nep-cna New Economics Papers
on China
Issue of 2008‒03‒15
seven papers chosen by
Zheng Fang
Ohio State University

  1. Performance Spillovers and Social Network in the Workplace: Evidence from Rural and Urban Weavers in a Chinese Textile Firm By Kato, Takao; Shu, Pian
  2. China's Exchange Rate Policy: A Survey of the Literature By Robert Lafrance
  3. IT Management of Chinese Firms: Quantitative Analysis by Using Survey Data By Xiaoyang FENG; MOTOHASHI Kazuyuki
  4. Ecological Economics of Water in China: Towards A Strategy for Sustainable Development By Khan, Haider; Liu, Yibei
  5. China’s New Development Strategy: Environment and Energy Security By Khan, Haider
  6. Chinese Competition and Skill-Upgrading in European Textiles: Firm-level Evidence By Ph. Monfort; Hylke Vandenbussche; E. Forlani
  7. Information and communication technologies and geographic concentration of manufacturing industries: Evidence from China By Hong, Junjie; Fu, Shihe

  1. By: Kato, Takao (Colgate University); Shu, Pian (MIT)
    Abstract: We provide some of the first rigorous evidence on performance spillovers and social network in the workplace. The data we use are rather extraordinary – weekly data for rejection rates (proportion of defective output) for all weavers in a firm during a 12 months (April 2003-March 2004) period, more than 10,000 observations. Our fixed effect estimates first point to significant spillovers of performance from high-ability weavers to low-ability weavers. On the other hand, we find no evidence for performance spillovers from low-ability to high-ability weavers. The findings are consistent with the knowledge sharing hypothesis that low-ability workers learn from high-ability workers but not vice versa. Second, by exploiting the well-documented fact that an exogenously-formed sharp divide between urban workers and rural migrant workers exists in firms in Chinese cities, we find that performance spillovers/knowledge sharing take place only within the confines of social network. Specifically rural low-ability weavers are found to improve their performance as their high-ability teammates (who are also rural migrants) improve their performance while they do not benefit from performance improvement of their high-ability teammates who are urban residents. Such heterogeneous performance interdependence of workers within the same team suggests that our evidence for performance spillovers is less likely to be a result of team specific demand shocks that generate spurious performance interdependence of all team members.
    Keywords: knowledge sharing, performance spillovers, social network
    JEL: M5 J24 L2
    Date: 2008–02
  2. By: Robert Lafrance
    Abstract: China's integration into the world economy has benefited its people by reducing poverty and raising living standards, and it has benefited the industrialized world by producing manufactured goods at lower cost. It has also raised geopolitical concerns as China's power grows, economic concerns as the manufacturing base in many industrialized countries erodes, and polemics as proposals of protectionist measures to counter China's export growth are put forward. The author reviews the literature on how China's exchange rate regime could evolve and contribute, through greater flexibility, to tempering domestic inflationary pressures and to facilitating an orderly resolution of global imbalances. His main conclusions are that China would benefit from moving towards a more flexible exchange rate regime and allowing the People’s Bank of China greater independence to pursue an inflation-control objective. In a transition phase, a managed float would be useful to limit volatility as firms adapt to the new system and the banking system is put on a sounder footing, a monetary policy framework is put in place, and capital controls are progressively eased. Shock therapy (a quick and pronounced revaluation) would be ill advised.
    Keywords: Exchange rate regimes
    JEL: F33 F36
    Date: 2008
  3. By: Xiaoyang FENG; MOTOHASHI Kazuyuki
    Abstract: This paper presents quantitative analysis of IT use, management, and organization at Chinese firms, based on the "International Comparative Survey of Firms' IT Strategies" conducted by the Research Institute of Economy, Trade and Industry (RIETI). The results of analysis show that Chinese firms have achieved remarkable progress with regards to the ability of IT to support business and strategies, and they have a clear comprehension of information resources and realize the importance of IT in some degree. However, we cannot find significant impact of IT use on firm profitability. This may be due to the fact that application of IT in Chinese firms is still in transition from the IT support stage of development, and further efforts for improving IT management are needed. In terms of IT organization, the share of firms with a chief information officer (CIO) is quite large, but most of the CIOs are only IT department managers. The status of CIOs in Chinese firms is low, and their power to influence managerial decisions at the company-wide level is still weak.
    Date: 2008–03
  4. By: Khan, Haider; Liu, Yibei
    Abstract: The main purpose of this paper is to analyze one important part of the emerging environmental problems in China--- water pollution. The importance of water for any nation is obvious. In case of China it acquires particular salience because of China’s industrial needs as well as human needs. Particularly significant is the rapid deterioration of the water quality and development of water shortages. Unless effective policy interventions are made quickly, this can develop into a major ecological disaster. We present arguments for taking the water resources problem in China seriously. The continuing and rapid deterioration of water quality poses grave health and other types of environmental threats. If these threats are not addressed in a timely manner, the situation will deteriorate even faster. The Chinese 11th five year plan acknowledges many of these problems. The analysis in this paper is consistent with the stated objective of addressing ecological issues via a new development strategy. We consider the institutional and policy-making issues carefully. The complexities of the water resource administration system in China are challenging. Coordination among WMR, SEPA, MOC, MOA, SFA, MoC, MOH and many other branches of the government will tax even the most sophisticated administrative apparatus. Clearly some simplification and streamlining is called for. At the same time, decentralization--- with proper incentives and monitoring mechanisms--- that gives more resources at the local level to fund defensive measures can improve performance on the ground. In the age of globalization, at least a significant part of China’s environmental problems stem from FDI-led production for export markets. Many enterprises have lax environmental management practices. This, of course, applies to many domestic SOEs as well. In all these cases, both market incentives such as effluent fees and better regulations with proper enforcement are needed. Regional and International cooperation and sharing of responsibilities are necessary parts of an overall policy package.
