwaag Serger, Sylvia (ITPS)
    Abstract: As one of the world’s largest recipients of Foreign Direct Investment (FDI), China is emerging as a key global player in Research and Development (R&D). This rapid increase in R&D investment is mainly attributed to the effort of strengthening the indigenous innovation capacity of domestic actors and, to an increasing extent, to the process of globalization of R&D with multinational enterprises as key driving force. This paper provides a detailed overview of the relative importance of foreign R&D in China based on quantitative mapping in terms of R&D inputs, outputs and local linkages in R&D-related activities, combined with an in-depth description of the nature of foreign R&D activities. Our empirical observation suggests that the growing importance of China in the globalization of R&D is more than a ‘flash-in-the-pan’. On one hand, China is facing new challenges, but at the same time is attempting to seize the “window of opportunity” to compete for knowledge and human resources through structural adjustments and new policy initiatives. On the other hand, multinational enterprises from OECD countries are not only intensifying, but also diversifying their activities in a larger number of R&D intensive sectors in China. In such a rapid and dynamic development, China seems to emerge not only as an important source of R&D but also a key magnet of global R&D operations.
    Keywords: China; R&D; Globalization; Multinationals
    JEL: F23 O31 O32
    Date: 2007–08–09
  6. By: Yu-Wei Hu; Colin Pugh; Fiona Stewart; Juan Yermo
    Abstract: Collective pension funds (CPFs) - occupational pension funds that cover the employees of more than one employer (enterprise) - have been operating in OECD countries for decades. Generally speaking, there are two models, i.e. closed pension funds, with membership restricted to a particular industry or group of industries, and open pension funds open to all types of company. The governance structure of such funds also operates in two ways – via an internal model (with trustees appointed by employers and employees) and external model (with professional, commercial trustees). In this report, we first describe and analyse how CPFs are operated in selected OECD countries and non-OECD economies. Then, we review occupational pensions (or Enterprise Annuities -EA- in Chinese terminology) in general and CPFs in particular. Given the problems holding back the development of EA plans among small and medium size enterprises (SMEs) in China, and bearing in mind both China‘s specific situations and international best practices, we propose a number of policy recommendations to promote the development of CPFs covering the SME sector. Our practical policy recommendations include 1) industry funds with more open membership; 2) establishment of new purpose-built industry funds; 3) establishment of new regional EA administration centres acting as independent pension councils (trustees) for open pension funds; 4) in parallel to these policy initiatives in China, commercial trustees should be encouraged to establish CPFs targeting the SME sector. <P>Fonds de pension collectifs : Observations internationales et conséquences pour la réforme des rentes d'entreprise en Chine <BR>Les fonds de pension collectifs (FPC) – fonds de pension professionnels qui couvrent des salariés relevant de plusieurs employeurs (entreprises) – existent dans les pays de l‘OCDE depuis plusieurs décennies. De manière générale, il existe deux modèles : des fonds de pension fermés auxquels seuls peuvent adhérer les travailleurs d‘une certaine industrie ou d‘un groupe d‘industries, et des fonds de pension ouverts auxquels peuvent adhérer les travailleurs de toutes entreprises. De même, il y a deux modèles de structure de gouvernance : un modèle interne (où les fiduciaires sont désignés par les employeurs et les travailleurs) et un modèle externe (où les fiduciaires sont des professionnels qui agissent à titre commercial). Dans ce rapport, nous commençons par décrire et analyser la façon dont les FPC sont gérés, dans certains pays de l‘OCDE et dans certaines économies extérieures à la zone de l‘OCDE. Puis nous examinons la question des pensions professionnelles (en Chine, on parle de rentes d‘entreprise), de façon générale, et des FPC en particulier. Étant donné les problèmes qui freinent le développement des systèmes de rentes d‘entreprise dans les petites et moyennes entreprises (PME) en Chine, et compte tenu, par ailleurs, des spécificités de la situation chinoise et des pratiques optimales définies au niveau international, nous formulons un certain nombre de recommandations pour promouvoir le développement des FPC dans le secteur des PME. Nos recommandations, concrètement, sont les suivantes: 1) ouvrir plus largement l‘adhésion aux fonds par industrie; 2) créer de nouveaux fonds par industrie spécialisés; 3) mettre en place de nouveaux centres régionaux de gestion des rentes d‘entreprise qui joueraient le rôle de conseils indépendants (fiduciaires) pour les fonds de pension ouverts; 4) parallèlement à ces initiatives d‘ordre public, en Chine, des fiduciaires agissant à titre commercial devraient être encouragées à créer des FPC ciblés sur le secteur des PME.
    Keywords: China, pension fund, fond de pension, Small and Medium-sized Enterprises
    JEL: G23 P52
    Date: 2007–08

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