nep-cna New Economics Papers
on China
Issue of 2008‒06‒21
seven papers chosen by
Zheng Fang
Ohio State University

  1. Does the Chinese Banking System Promote the Growth of Firms? By Panicaos Demetriades; Jun Du; Sourafel Girma; Chenggang Xu
  2. Real and Financial Sector Linkages in China and India By Jahangir Aziz
  3. Self-selection and Earnings of Migrants: Evidence from Rural China By Zheren WU
  4. A Real Model of Transitional Growth and Competitiveness in China By Céline Rochon; Geneviève Verdier; Leslie Lipschitz
  5. Relative Income Positions and Labor Migration: A Panel Study Based on a Rural Household Survey in China By Zheren WU
  6. Educational inequality and educational poverty. The chinese case in the period 1975-2004 By Saccone Donatella
  7. Economy, order and social control: the maoist case By EL KAROUNI, Ilyess

  1. By: Panicaos Demetriades (University of Leicester); Jun Du (Aston University); Sourafel Girma (University of Nottingham); Chenggang Xu (London School of Economics)
    Abstract: Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.
    Keywords: Chinese banking system development, value added and TFP growth, panel dataset
    JEL: E44 O53
    Date: 2008–02
  2. By: Jahangir Aziz
    Abstract: In the spirit of what is known as business cycle accounting, this paper finds that the investment wedge-the gap between household's rate of intertemporal substitution and the marginal product of capital-is large and quantitatively significant in explaining China's and India's growth. Specific financial sector policies are shown to map well the size and changes in the investment wedge. In the case of China, nonperforming loans, borrowing constraints, and uncertainty over changes in government guidance in bank lending, have implied large transfers from households to firms that have kept capital cost low and encouraged investment. In the case of India, post-1992 financial sector reforms, particularly the reduction in the funds preempted by the government from the banking system, has played an important role in reducing the cost of capital. Simulations show that for rebalancing growth in China and sustaining high investment rate in India, further financial sector reforms could turn out to be key.
    Keywords: Working Paper , China, People's Republic of , India ,
    Date: 2008–04–22
  3. By: Zheren WU (Osaka School of International Public Policy, Osaka University)
    Abstract: Using data from a rural household survey in China, this paper explores the link between employment choice (nonworking, local farm work, local nonfarm work and migratory work) and migrant earnings. We find significant self-selection in migration. Youths, males, better-educated individuals and those in good health are more likely to migrate. In terms of unobserved characteristics, we find positive selection in migration as related to the alternatives of not working and local farm work, and insignificant self-selection as related to local nonfarm work. Controlling for self-selection, the wage returns to gender (male), education and health are lower than those obtained from simple ordinary least squares (OLS), and the returns to experience are higher. More importantly, we find different self-selection between individuals who have moved as pioneers and migrants from households in which other members have already migrated.
    Keywords: Migration, Migration, Self-selection, Pioneer migrants
    JEL: J24 J31 O15
    Date: 2008–06
  4. By: Céline Rochon; Geneviève Verdier; Leslie Lipschitz
    Abstract: We present a stylized real model of the Chinese economy with the objective of explaining two features: (1) domestic production is highly competitive in the sense that an accumulation of capital that raises the marginal product of labor elicits increases in employment and output rather than only in wages; and (2) even though the domestic saving rate is high, foreign direct investment is also substantial. We explain these features in terms of a conventional neoclassical growth model-with no monetary or nominal exchange rate policy-by including two aspects of the economy explicitly in the model: (1) low production wages are sustained by a large reserve army of rural labor which drives internal migration, and (2) domestic capital is distinct from importable capital and complementary with it in production. The results suggest that underlying real phenomena are important in explaining recent history; while nominal renmimbi appreciation may dampen price and wage increases, it would probably not change the real factors that have sustained rapid growth.
    Keywords: Working Paper , China, People's Republic of , Economic growth , Competition , Foreign investment , Investment , Savings , Labor supply , Wages , Prices , Exchange rates ,
    Date: 2008–04–25
  5. By: Zheren WU (Osaka School of International Public Policy, Osaka University)
    Abstract: Migration may be used as a strategy to improve a householdfs comparative income position in residential areas. Previous studies have found empirical evidence that relative incomes affect emigration decisions. However, no effect is detected for internal migration. In this paper, we reexamine the effect of relative income positions on internal migration behavior. Based on data from a rural household panel survey of the Sichuan and Anhui provinces in China, we find that motives based on relative income play an important role in householdsf migration decisions. When all else is equal, a household that is poor relative to its home village reference group is more likely to increase migration than is a household in the upper end of the village income distribution. This effect is particularly apparent in households with pioneer migrants. The empirical results also indicate that pioneer migrants may confer a positive externality on potential future migrants. Workers belonging to households with pioneers might be less impeded by migration risks and costs and may be more likely to view migration (an increase in the number of migrants) as an effective strategy for improving their relative economic positions.
    Keywords: Migration, Relative income position, Pioneer migrants
    JEL: J24 O15 R23
    Date: 2008–06
  6. By: Saccone Donatella (University of Turin)
    Date: 2008–05
  7. By: EL KAROUNI, Ilyess
    Abstract: Faced with a mixed civilian population, the action of the Chinese Communist Party (CCP) can be grasped in the light of collective action. According to its support to the PCC, we can divide up the population into two groups. The first has an interest in the action of the new government which must then prevent the attitude known as "free-riding". The second is unfavourable and the CCP must prevent it to be obstructive. In these conditions how the Chinese leaders can build a new order while enjoying, if not the cooperation, at least the "silence" of the population? Coercion, satisfaction of the interests of a portion of the population and in particular ideology are solutions. Indeed, people can act collectively if they have an interpretative framework, or in other words a common ideology. Various elements of what Lindblom calls "préceptoral system" are implemented. Admittedly, coercion and granting favors are also used to regulate the new order in formation. But it rests essentially on education, persuasion, indoctrination. As the episode of the Great Leap Forward show, ideological incentives replace the traditional economic one that are crystallized in contracts and property rights.
    Keywords: Collective action; coercion; incentive; ideology; Great Leap forward
    JEL: N45 P35
    Date: 2008–06–18

This nep-cna issue is ©2008 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.