nep-cna New Economics Papers
on China
Issue of 2008‒09‒13
thirteen papers chosen by
Zheng Fang
Ohio State University

  1. Migrant labor markets and the welfare of rural households in the developing world : evidence from China By de Brauw, Alan; Giles, John
  2. The anatomy of China's export growth By Amiti, Mary; Freund, Caroline
  3. The determinants of the outward foreign direct investment of China and India: Whither the home country? By Tolentino, Paz Estrella
  4. Ownership, R&D and productivity change : assessing the catch-up in China’s high-tech industries By Yu, J.; Nijkamp, P.
  5. China is poorer than we thought, but no less successful in the fight against poverty By Chen, Shaohua; Ravallion, Martin
  6. Comparing Chinese and the Indian Software MNCs: Domestic and Export Market Strategies and Their Interplay By Niosi, Jorge; Tschang, F. Ted
  7. Impact of Revised CO2 Growth Projections for China on Global Stabilization Goals By Geoffrey J. Blanford; Richard G. Richels; Thomas F. Rutherford
  8. Rising income inequality in China : a race to the top By Luo, Xubei; Zhu, Nong
  9. Health reform, population policy and child nutritional status in China By Bredenkamp, Caryn
  10. The impact of remittances on rural poverty and inequality in China By Zhu, Nong; Luo, Xubei
  11. Financing rural development for a harmonious society in China : recent reforms in public finance and their prospects By Fock, Achim; Wong, Christine
  12. Domestic water pricing with household surveys : a study of acceptability and willingness to pay in Chongqing, China By Wang, Hua; Xie, Jian; Li, Honglin
  13. China and central and eastern European countries : regional networks, global supply chain, or international competitors? By Fung , K.C.; Korhonen, Iikka; Li, Ke; Ng, Francis

  1. By: de Brauw, Alan; Giles, John
    Abstract: In this paper, the authors examine the impact of reductions in barriers to migration on the consumption of rural households in China. The authors find that increased migration from rural villages leads to significant increases in consumption per capita, and that this effect is stronger for poorer households within villages. Household income per capita and non-durable consumption per capita both increase with out-migration, and increase more for poorer households. The authors also establish a causal relationship between increased out-migration and investment in housing and durable goods assets, and these effects are also stronger for poorer households. The authors do not find robust evidence, however, to support a connection between increased migration and investment in productive activity. Instead, increased migration is associated with two significant changes for poorer households: increases both in the total labor supplied to productive activities and in the land per capita managed by the household. In examining the effect of migration, we pay considerable attention to developing and examining our identification strategy.
    Keywords: Access to Finance,Population Policies,Economic Theory&Research,Labor Policies,Debt Markets
    Date: 2008–04–01
  2. By: Amiti, Mary; Freund, Caroline
    Abstract: Decomposing China's real export growth, of over 500 percent since 1992, reveals a number of interesting findings. First, China's export structure changed dramatically, with growing export shares in electronics and machinery and a decline in agriculture and apparel. Second, despite the shift into these more sophisticated products, the skill content of China's manufacturing exports remained unchanged, once processing trade is excluded. Third, export growth was accompanied by increasing specialization and was mainly accounted for by high export growth of existing products (the intensive margin) rather than in new varieties (the extensive margin). Fourth, consistent with an increased world supply of existing varieties, China's export prices to the United States fell by an average of 1.5 percent per year between 1997 and 2005, while export prices of these products from the rest of the world to the United States increased by 0.4 percent annually over the same period.
