nep-cna New Economics Papers
on China
Issue of 2008‒01‒12
fourteen papers chosen by
Zheng Fang
Ohio State University

  1. Economic growth across space and time: subprovincial evidence from Mainland China By Curran, Declan; Funke, Michael; Wang, Jue
  2. Trends and Determinants of China’s Industrial Agglomeration By Lu, Jiangyong; Tao, Zhigang
  3. Determinants of Entrepreneurial Activities in China By Lu, Jiangyong; Tao, Zhigang
  4. Are there lessons for africa from China ' s success against poverty ? By Ravallion, Martin
  5. How Does Privatization Work in China? By Bai, Chong-En; Lu, Jiangyong; Tao, Zhigang
  6. More Men, More Crime: Evidence from China’s One-Child Policy By Lena Edlund; Hongbin Li; Junjian Yi; Junsen Zhang
  7. Formal versus informal finance : evidence from China By Maksimovic, Vojislav; Demirguc-Kunt, Asli; Ayyagari, Meghana
  8. Agglomeration of Economic Activities in China: Evidence from Establishment Censuses By Lu, Jiangyong
  9. Revolution and Family in Rural China: Influence of Family Background on Current Family Wealth By Hiroshi Sato; Li Shi
  10. Earnings Instability and Earnings Inequality in Urban China: 1989-2006 By Zhong Zhao
  11. Growth of the Firm and Economic Backwardness: A Case Study and Analysis of China's Mobile Handset Industry By Kimura, Koichiro
  12. Attitudes towards Italian wine of practitioners in the Chinese distribution By Sergio Marchesini; Huliyeti Hasimu; Maurizio Canavari; Alessandro Farneti
  13. From Export Promotion To Import Substitution; Comparative Experience of China and Mexico By Shafaeddin, Mehdi; Pizarro, Juan
  14. The Effects of Corporate Governance and Institutional Environments on Export Behaviour: Evidence from Chinese Listed Firms By Lu, Jiangyong; Xu, Bin; Liu, Xiaohui

  1. By: Curran, Declan (BOFIT); Funke, Michael (BOFIT); Wang, Jue (BOFIT)
    Abstract: This paper considers the persistent differences in economic performance across Chinese regions. We introduce a new county- and city-level dataset that spans all of mainland China and provides a detailed view of Chinese regional growth over the period 1997-2005. Non-parametric kernel density estimation is employed to establish the cross-sectional GDP per capita distribution, and the distributional dynamics are investigated using the probability matrix technique and associated stochastic kernel estimator. A set of explanatory variables is then introduced, and several regressions are run to test for conditional ƒÒ-convergence and to pinpoint influential factors for economic growth across counties and cities.
    Keywords: regional economic growth; China
    JEL: O11 R11
    Date: 2008–01–04
  2. By: Lu, Jiangyong; Tao, Zhigang
    Abstract: This paper investigates trends and determinants of the spatial concentration of China’s manufacturing industries using a large firm-level data for the time period of 1998 to 2005. It is found that the overall industrial agglomeration in China has increased steadily in recent years though it is still much lower than those of the well-developed market economies (such as United States, United Kingdom, and France). It is also found that local protectionism among China’s various regions obstructs China’s industrial agglomeration while Marshallian externalities facilitate the process of spatial concentration of manufacturing industries. On an optimistic note, there is evidence that the negative impacts of local protectionism have become less significant over time but those of Marshallian externalities are gaining in importance, which is consistent with the overall trend of China’s industrial agglomeration.
    JEL: R1
    Date: 2007–11
  3. By: Lu, Jiangyong; Tao, Zhigang
    Abstract: The institutional environment – including protection of private properties and contract enforcement – has been rather unfavorable for the emergence and development of China’s private enterprises. This is in sharp contrast to the case of the developed economies where the institutional environment is conductive to the entrepreneurial activities and only the personal attributes of would-be entrepreneurs determine their entrepreneurship decision. We thus propose a theoretical framework for the entrepreneurship decision in China with a focus on the role of institutional environment. Using a life-histories survey data of 2,854 respondents from twenty cities in China, we find strong support for the impacts of the institutional environment and its interactions with other determinants of entrepreneurship decision.
    JEL: J2
    Date: 2007–01
  4. By: Ravallion, Martin
    Abstract: At the outset of China ' s reform period, the country had a far higher poverty rate than for Africa as a whole. Within five years that was no longer true. This paper tries to explain how China escaped from a situation in which extreme poverty persisted due to failed and unpopular policies. While acknowledging that Africa faces constraints that China did not, and that context matters, two lessons stand out. The first is the importance of productivity growth in smallholder agriculture, which will require both market-ba sed incentives and public support. The second is the role played by strong leadership and a capable public administration at all levels of government.
    Keywords: Rural Poverty Reduction,Population Policies,Achieving Shared Growth,Services & Transfers to Poor
    Date: 2008–01–01
  5. By: Bai, Chong-En; Lu, Jiangyong; Tao, Zhigang
    Abstract: Using a comprehensive panel data set of China’s state-owned enterprises, we investigate the impacts of privatization, of different time sequences and extent of non-state ownership, on social welfare and firm performance. Attention has been focused on the sources of gain in firm performance and the long-run impacts of privatization. It is found that the privatization of China’s state-owned enterprises was achieved with limited compromise on social welfare responsibilities, and significant gain in firm performance was obtained by motivating the management and reducing agency cost at the management level.
