nep-cna New Economics Papers
on China
Issue of 2008‒03‒25
twelve papers chosen by
Zheng Fang
Ohio State University

  1. Aspirations, Adaptation and Subjective Well-Being of Rural-Urban Migrants in China By John Knight; Ramani Gunatilaka
  2. Can the Augmented Solow Model Explain China's Economic Growth? A Cross-Country Panel Data Analysis By Sai Ding; John Knight
  3. Resource abundance and regional development in China: By Zhang, Xiaobo; Xing, Li; Fan, Shenggen; Luo, Xiaopeng
  4. Trade Growth, Production Fragmentation, and China's Environment By Judith M. Dean; Mary E. Lovely
  5. Hong Kong SAR as a Financial Center for Asia: Trends and Implications By Cynthia Leung; Olaf Unteroberdoerster
  6. The role of clustering in rural industrialization: A Case Study of the Footwear Industry in Wenzhou By Huang, Zuhui; Zhang, Xiaobo; Zhu, Yunwei
  7. The Higher Educational Transformation of China and Its Global Implications By Yao Li; John Whalley; Shunming Zhang; Xiliang Zhao
  8. A Test of the Balassa-Samuelson Effect Applied to Chinese Regional Data By Stephen G Hall; Qian Guo
  9. Trade remedies and non-market economies : economic implications of the first US countervailing duty case on China By Zhao, Longyue; Wang, Yan
  10. Migration Experiences of North Korean Refugees: Survey Evidence from China By Yoonok Chang; Stephan Haggard; Marcus Noland
  11. Offshoring and Trade in East Asia: Statistical Evidences By WAKASUGI Ryuhei; ITO Banri; TOMIURA Eiichi
  12. Impact of contract farming on income: Linking small farmers, packers, and supermarket in China By Miyata, Sachiko; Minot, Nicholas; Hu, Dinghuan

  1. By: John Knight; Ramani Gunatilaka
    Abstract: This research is among the first to link the literatures on migration and on subjective well-being in developing countries. It poses the question: why do rural-urban migrant households settled in urban China have an average happiness score lower than that of rural households? It examines the hypothesis that migrants have false expectations because they cannot foresee how their aspirations will adapt to their new situation, and draws on research on both psychology and sociology. Estimated happiness functions and decomposition analyses, based on a 2002 national household survey, suggest that their high aspirations in relation to achievement, influenced by their new reference groups, make for unhappiness. The evidence is consistent with the hypothesis.
    Keywords: Rural-Urban Migration, Subjective Well-Being, Happiness, Relative Deprivation, Aspirations, China
    JEL: I32 O15
    Date: 2008
  2. By: Sai Ding; John Knight
    Abstract: China’s economy grew at an average annual real growth rate of 9 percent over the last three decades. Despite the vast empirical literature on testing the neoclassical model of economic growth using data on various groups of countries, very few cross-country regressions include China and none of them particularly focuses on the explanation of China’s remarkable economic growth. We attempt to fill this gap by utilizing panel data on 146 countries over the period 1980-2000 to examine the extent to which the growth difference between China and other countries can be explained by the augmented Solow model. The estimates are based on system GMM estimation which allows for unobserved country-specific effects, measurement error, and endogeneity problems of regressors. We find that, in spite of the restrictive assumptions involved, the Solow model augmented by both human capital and structural change provides a fairly good account of international variation in economic growth. In particular, physical capital investment, changes in the structure of employment, conditional convergence, and population growth are the main sources of the growth difference between China and many other countries.
    Keywords: China, Augmented Solow Model, Cross-Country Growth Regression
    JEL: O11 O47
    Date: 2008
  3. By: Zhang, Xiaobo; Xing, Li; Fan, Shenggen; Luo, Xiaopeng
    Abstract: "Over the past several decades, China has made tremendous progress in market integration and infrastructure development. Demand for natural resources has increased from the booming coastal economies, causing the terms of trade to favor the resource sector, which is predominantly based in the interior regions of the country. However, the gap in economic development level between the coastal and inland regions has widened significantly. In this paper, using a panel data set at the provincial level, we show that Chinese provinces with abundant resources perform worse than their resource-poor counterparts in terms of per capita consumption growth. This trend that resource-poor areas are better off than resource-rich areas is particularly prominent in rural areas. Because of the institutional arrangements regarding property rights of natural resources, most gains from the resource boom have been captured either by the government or state owned enterprises. Thus, the windfall of natural resources has more to do with government consumption than household consumption. Moreover, in resource-rich areas, greater revenues accrued from natural resources bid up the price of non-tradable goods and hurt the competitiveness of the local economy." from Authors' Abstract
    Keywords: Regional inequality, Resource curse, Dutch disease, Property rights, Rural-urban linkages,
    Date: 2007
  4. By: Judith M. Dean; Mary E. Lovely
    Abstract: Trade growth for a relatively poor country is thought to shift the composition of industrial output towards dirtier products, aggravating environmental damage. China's rapidly growing trade and serious environmental degradation appear to be no exception. However, much of China's trade growth is attributable to the international fragmentation of production. This kind of trade could be cleaner, if fragmented production occurs in cleaner goods, or if China specializes in cleaner stages of production within these goods. Using Chinese official environmental data on air and water pollution, and official trade data, we present evidence that (1) China's industrial output has become cleaner over time, (2) China's exports have shifted toward relatively cleaner, highly fragmented sectors, and (3) the pollution intensity of Chinese exports has fallen dramatically between 1995 and 2004. We then explore the role of fragmentation and FDI in this trend toward cleaner trade. Beginning with a standard model of the pollution intensity of trade, we develop a model that explicitly introduces production fragmentation into the export sector. We then estimate this model using pooled data on four pollutants over ten years. Econometric results support the view that increased FDI and production fragmentation have contributed positively to the decline in the pollution intensity of China's trade, as has accession to the WTO and lower tariff rates.