    Keywords: Economic Theory&Research,Free Trade,Trade Policy,Emerging Markets,Debt Markets
    Date: 2008–05–01
  3. By: Tolentino, Paz Estrella (School of Management and Organizational Psychology Birkbeck, University of London)
    Abstract: The current study examines the relationships between several home country-specific macroeconomic factors and the level of the outward FDI of China and India using multiple time-series data from 1982 to 2006 and from 1980 to 2006, respectively. With the use of a vector autoregressive model assessing the causal relationships of the endogenous variables, the empirical research proves that Chinese national characteristics associated with income per capita, openness of the economy to international trade, interest rate, human capital, technological capability, exchange rate and exchange rate volatility do not Granger cause the level of outward FDI of China. By contrast, the national technological capability of India Granger causes their level of outward FDI. The level of outward FDI of China does not Granger cause any of the home country-specific macroeconomic factors considered, while the level of outward FDI of India Granger causes their national interest rate.
    Keywords: outward FDI, home country, FDI determinants, China, India, MNCs, VAR model, foreign direct investment, multinational corporations
    JEL: F23 C32 C51
    Date: 2008
  4. By: Yu, J. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Nijkamp, P.
    Abstract: This study contributes to the debate on whether China’s domestic enterprises (DEs) have experienced a significant catch-up compared with foreign-funded enterprises (FFEs) in high-tech industries. Our paper tries to estimate a new set of capital stock and R&D capital stock by ownership for China’s high-tech industries. Then, using this newly constructed data set, it assesses the comparative productivity performance of state-owned enterprises (SOEs) (as the most important proxy for DEs) in high-tech industries from 1996 to 2006. The results show that SOEs as a whole have experienced an inverted U-shape trajectory of catch-up for 1996-2006, while those SOEs which originate from competitive industries tend to show a better performance. With respect to the technology catch-up, SOEs in particular are still lagging behind because of their failure to develop indigenous technology capabilities.
    Keywords: Productivity; R&D; Catch-up; Indigenous technology capability
    JEL: E22 L63 O47 P27
    Date: 2008
  5. By: Chen, Shaohua; Ravallion, Martin
    Abstract: In 2005, China participated for the first time in the International Comparison Program (ICP), which collects primary data across countries on the prices for an internationally comparable list of goods and services. This paper examines the implications of the new Purchasing Power Parity (PPP) rate (derived by the ICP) for China's poverty rate (by international standards) and how it has changed over time. We provide estimates with and without adjustment for a likely sampling bias in the ICP data. Using an international poverty line of USD 1.25 at 2005 PPP, we find a substantially higher poverty rate for China than past estimates, with about 15% of the population living in consumption poverty, implying about 130 million more poor by this standard. The income poverty rate in 2005 is 10%, implying about 65 million more people living in poverty. However, the new ICP data suggest an even larger reduction in the number of poor since 1981.
    Keywords: Rural Poverty Reduction,Population Policies,Achieving Shared Growth,ICT Applications
    Date: 2008–05–01
  6. By: Niosi, Jorge (Department of Management and Technology, University of Québec at Montréal); Tschang, F. Ted (School of Business, Singapore Management University)
    Abstract: China and India are emerging as major new entrants in the international software industry. Both are rapidly learning through outsourcing with multinational enterprises from advanced nations. Yet, their paths to this dynamic sector are very different. Chinese software firms have focused on their domestic market by working with foreign MNCs, while they move cautiously abroad. Indian firms, despite already being large, continue to expand overseas as well as to climb the value chain. We show that a macro perspective on the global movement of work can be gained by utilizing concepts from different approaches to the MNC. At the same time, the innovation systems perspective is necessary to explain the foundations of the industry. The paper provides hypotheses and performs an initial validation of them. It concludes that the internationalization and learning processes are somewhat different in the Chinese and Indian MNCs, and provides explanations for the different patterns.