    Keywords: Ecological Economics; Water Pollution; Economic Growth; Development Strategy; China; Coase Theorem; Externalities
    JEL: O25 O13 O32 O33 O21
    Date: 2008
  5. By: Khan, Haider
    Abstract: This paper analyzes China's development strategy by focusing on both global and regional approaches to solving problems of energy security and ecological imbalance by addressing specifically the problems of China’s energy security. PRC’s growing energy dependence has become a major concern for both economic and national security policymakers in that country. The ambitious goal of modernization of the economy along the lines of the other newly industrialized economies(NIEs) of Asia has succeeded only too well, and it is difficult to reorient economic priorities. If examined rigorously, such an economic strategic assumption can be seen to entail the goal of creating further technological capabilities. In particular, China seems to be firmly committed to the creation of a largely self-sustaining innovation system as part of a knowledge-based economy of the future . Such innovation systems, called positive feedback loop innovation systems or POLIS have been created by advanced countries, and NIEs such as South Korea and Taiwan are proceeding to create these as well. But this will add to its energy burden and further dependence on the US as the power which controls the key sea lanes. Only a strategic reorientation to building a self-sustaining POLIS and appropriate regional cooperation institutions can lead to the way out of the current dilemma for China. Fortunately, such a model of POLIS which is distributionally and ecologically sensitive can be built for China and applied strategically to lead towards a sustainable development trajectory. However, time is of the essence. Given the path dependence of development unless strategic disengagement from the existing path followed by a strategic engagement with the alternative strategy is begun within the next five years, it may well be too late. The stakes are indeed very high. A more detailed strategy paper based on the key ideas from the alternative strategy outlined here with concrete quantitative scenarios and feasibility studies along the lines of models sketched in the appendix ( and other, more detailed models) will go some distance towards giving the appropriate analytical foundations for the policy makers. The preliminary results confirm the predictions regarding fossil fuel-based energy shortage and lead towards a serious consideration of alternative energy sources. Achieving the twin goals of energy security and ecological balance are challenging but not impossible for China. Serious policy research can be used effectively if there is the political will to do so. The goal of regional cooperation is also achievable if patient negotiations in good faith can start in earnest. In particular, cooperation with other Asian economies, particularly Japan, Indonesia, Viet Nam and India will be crucial.This paper has sketched out the complexities of cooperation and conflict between China and Japan. Future work will address the problems of Regional cooperation for China in the East, South and South Asian context as well as in the context of Africa and Latin America.
    Keywords: China; Development Strategy; Energy; Environment; POLIS; Innovation System; Regional Cooperation
    JEL: Q32 D62 C68 O53 O13
    Date: 2008
  6. By: Ph. Monfort; Hylke Vandenbussche; E. Forlani
    Abstract: In this paper we study the effect of import competition from China on the Belgian textiles sector. Our analysis comprises both trade data and firm-level data. We study the evolution of the unit values in textiles exported from China into the EU versus textiles exported from Belgium to the rest of the EU over the past ten years. We clearly find evidence of a widening price gap between Chinese and Belgian textiles export prices. Chinese textiles seem to become relatively cheaper over time. These findings are in line with Schott (2004; 2007) who argues that capital abundant countries in the US and Europe use their endowment advantage to produce product varieties that are superior in quality compared to labour intensive countries like China. Next we use firm-level data on Belgian textiles firms in search of evidence of quality and skill upgrading in Belgian textiles exports. We study the evolution of firm-level variables such as R&D outlays, the proportion of skilled and unskilled labour used in production and capital intensity. Both China’s entry into the WTO and the end of the Multi- Fibre Agreement significantly seem to cause important shifts in firm level production processes. A very robust result that emerges from the analysis is the one of skill upgrading. While over the past ten years total employment in the Belgian textiles sector has substantially decreased, the ratio of skilled versus unskilled workers has gone up significantly. The evidence is indicative that the Belgian textile sector has been undergoing substantial changes. It is becoming smaller but at the same time seems to be responding to the competition from a low-wage country like China by increasing the skill-content of its products and moving up the quality ladder.
    Date: 2008
  7. By: Hong, Junjie; Fu, Shihe
    Abstract: Using the 2004 China economic census database, this paper examines the impact of information and communication technologies (ICT) on the geographic concentration of manufacturing industries, controlling for other determinants of industrial agglomeration. Higher geographic concentration is found consistently in industries where ICT are more widely adopted, and the association is stronger at higher geographic levels. Furthermore, young firms that have adopted ICT, although they are more footloose, contribute to industrial agglomeration. High-tech industries with advanced ICT also tend to agglomerate. Contrary to the prevalent argument that ICT lead to more dispersion, our study suggests that ICT promote industrial agglomeration.
    Keywords: Information and communication technologies; Geographic concentration; Agglomeration
    JEL: R32 R12
    Date: 2008–03–08

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