    JEL: L2
    Date: 2007–08
  6. By: Lena Edlund (Columbia University and IZA); Hongbin Li (Chinese University of Hong Kong and Tsinghua University); Junjian Yi (Chinese University of Hong Kong); Junsen Zhang (Chinese University of Hong Kong and IZA)
    Abstract: Crime rates almost doubled in China between 1992 and 2004. Over the same period, sex ratios (males to females) in the crime-prone ages of 16-25 years rose sharply, from 1.053 to 1.093. Although scarcity of females is commonly believed to be a source of male antisocial behavior, a causal link has been difficult to establish. Sex-ratio variation is typically either small or related to social conditions liable to also affect crime rates. This paper exploits two unique features of the Chinese experience: the change in the sex ratio was both large and mainly in response to the implementation of the one-child policy. Using annual province-level data covering the years 1988-2004, we find that a 0.01 increase in the sex ratio raised the violent and property crime rates by some 5-6%, suggesting that the increasing maleness of the young adult population may account for as much as a third of the overall rise in crime.
    Keywords: male-biased sex ratios, crime, one-child policy, China
    JEL: J12 J13 K42
    Date: 2007–12
  7. By: Maksimovic, Vojislav; Demirguc-Kunt, Asli; Ayyagari, Meghana
    Abstract: China is often mentioned as a counterexample to the findings in the finance and growth literature since, despite the weaknesses in its banking system, it is one of the fastest growing economies in the world. The fast growth of Chinese private sector firms is taken as evidence that it is alternative financing and governance mechanisms that support China ' s growth. This paper takes a closer look at firm financing patterns and growth using a database of 2,400 Chinese firms. The authors find that a relatively small percentage of firms in the sample utilize formal bank finance with a much greater reliance on informal sources. However, the results suggest that despite its weaknesses, financing from the formal financial system is associated with faster firm growth, whereas fund raising from alternative channels is not. Using a selection model, the authors find no evidence that these results arise because of the selection of firms that have access to the formal financial system. Although firms report bank corruption, there is no evidence that it significantly affects the allocation of credit or the performance of firms that receive the credit. The findings suggest that the role of reputation and relationship based financing and governance mechanisms in financing the fastest growing firms in China is likely to be overestimated.
    Keywords: Access to Finance,Banks & Banking Reform,,Debt Markets,Bankruptcy and Resolution of Financial Distress
    Date: 2008–01–01
  8. By: Lu, Jiangyong
    Abstract: In this paper, we document spatial distribution of economic activities in China based on two recent nationwide censuses of establishments. This paper provides the whole picture of agglomeration of economic activities in China for the first time in the literature. The robust increasing trend of agglomeration supports the argument that interregional trade barriers in China decreased during the period of 1996-2001. We extend the agglomeration literature by studying agglomeration patterns of establishments with various ownership types. We find that non-public owned establishments are more spatially concentrated compared with public owned establishments. We also examine determinants of agglomeration economies with multivariate regressions. Results show that micro-foundations of agglomeration work well in explaining agglomeration of non-public owned establishments, but not for public owned establishments in China.
    Keywords: Geographic Concentration; Micro-foundations; Ownership
    JEL: R10
    Date: 2008–01–06
  9. By: Hiroshi Sato (Hitotsubashi University); Li Shi (Beijing Normal University and IZA)
    Abstract: This paper examines the influence of family human capital on offspring’s economic status in post reform rural China by concentrating on the father-son relationship. We focus on two indicators of family background: family class origin (jiating chengfen) and occupational experience. The results of a family wealth function for 2002 suggest that, after controlling for other individual and family characteristics, both measures of family background have a significant influence on family wealth. First, parental experience of a nonagricultural family business before collectivization has a positive and statistically significant effect on current family wealth. Second, the offspring of landlord/rich peasant and middle peasant families are more likely to have higher family wealth than poor and lower-middle peasant families. We also find cohort and regional differences in the influence of family background. Our findings suggest that the strength and robustness of the Chinese rural family as a cultural institution preserves family human capital across radical institutional changes.
    Keywords: family human capital, family background, intergenerational correlation, distribution of wealth
    JEL: D31 J24 N35 O15
    Date: 2007–12
  10. By: Zhong Zhao (IZA)
    Abstract: This paper investigates the evolution of earnings inequality in urban China from 1989 to 2006. After decomposing the variance of log of earnings into transitory and permanent two parts, we find that both components are important contributors to the total variance of earnings. We also find that the share of the transitory part has been decreasing from early 1990 to 2004; however, this decreasing trend is reversed from 2004 to 2006. Compared female to male, though these two populations share similar trends in the changes of transitory and permanent components, changes are more pronounced for female than for male. Our results suggest that the time-invariant part and time related part in permanent earnings are negatively correlated. This implies converge of earnings profile in long run and also implies that there is more mobility within the distribution of long-term earnings.