    JEL: F1 F14 F18 F2
    Date: 2008–03
  5. By: Cynthia Leung; Olaf Unteroberdoerster
    Abstract: We document Hong Kong SAR's evolving role as an international financial center in the Asia region, the importance of the growing special link with China as well as supply-side advantages, and outline the scope for future financial services growth. Hong Kong SAR has a long established track record as Asia's premier center for cross-border financial transactions. Further financial opening of China is likely to consolidate Hong Kong SAR's leading position as Asia's international financial center over the medium term. However, preserving Hong Kong SAR's first-mover advantage in the long-term calls for a development strategy that balances reaping the benefits from the special China role with the need to transcend into a truly international center in the long run.
    Keywords: Financial sector , Hong Kong Special Administrative Region of China , Capital flows , Banking , Foreign direct investment ,
    Date: 2008–03–05
  6. By: Huang, Zuhui; Zhang, Xiaobo; Zhu, Yunwei
    Abstract: "Wenzhou used to be one of the poorest regions in eastern China. With limited arable land, poor road access to major cities, and little support from the upper level governments, this region seemed to lack all the conditions necessary for economic growth. However, over the past several decades Wenzhou has developed the most dynamic private sector in China, and has accordingly achieved one of the fastest growth rates. In particular, the footwear industry in Wenzhou has grown from a negligible market share to the largest in China. Here, we report a survey of 140 Wenzhou-based footwear enterprises of various scales, and use this information to examine the driving forces behind the dramatic rural industrial growth seen in this region. Our results show that clustering deepens the division of labor in the production process and makes it possible for small entrepreneurial firms to enter the industry by focusing on a narrowly defined stage of production. Therefore, Wenzhou represents an example of how clustering plays a significant role in helping fledgling rural industries overcome the growth constraints of capital and technology in the incipient stage of industrialization." from Authors' Abstract
    Keywords: Cluster analysis, Industrialization, Finance, Economic development, Nonfarm economy,
    Date: 2007
  7. By: Yao Li; John Whalley; Shunming Zhang; Xiliang Zhao
    Abstract: This paper documents the major transformation of higher education that has been underway in China since 1999 and evaluates its potential global impacts. Reflecting China's commitment to continued high growth through quality upgrading and the production of ideas and intellectual property as set out in both the 10th (2001-2005) and 11th (2006-2010) five-year plans, this transformation focuses on major new resource commitments to tertiary education and also embodies significant changes in organizational form. This focus on tertiary education differentiates the Chinese case from other countries who earlier at similar stages of development instead stressed primary and secondary education. The number of undergraduate and graduate students in China has been grown at approximately 30% per year since 1999, and the number of graduates at all levels of higher education in China has approximately quadrupled in the last 6 years. The size of entering classes of new students and total student enrollments have risen even faster, and have approximately quintupled. Prior to 1999 increases in these areas were much smaller. Much of the increased spending is focused on elite universities, and new academic contracts differ sharply from earlier ones with no tenure and annual publication quotas often used. All of these changes have already had large impacts on China's higher educational system and are beginning to be felt by the wider global educational structure. We suggest that even more major impacts will follow in the years to come and there are implications for global trade both directly in ideas, and in idea derived products. These changes, for now, seem relatively poorly documented in literature.
    JEL: I2 I23
    Date: 2008–03
  8. By: Stephen G Hall; Qian Guo
    Abstract: In this paper we investigate the relevance of the Balassa-Samuelson effect to the determination of regional inflation in China, for the period 1985 – 2000. To do this, we first construct annual measures of Chinese inflation and industry input on regional and sectoral basis. Then we generalize the Asea and Mendoza (1994) settings to consider asymmetric productivity shocks across sectors. Testing this model on Chinese Regional Data aid of non-stationary panel data techniques, it shows that our extended theoretical model is a good empirical representation of the Chinese data which supports the Balassa- Samuelson effect. Moreover, we are able to test the Asea and Mendoza (1994) version of our general model and find that the restrictions are rejected.