    Keywords: outsourcing, software industry, industrial development, MNCs, MNEs, multinational enterprise, China, India
    JEL: L23 L24 O14 O32 P45
    Date: 2008
  7. By: Geoffrey J. Blanford (Electric Power Research Institute); Richard G. Richels (Electric Power Research Institute); Thomas F. Rutherford (Centre for Energy Policy and Economics)
    Abstract: Recent growth in carbon dioxide emissions from China’s energy sector has exceeded expectations. In a major US government study of future emissions released in 2007 (1), participating models appear to have substantially underestimated the near-term rate of increase in China’s emissions. We present a recalibration of one of those models to be consistent with both current observations and historical development patterns. The implications of the new specification for the feasibility of commonly discussed stabilization targets, particularly when considering incomplete global participation, are profound. Unless China’s emissions begin to depart soon from their (newly projected) business-as-usual path, stringent stabilization goals may be unattainable. The current round of global policy negotiations must engage China and other developing countries, not to the exclusion of emissions reductions in the developed world and possibly with the help of significant financial incentives, if such goals are to be achieved. It is in all nations’ interests to work cooperatively to limit our interference with the global climate.
    Keywords: Energy-Economy Modeling, China, Economic Growth Rates, Energy Intensity, International Climate Policy
    JEL: Q48 H23 O13
    Date: 2008–09
  8. By: Luo, Xubei; Zhu, Nong
    Abstract: Income inequality in China has risen rapidly in the past decades across regions, between rural and urban sectors, and within provinces. The dynamics of divergence across these sub-national areas have taken the form of a"race to the top"- meaning that all segments of the population, including the poor with low education in lagging inland rural areas, have experienced gains in average income. The largest gains have been registered by those with higher income and education in leading coastal urban areas. Using the China Economic, Population, Nutrition and Health Survey data of 1989 and 2004, we show that the most important factors explaining overall inequality are differential returns to schooling and sector of employment. A decomposition analysis based on household income determination shows that the increase in returns to education explains two-thirds of income changes in urban areas and one-sixth in rural areas. The widening income gaps are the consequence of higher growth in leading urban and coastal areas and that the skilled population has benefited more from the economic reforms carried out during the last 25 years. The authors argue that rising income inequality can be part of a normal process of development at a certain stage, and that the dynamics of spatial income divergence in the form of"a race to the top"can be desirable to some extent as it unleashes competitive pressure and creates incentives for investment in skills. Continuing to improve market efficiency and investing in people, in particular improving education service in lagging areas to poor people, are important for sustainable growth and equitable distribution in the long run.
    Keywords: Rural Poverty Reduction,Inequality,Achieving Shared Growth,Population Policies,
    Date: 2008–08–01
  9. By: Bredenkamp, Caryn
    Abstract: This paper examines the determinants of child nutritional status in seven provinces of China during the 1990s, focusing specifically on the role of two areas of public policy, namely health system reforms and the one child policy. The empirical relationship between income and nutritional status, and the extent to which that relationship is mediated by access to quality healthcare and being an only-child, is investigated using ordinary least squares, random effects, fixed effects, and instrumental variables models. In the preferred model - a fixed effects model where income is instrumented - the author find that being an only-child increases height-for-age z-scores by 0.119 of a standard deviation. The magnitude of this effect is found to be largely gender and income neutral. By contrast, access to quality healthcare and income is not found to be significantly associated with improved nutritional status in the preferred model. Data are drawn from four waves of the China Health and Nutrition Survey.
    Keywords: Health Monitoring&Evaluation,Population Policies,Transport Economics Policy&Planning,Health Systems Development&Reform,Rural Poverty Reduction
    Date: 2008–04–01
  10. By: Zhu, Nong; Luo, Xubei
    Abstract: Large numbers of agricultural labor moved from the countryside to cities after the economic reforms in China. Migration and remittances play an important role in transforming the structure of rural household income. This paper examines the impact of rural-to-urban migration on rural poverty and inequality in the case of Hubei province using the data of a 2002 household survey. Since remittances are a potential substitute for farm income, the paper presents counterfactual scenarios of what rural income, poverty, and inequality would have been in the absence of migration. The results show that, by providing alternatives to households with lower marginal labor productivity in agriculture, migration leads to an increase in rural income. In contrast to many studies that suggest the increasing share of non-farm income in total income widens inequality, this paper offers support for the hypothesis that migration tends to have egalitarian effects on rural income for three reasons: (i) migration is rational self-selection - farmers with higher agricultural productivities choose to remain in local agricultural production while those with higher expected return in urban non-farm sectors migrate; (ii) poorer households facing binding constraints of land shortage are more likely to migrate; and (iii) the poorest poor benefit disproportionately from remittances.
