nep-cna New Economics Papers
on China
Issue of 2009‒01‒17
six papers chosen by
Zheng Fang
Ohio State University

  1. Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis By Albert Park; Dean Yang; Xinzheng Shi; Yuan Jiang
  2. Vertical Integration, Institutional Determinants and Impact: Evidence from China By Joseph P.H. Fan; Jun Huang; Randall Morck; Bernard Yeung
  3. China’s provincial disparities and the determinants of provincial inequality By Thomas Gries; Magarete Redlin
  4. Industrial Coal Demand in China: A Provincial Analysis By Matteo Manera; Cristina Cattaneo; Elisa Scarpa
  5. Common Influences, Spillover and Integration in Chinese Stock Markets By Enzo Weber; Yanqun Zhang
  6. Revisiting the psychic distance paradox: international retailing in China in the long run (1840-2005 By Andrew Godley; Haiming Hang

  1. By: Albert Park; Dean Yang; Xinzheng Shi; Yuan Jiang
    Abstract: We ask how export demand shocks associated with the Asian financial crisis affected Chinese exporters. We construct firm-specific exchange rate shocks based on the pre-crisis destinations of firms' exports. Because the shocks were unanticipated and large, they are a plausible instrument for identifying the impact of exporting on firm productivity and other outcomes. We find that firms whose export destinations experience greater currency depreciation have slower export growth, and that export growth leads to increases firm productivity and other firm performance measures. Consistent with "earning-by-exporting", the productivity impact of export growth is greater when firms export to more developed countries.
    JEL: D24 F10 F31 L60
    Date: 2009–01
  2. By: Joseph P.H. Fan; Jun Huang; Randall Morck; Bernard Yeung
    Abstract: Where legal systems and market forces enforce contracts inadequately, vertical integration can circumvent these transaction difficulties. But, such environments often also feature highly interventionist government, and even corruption. Vertical integration might then enhance returns to political rent-seeking aimed at securing and extending market power. Thus, where political rent seeking is minimal, vertical integration should add to firm value and economy performance; but where political rent seeking is substantial, firm value might rise as economy performance decays. China offers a suitable background for empirical examination of these issues because her legal and market institutions are generally weak, but nonetheless exhibit substantial province-level variation. Vertical integration is more common where legal institutions are weaker and where regional governments are of lower quality or more interventionist. In such provinces, firms led by insiders with political connections are more likely to be vertically integrated. Vertical integration is negatively associated with firm value if the top corporate insider is politically connected, but weakly positively associated with public share valuations if the politically connected firm is independently audited. Finally, provinces whose vertical integrated firms tend to have politically unconnected CEOs exhibit elevated per capita GDP growth, while provinces whose vertically integrated firms tend to have political insiders as CEOs exhibit depressed per capita GDP growth.
    JEL: G38 L22 P14 P16
    Date: 2009–01
  3. By: Thomas Gries (University of Paderborn); Magarete Redlin (University of Paderborn)
    Abstract: The paper explains the growth — inequality nexus for China’s provinces. The theoretical model of provincial development consists of two regions and studies the interactions of a mutually depending development process. Due to positive externalities, incoming trade and FDI induce imitation and hence productivity growth. The regional government can influence the economy by changing international transaction costs and providing public infrastructure. Due to mobile domestic capital, disparity effects are reinforced. The implications of the theoretical model are tested. As the central intention of the paper is to explain provincial disparity we directly relate income disparity (indicated by the contribution to the per capita income Theil index) to the disparity of selected income determining factors (indicated by the contribution to every other Theil index of the determinants). We examine the determinants of income and inequality for 28 Chinese provinces over the period 1991-2004 and apply a fixed effects panel estimation. Our analysis is based on revised GDP and investment data from Hsueh and Li (1999) and various sources of Chinese official statistics provided by the National Bureau of Statistics (NBS). The results confirm the theoretical framework and suggest a direct linkage between the factors that determine regional income and regional disparity. More specific, it is apparent that trade, foreign and domestic capital and government expenditure have an impact on the provincial inequality. Moreover, it is the success of the coastal regions and hence potentially geography with the low international transaction costs that drives the provincial inequality of China.
    Keywords: regional development, FDI, international integration, China
    JEL: J24 O14 O18 O33 O40
    Date: 2008–08
  4. By: Matteo Manera (University of Milano-Bicocca); Cristina Cattaneo (Fondazione Eni Enrico Mattei, Milan and University of Sussex); Elisa Scarpa (Edison Trading)
    Abstract: In recent years, concerns regarding the environmental implications of the rising coal demand have induced considerable efforts to generate long-term forecasts of China’s energy requirements. Nevertheless, none of the previous empirical studies on energy demand for China has tackled the issue of modelling coal demand in China at provincial level. The aim of this paper is to fill this gap. In particular, we model and forecast the Chinese demand for coal using time series data disaggregated by provinces. Moreover, not only does our analysis account for heterogeneity among provinces, but also, given the nature of the data, it captures the presence of spatial autocorrelation among provinces using a spatial econometric model. A fixed effects spatial lag model and a fixed effects spatial error model are estimated to describe and forecast industrial coal demand. Our empirical results show that the fixed effect spatial lag model better captures the existing interdependence between provinces. This model forecasts an average annual increase in coal demand to 2010 of 4 percent.
    Keywords: Energy demand, Coal demand, China, Spatial econometrics, Panel data, Forecasting
    JEL: C23 E6 Q31 Q41
    Date: 2008–02
  5. By: Enzo Weber; Yanqun Zhang
    Abstract: The Chinese stock market features an interesting history of divided market segments: domestic (A), foreigners' (B) and overseas (H). This puts forth questions of market integration as well as cross-divisional information transmission. We address these issues in a structural DCC framework, an econometric technique capable of identifying common factor in uences from (bi-directional) spillovers as constituents of contemporaneous correlations. We find initial dominance of transmission from A to B and to a lesser extent from H to B and A to H. However, since the opening of the B-market for Chinese citizens in 2001, common factors have largely replaced direct spillovers.
    Keywords: China, Stock Market, Integration, Causality, Correlation
    JEL: C32 G10
    Date: 2008–12
  6. By: Andrew Godley (School of Management, University of Reading); Haiming Hang (School of Management, University of Reading)
    Abstract: This paper uses original research on the roles played by two sets of foreign entrants into Chinese retailing since the 1850s - the overseas Chinese entrants and western entrants - to explore the psychic distance paradox over the long run. It explains how the advantages of psychic closeness in Chinese retailing have always been important in reducing entry barriers, but that the increasing costs of technology have increased the significance of firm proprietary strengths in some formats, notably supermarkets, so reducing the relative importance of psychic closeness. The paper therefore illustrates how taking the long-term perspective enables more sophisticated conclusions to emerge. A cross sectional analysis of one sector – Chinese supermarkets – would confirm the psychic distance paradox; overseas Chinese have been unable to translate psychic closeness into superior performance. By contrast their historic performance in department stores and more recently in fashion chains has been superior to the format leaders. This long term perspective therefore suggests that the understanding of the psychic distance paradox needs to be moderated by additional conceptualisation.
    Keywords: Psychic Distance, China, International Retailing, Internationalisation Process
    Date: 2008

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