nep-cna New Economics Papers
on China
Issue of 2008‒10‒21
nine papers chosen by
Zheng Fang
Ohio State University

  1. The Dragon vs. The Elephant: Comparative Analysis of Innovation Capability in the Telecommunications Equipment Industry in China and India By Sunil Mani
  2. Policies for Industrial Learning in China and Mexico: Neo-developmental vs. Neo-liberal approaches By Shafaeddin, Mehdi; Gallaher, Kevin
  3. Creative China? The University, Tolerance and Talent in Chinese Regional Development By Florida, Richard; Mellander, Charlotta; Qian, Haifeng
  4. China's Regional Convergence in Panels with Multiple Structural Breaks By Matsuki, Takashi; Usami, Ryoichi
  5. China: Shadow WTO agricultural domestic support notifications By Cheng, Fuzhi
  6. Metal Intensity in Comparative Historical Perspective: China, North Asia, the United States & the Kuznets Curve By Huw McKay
  7. Race to the top and race to the bottom: Tax competition in rural China: By Yao, Yi; Zhang, Xiaobo
  8. The dragon and the elephant: Learning from agricultural and rural reforms in China and India By Gulati, Ashok; Fan, Shenggen
  9. Urbanization and the spread of diseases of affluence in China By Van der Poel, E; O'Donnell, O; van Doorslaer, E