    Keywords: Rural Poverty Reduction,Population Policies,Access to Finance,Inequality
    Date: 2008–05–01
  11. By: Fock, Achim; Wong, Christine
    Abstract: The Government of China has placed strong emphasis on addressing problems related to agriculture, farmers, and rural society, with the development of a"new socialist countryside"designated as a top priority for the Eleventh Five-Year Plan (2006-2010). The financing of public services in rural areas will be a key determinant of the Plan's success. This report analyzes the performance of the intergovernmental fiscal system - the financing of rural development through counties, townships, and villages - and the impact of recent reforms. The authors show that achieving the government's objectives will require channeling substantial new resources to rural areas. In addition, ensuring the effective transfer of resources and their efficient utilization will require fundamental reforms to a wide range of public institutions, including budget and planning processes, personnel management systems, and the organization of government agencies. The authors argue that a comprehensive reform strategy is needed to address fundamental vertical and horizontal imbalances in the intergovernmental fiscal system The reforms must reach beyond the fiscal system to build improved accountability mechanisms to improve public service delivery at the grassroots level. And, given China's size and diversity, reform efforts must focus on improving incentive structures at the county, township, and village levels.
    Keywords: Public Sector Economics&Finance,Access to Finance,Banks&Banking Reform,Debt Markets,
    Date: 2008–08–01
  12. By: Wang, Hua; Xie, Jian; Li, Honglin
    Abstract: In determining domestic water prices, policy makers often need to use information about the demand side rather than only relying on information about the supply side. Household surveys have frequently been employed to collect demand-side information. This paper presents a multiple bounded discrete choice household survey model. It discusses how the model can be utilized to collect and analyze information about the acceptability of different water prices by different types of households, as well as households'willingness to pay for water service improvement. The results obtained from these surveys can be directly utilized in the development of water pricing and subsidy policies. The paper also presents an empirical multiple bounded discrete choice study conducted in Chongqing, China. In this case, domestic water service quality was seriously inadequate, but financial resources were insufficient to improve service quality. With a survey of about 1,500 households in five suburban districts in Chongqing Municipality, this study shows that a significant increase in the water price is feasible as long as the poorest households can be properly subsidized and certain public awareness and accountability campaigns can be conducted to make the price increase more acceptable to the public. The analysis also indicates that the order in which hypothetical prices are presented to respondents systematically affects their answers, and should be taken into account when designing survey instruments.
    Keywords: Town Water Supply and Sanitation,Water Supply and Sanitation Governance and Institutions,Environmental Economics&Policies,Water and Industry,Water Supply and Systems
    Date: 2008–08–01
  13. By: Fung , K.C.; Korhonen, Iikka; Li, Ke; Ng, Francis
    Abstract: China has emerged as one of the top recipients of foreign direct investment in the world. Meanwhile, the successful transition experience of many Central and Eastern European countries has also allowed them to attract an increasing share of global foreign direct investment. In this paper, the authors use a panel data set to investigate whether foreign direct investment flows to these two regions are complements, substitutes, or independent of each other. Taking into account the role of host country characteristics - such as market size, degree of trade liberalization, and human capital - the authors find no evidence that foreign direct investment flows to one region are at the expense of those to the other. Instead, the results suggest that foreign direct investment flows are driven by distinct regional production networks (and thus are largely independent of each other) and the development of global supply chains (indicating that foreign direct investment flows are complementary).
    Keywords: Debt Markets,Foreign Direct Investment,Emerging Markets,Economic Theory&Research,Investment and Investment Climate
    Date: 2008–08–01

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