    Keywords: earnings inequality, covariance structure of earnings, China
    JEL: D31 O15 J31
    Date: 2007–12
  11. By: Kimura, Koichiro
    Abstract: Economic backwardness often influences the growth of firms in developing countries. In this paper, we investigate the growth conditions and paths available for latecomers competing with first movers. Employing the concepts of boundaries of the firm and the disadvantage of backwardness, we present a case study of China's mobile handset industry and proceed to develop a simple model. We find that although significant disadvantage does not allow latecomers to grow, there are possibilities for changing the conditions of growth if latecomers can utilize outside resources and/or indigenous advantages.
    Keywords: Boundaries of the Firm, Backwardness, Mobile Handset, China, Telephone, Information services industry, Business enterprises
    JEL: D23 L63 O12 O53
    Date: 2007–12
  12. By: Sergio Marchesini (Alma Mater Studiorum University of Bologna); Huliyeti Hasimu (Alma Mater Studiorum University of Bologna); Maurizio Canavari (Alma Mater Studiorum University of Bologna); Alessandro Farneti (Alma Mater Studiorum University of Bologna)
    Abstract: China’s economy has grown at an impressive rate after the integration into the global trading system (WTO) in 2001, a major turning point in the Chinese economic history. The opening policy has increased business opportunities for both local and foreign operators; however, in spite of the great appeal of such cooperation, many obstacles yet exist: language, culture, education, business practices, and industrial development. Food products supply and access to the market are mastered by a relatively small group of businessmen: international buyers, purchasing agents, retailers and representatives of large-scale distribution chains. The perception they have of a potential source country is a key factor for a successful market approach. The present study aims at understanding the attitudes of distribution practitioners in the Chinese market towards imported Italian quality wine, as well as the current communication, marketing, strategic and organizational advantages or deficiencies of Italian producers, compared to other European counterparts. The primary data were collected through personal interviews with key informants in Shanghai, Beijing and Guangzhou. Such information has been completed with an analysis of the existing literature, meetings with sector operators as well as with talks and presentations of experts attending the “International Workshop on Chinese Wine Market”, held in Beijing on August 8-10, 2007. The interviews have been administered as conversation-like dialogues, on the base of a semi-structured interview outline, providing also the framework for a qualitative content analysis. This paper is aimed at giving an insight on import and distribution of Italian wine in China, highlighting both positive and negative feedbacks on the effectiveness of marketing strategies of Italian wine trading companies.
    Keywords: wine, international trade, distribution, China, "Made in Italy"
    JEL: Q13 Q17
    Date: 2007–12
  13. By: Shafaeddin, Mehdi; Pizarro, Juan
    Abstract: Abstract Both Mexico and China have started export orientation in some industries, through assembly operations, based on imported inputs a couple of decades ago. The literature on industrialization, has discussed the questions of import substitutions and outward-orientation mainly as alternative routes to industrialization. In both cases, it is argued that “learning” would contribute to industrial development. Proponent of import substitution argued that import substitution contributes to industrial development through “learning by doing”. Those in favour of free trade and outward orientation argue that trade contributes to the transfer of knowledge and technology. This study is the first part of a twin study in which the authors attempt to shed some light on the comparative experience of the two countries in the light of the above-mentioned literature. The present study is devoted to the establishment of facts, while in the second study an attempt will be made to provide an explanation for differences in the performance of the two countries and the role played by their government in order to see whether the process, if successful, is replicable elsewhere. China and Mexico the process of trade liberalization and development of export oriented industries started, following a period of pursuing import substitution strategy , more or less, at the same time-if not earlier in the case of Mexico. It will be shown in this study that both countries have managed to develop comparative advantage in many industries initiated through import substitution; but China has been more successful than Mexico in gradually increasing value added in export oriented industries by substituting domestic production for imported inputs in these industries. The first section is devoted to a brief survey of the literature. In the second section, we will shed some light on the general trends in development of export promotion industries and general performance of the manufacturing sector in exports and production. The third section is devoted to the analysis of processing trade and value added in assembly operations through production of domestic components. In section four we will investigate the evolution of revealed comparative advantage in exports, production and assembly operation of traded finished goods and parts and components in order to shed some light on their future export prospects. The final section will conclude the study. . 2
    Keywords: Mexico; China; Industrialization; Value added; Trade policy; Import substitution; export expansion
    JEL: F0 N6 O5 O2 O1 F1 O3 O4
    Date: 2007–06
  14. By: Lu, Jiangyong; Xu, Bin; Liu, Xiaohui
    Abstract: The impact of corporate governance on export decisions is an important yet under- explored research issue. This paper examines this issue with respect to Chinese listed firms. We adopt an analytical framework in which the effects of corporate governance on export decisions are associated with institutional environment. We test several hypotheses derived from this framework. The sample firm’s export propensity and export intensity are found to be positively impacted by CEO ownership share and independent director ratio, and negatively impacted by private/family control. The export-promoting effects of CEO ownership share and independent director ratio are found to be positively moderated by a well-established institutional environment.
    JEL: F0
    Date: 2007–12

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