    Date: 2008–03
  9. By: Zhao, Longyue; Wang, Yan
    Abstract: In 2007, the United States Department of Commerce altered a 23-year old policy of not applying the countervailing duty law to non-market economies, and initiated eight countervailing and antidumping duty investigations on Chinese imports. The change brings heated debate on trade remedy policies and issues of non-market economies. This study focuses on the first countervailing duty case on imported coated free sheet paper from China and analyzes the implications of this test case for United States-China bilateral trade, and industrial policies in transitioning market economies. The paper also provides a brief review of the economics of subsidies, World Trade Organization rules on subsides and countervailing measures, and United States countervailing duty laws applied to non-market economies. While recently acceded countries should review their domestic development policies from the perspective of economic efficiency and comply with the World Trade Organization rules, it is also important to further clarify the issues of non-market economies under the multilateral trading system, and pay keen attention to the rules negotiations in the current World Trade Organization Doha Development Round.
    Keywords: Economic Theory & Research,Trade Law,Emerging Markets,Markets and Market Access,Debt Markets
    Date: 2008–03–01
  10. By: Yoonok Chang (Hansei University, Foreign Language Education Center, Department of Graduate Education); Stephan Haggard (University of California, San Diego Graduate School of International Relations and Pacific Studies); Marcus Noland (Peterson Institute for International Economics)
    Abstract: Chronic food shortages, political repression, and poverty have driven tens of thousands of North Koreans into China. This paper reports results from a large-scale survey of this refugee population. The survey provides insight not only into the material circumstances of the refugees but also into their psychological state and aspirations. One key finding is that many North Korean refugees suffer severe psychological stress akin to post-traumatic stress disorder. This distress is caused in part by their vulnerability in China, but it is also a result of the long shadow cast by the North Korean famine and abuses suffered at the hands of the North Korean political regime: first and foremost, perceptions of unfairness with respect to the distribution of food aid, death of family members during the famine, and incarceration in the North Korean gulag, where the respondents reported witnessing forced starvation, deaths due to torture, and even infanticide and forced abortions. These traumas, in turn, affect the ability of the refugees to hold jobs in China and accumulate resources for on-migration to third countries. Most of the refugees want to permanently resettle in South Korea, though younger, better-educated refugees prefer the United States as a final destination.
    Keywords: North Korea, China, refugees, migration
    JEL: P2 P3 F22
    Date: 2008–04
  11. By: WAKASUGI Ryuhei; ITO Banri; TOMIURA Eiichi
    Abstract: Japanese shares of export and manufacturing value added in the global market have declined significantly, whereas those in China have risen sharply. Recent increase of global offshoring is noteworthy as a factor to cause changes in the structure of international trade and the production-depth. This paper examines how recent increase of offshoring by Japanese firms relates to the changes in the composition of export and manufacturing value added among Japan, China, East Asian countries, the US, and European countries, on the basis of our original survey of Japanese firmfs offshoring and the statistics of export and manufacturing production of these countries. It also discusses how the net cost saving of offshoring due to wage differentials and institutional factors will affect the sustainability of Japanese offshoring.
    Date: 2008–03
  12. By: Miyata, Sachiko; Minot, Nicholas; Hu, Dinghuan
    Abstract: "Contract farming is seen by proponents as a way to raise small-farm income by delivering technology and market information to small farmers, incorporating them into remunerative new markets. Critics, however, see it as a strategy for agribusiness firms to pass production risk to farmers, taking advantage of an unequal bargaining relationship. There is also concern that contract farming will worsen rural income inequality by favoring larger farmers. This study examines these issues in Shandong Province, China, using survey data collected from 162 apple and green onion farmers and interviews with four contracting firms in 2005. Using a probit model to estimate participation in a contract-farming scheme, we find little evidence that contracting firms prefer to work with larger farmers, though all farms in the area are quite small. Furthermore, using a Heckman selection-correction model to control for possible selection bias, we find that contract farmers earn significantly more than independent farmers after controlling for household labor availability, education, farm size, and other characteristics. Finally, we find that the way contracting contributes to farm income varies between commodities: contract apple growers benefit from higher yields (presumably due to technical assistance), while contract green onion growers receive higher prices (presumably due to better quality). These results suggest that contract farming can help small farmers raise their incomes and gain access to the growing urban and export markets. Questions remain regarding the number of farmers that are, or could be, brought into similar contract arrangements." from Authors' Abstract
    Keywords: Contract farming, Horticulture, exports, Small farmers, Supermarkets,
    Date: 2007

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