  1. By: Sunil Mani
    Abstract: China and India have one of the largest telecommunications equipment markets in the world. The paper employs a sectoral system of innovation framework towards understanding the differential outcomes in innovation capability building in the industry achieved by China and India. The countries have pursued widely diverging strategies for developing their domestic innovation capability. Although the sectoral system of innovation in both the countries were promoted and nurtured by the state through a variety of instruments, the quality of such interventionist strategy is found to be better in China. The final outcome proves this line of argument. [CDS Working Paper 373, July 2005]
    Keywords: Innovation capability, China, India, Telecommunications industry, Digital switching systems, Mobile telephony
  2. By: Shafaeddin, Mehdi; Gallaher, Kevin
    Abstract: Abstract Previous work has shown that the results of both China and Mexico’s export-led market reforms over the past quarter century have been strikingly different. In contrast to China, Mexico has not managed to increase the value added of its exports of manufactured goods and has subsequently had a difficult time competing with China in world markets. Building on this previous work, in this paper we conduct a comparative analysis of the role of government policies in industrial learning and the development of capabilities of indigenous firms in Mexico and China in order to shed light on why China is so outperforming Mexico. We find that Mexico and China have had starkly different approaches to economic reform in this area. Mexico’s approach to reform has been a “neo-liberal” one, whereas China’s could be described as “neo-developmental.” Mexico’s hands-off approach to learning has resulted in a lack of development of endogenous capacity of domestic firms, little transfer of technology, negligible progress in the upgrading of industrial production, and little increase in value added of exports. By contrast, China has deployed a hands-on approach of targeting and nurturing domestic firms through a gradual and trial and error led set of government policies.
    Keywords: International trade; development; competitiveness; value added; government policy; assembly operations
    JEL: O38 O25 O34 I0 O32 L60 O14 L63 N65 O30 F10 L52 I00 O20 O31 P52
    Date: 2008–09
  3. By: Florida, Richard (Martin Prosperity Institute); Mellander, Charlotta (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Qian, Haifeng (School of Public Policy, George Mason University)
    Abstract: The relationships between talent, technology and regional development have been widely examined in the advanced economies. While there is a general consensus as to the important role talent plays in regional development, debate has emerged on two key issues. The first involves the efficacy of educational (i.e. human capital) versus occupational (i.e. the creative class) measures of talent; the second involves the factors affecting the distribution of talent. In this study, we have used structural equation models and path analysis. We employed both educational and occupational measures of talent to examine the relationships between talent, technology and regional economic performance in China, and to isolate the effects of tolerance, differing levels of consumer service amenities, and the location of universities on the distribution of talent. Contrary to the findings of empirical studies on the developed economies, we found the relationships between the distribution of talent and technology and between the distribution of talent and regional economic performance in China to be weak. We found the presence of universities – a factor highly influenced by government policy – and the actual stock of talent to be strongly related. We also found that tolerance, as measured by the “Hukou index,” plays an important role in the distribution of talent and technology in China.
    Keywords: China; Talent; Human Capital; Creative Class; Tolerance; Technology; Regional Development
    JEL: O30 P30 R12
    Date: 2008–10–13
  4. By: Matsuki, Takashi; Usami, Ryoichi
    Abstract: This study investigates the existence of regional convergence of per capita outputs in China from 1952–2004, particularly focusing on considering the presence of multiple structural breaks in the provincial-level panel data. First, the panel-based unit root test that allows for occurrence of multiple breaks at various break dates across provinces is developed; this test is based on the p-value combination approach suggested by Fisher (1932). Next, the test is applied to China’s provincial real per capita outputs to examine the regional convergence in China. To obtain the p-values of unit root tests for each province, which are combined to construct the panel unit root test, this study assumes three data generating processes: a driftless random walk process, an ARMA process, and an AR process with cross-sectionally dependent errors in Monte Carlo simulation. The results obtained from this study reveal that the convergence of the provincial per capita outputs exists in each of the three geographically classified regions—the Eastern, Central, and Western regions—of China.
    Keywords: panel unit root test;multiple breaks;combining p-values;nonstationary panels;China;convergence
    JEL: O47 C12 C33
    Date: 2007–03–17
  5. By: Cheng, Fuzhi
    Abstract: "This paper reviews recent agricultural policy changes in China and presents estimates of domestic support for the period 1996-2005. A set of relevant alternative subsidy-definition scenarios and their effects on the calculated levels of support are analyzed, and a projection of domestic support through 2013 is presented. The paper concludes with a discussion of new WTO rules that may be negotiated in the Doha Round and their implications for China. Based on standard WTO subsidy calculation methods, our results indicated that China's domestic support for the period 1996-2005 has been well below the limits agreed at its WTO accession. The market price support (MPS) component of the aggregate measure of support (AMS) in China has been below zero, and this has dwarfed the relatively small but positive non-product specific AMS and led to a zero current total AMS after de minimis. China has no AMS commitments but can provide trade-distorting domestic support to agricultural producers up to 8.5 percent of the value of production (or RMB561 billion). Thus there appears to be substantial room for China to extend its amber box subsidy measures through heavy use of the de minimis provision. We project domestic support notifications through 2013 based on specified assumptions about domestic policies, including changes in administered prices and commodity program coverage. New rules potentially negotiated in the Doha Round are expected to provide more constraints on subsidies. Due to China's developing country status, with no AMS commitments under the Uruguay Round Agreement on Agriculture the impacts of these new constraints are shown to be limited, although our projections indicate that China may exceed its WTO commitment levels under certain price and commodity coverage scenarios." from authors' abstract
    Keywords: Agricultural policies, WTO Doha round, WTO compliance, Notification of domestic support, China agricultural support policies, Globalization, Markets,
    Date: 2008
  6. By: Huw McKay
    Abstract: The aim of this paper is to investigate the likely future path of China’s metal intensity by referencing the experience of relevant peers through initial engagement with a technology-led strategy and beyond. This question cuts to the very roots of Chinese long run economic strategy and performance. The broad conclusion is that there is no ‘silver bullet’ quantitative model that captures the dynamics of metal intensity through the entirety of the industrialisation process. Even the identification of a robust non-linear long run relationship between steel intensity and income per capita in the United States, styled here as the “metal intensity Kuznets curve”, does not overturn this position. Each national industrialisation process, its entry into the global strategic transition and its relationship to metal intensity, appears to be sui generis and should be dealt with accordingly. China will not continue to follow a metal intensity path similar to Korea’s for more than another decade. After that point, similarities with the Japanese and United States’ experiences will increase, but a distinct Chinese character will develop. The peak in Chinese steel usage per capita should occur within a handful of years from 2020.
    Keywords: metal intensity, Asian industrialisation, China, strategic transition, Kuznets curve
    JEL: N1
    Date: 2008–09
  7. By: Yao, Yi; Zhang, Xiaobo
    Abstract: "Fiscal federalism has been argued to intensify regional competition and promote economic growth. This paper is the first, to our knowledge, to empirically assess the patterns and extent of strategic tax competition between geographically neighboring governments in China. Using a panel data set containing data at the county level, we apply Anselin's (1995) local indicator of spatial association (LISA) approach to statistically test the existence of local capital tax competition and examine its determining factors. We find heterogeneous tax competition behaviors across regions. Under decentralized fiscal structure and centralized merit-based governance structure, local governments have strong incentives to compete with each other to attract mobile capital. Counties in the coastal areas with favorable initial conditions of larger tax base tend to “race to the bottom” by lowering tax rates so as to create a pro-business environment. In contrast, the local governments in poor regions have difficulty in competing with the governments on the coast to attract investment and develop the local nonfarm economy. Their local revenues are sometimes barely sufficient to cover the salaries of civil servants on the public payroll. Consequently, they are more likely to levy heavy taxes on existing enterprises, worsening the business investment environment. This leads to a “race to the top” in raising effective tax rate in lagging regions." from authors' abstract
    Keywords: Fiscal decentralization, Regional inequality, Tax competition, economic growth, Development strategies,
    Date: 2008
  8. By: Gulati, Ashok; Fan, Shenggen
    Abstract: "During the past two-and-a-half decades, China and India have implemented a series of economic reforms that have led to recent growth rates of 9-11 percent per year in China and 8-9 percent per year in India. The rapid economic growth of the two countries has not only captured the attention of the world but has also set into motion a rethinking of the very paradigm of economic development because, despite similar trends in growth rates, the two countries have taken different reform paths, which have led to different rates of poverty reduction. Thus far, agriculture-led growth in China has reduced poverty much faster than has India's experience of liberalizing and reforming the manufacturing sector. With public investments in rural roads and agricultural research and development (R&D) playing critical roles, China has been able to not only feed its population but also raise rural incomes despite having much smaller average landholding size than in India. Nonetheless, there are also lessons to be learned from India's experience. This brief is based on a book, The Dragon and the Elephant: Agricultural and Rural Reforms in China and India (published for IFPRI by Johns Hopkins University Press and, in South Asia, by Oxford University Press-India), which compares the rural development and agricultural reform experiences of China and India and examines the lessons that can be learned from both." from Text
    Date: 2008
  9. By: Van der Poel, E; O'Donnell, O; van Doorslaer, E
    Abstract: A new methodology is used to quantify, track and explain the distribution of obesity and hypertension across areas differentiated by their degree of urbanicity. We construct an index of urbanicity from longitudinal data on community characteristics from the China Health and Nutrition Survey and compute a rank-based measure of inequality in disease risk factors by degree of urbanicity. Prevalence rates almost doubled over the period 1991-2004 and the risk factors became less concentrated in more urbanized areas. Decomposition analysis shows that urbanicity-related inequalities are mostly attributable to differences in community level characteristics and to disparities in incomes and in the physical and farming activity of individuals.
    Keywords: China, urbanization, health inequalities, obesity, hypertension, decomposition
    Date: 2008–10

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