nep-cna New Economics Papers
on China
Issue of 2009‒02‒14
eleven papers chosen by
Zheng Fang
Ohio State University

  1. Financial Security of Elders in China By Yang Cheng; Mark Rosenberg
  2. Enhancing Market Openness through Regulatory Reform in the People's Republic of China By Malory Greene; Charles Tsai
  3. Energy Saving Technology Diffusion via FDI and Trade: A CGE Model of China By Michael Hübler
  4. Unravelling the Complex Motivations behind China's FDI By Yi Zhang
  5. Can Demand from China Shield East Asian Economies from Global Slowdown? By Zhiwei Zhang
  6. China's Impact on Foreign Trade and Investment in other Asian Countries By Prema-chandra Athukorala
  7. China's Integration with the World: Development as a Process of Learning and Industrial Upgrading By Yifu, Justin; Wang, Yan
  8. Human Capital, Economic Growth, and Regional Inequality in China By Belton Fleisher; Haizheng Li; Min-Qiang Zhao
  9. CO2 Emissions, Research and Technology Transfer in China By Ang, James
  10. Understanding the Zhejiang industrial clusters:Questions and re-evaluations By Lu Shi; Bernard Ganne
  11. Political connections and the process of going public: evidence from China By Francis , Bill B; Hasan, Iftekhar; Sun, Xian

  1. By: Yang Cheng; Mark Rosenberg
    Abstract: China is one of the largest countries in the world in terms of both geography and population size, with lower economic levels compared to the developed countries, and great regional differences. This paper introduces the rapid demographic changes of the Chinese population and the current financial security of elders in China. The World Bank’s multi-pillar model is used to explain the financial security of elders in China, which includes the current pension and health care systems in urban and rural areas in China respectively. The important issues of financial security of elders which the Chinese government should address in the near future are also discussed. The paper concludes with a consideration of the results of social welfare system reforms by the Chinese government and future research interests from a geographer’s perspective.
    Keywords: Financial security, elders, social welfare system, China
    JEL: I31
    Date: 2009–01
  2. By: Malory Greene; Charles Tsai
    Abstract: This study analyses the People’s Republic of China’s trade policy environment with a focus on trade-related regulations and their role in supporting China’s market openness. It examines in particular to what extent China’s trade regulations comply with the principles of transparency and non-discrimination and facilitate foreign trade operations and international competition. The report proposes a series of policy recommendations to make China’s regulatory framework more market-oriented and trade-and-investment friendly. The study is complemented with a business survey of OECD member country enterprises and Chinese firms. The survey assesses government influence on the investment climate through the impact of their policies on the costs, risks and barriers to competition facing firms. The main report and the business survey conclude that transparency plays a critical role in the development of a healthy business environment by reducing regulatory impediments.
    Keywords: investment, trade policy, regulatory reforms, transparency, intellectual property rights, standards, market openness, non-discrimination, China, conformity assessment, trade restrictiveness index, trade reform
    Date: 2008–12–18
  3. By: Michael Hübler
    Abstract: This paper introduces intra- and inter-sectoral technology diffusion via FDI and imports into a recursive-dynamic CGE model for climate policy analyses. It analyzes China’s accession to a Post Kyoto emission regime that keeps global emissions from 2012 on constant. Due to ongoing energy efficiency gains, partly stemming from international technology diffusion, China will become a net seller of emission permits and steadily reduce emissions, possibly below their 2004 level until 2030. This will reduce the world CO2 price significantly. The impact of supporting foreign firms and of reducing import tariffs on Chinese welfare will not significantly change when China joins the Post Kyoto regime
    Keywords: Technology diffusion, technology transfer, trade, FDI, climate change, China
    JEL: F18 F21 N75 O33
    Date: 2009–01
  4. By: Yi Zhang
    Abstract: We empirically investigate the factors that drive China's outward FDI using dynamic panel methods for 27 countries from 1995 to 2002. Based on the literature review we test three hypotheses: comparative advantages in low wage countries, vertical integration towards resource and human capital abundant countries, and the transaction-enforcing FDI to complement exports. Our results provide strong support for the transaction-enforcing motive: China's FDI follows exports. Next, only in the presence of exports, low income per capita is important arguably because low-income countries have a preference for Chinese low-cost exports. Finally, though this series we find no evidence of FDI to skill-abundant countries and no evidence that host market resources or governance matters.
    Keywords: China, transaction-enforcing FDI, locational determinants
    JEL: F21 F23 O16 O19 O53
    Date: 2009–02
  5. By: Zhiwei Zhang (Research Department, Hong Kong Monetary Authority)
    Abstract: This paper quantifies how much of exports from eight East Asian economies were consumed by consumers in China, US, Japan, other developed economies, and the rest of the world. We control for the indirect exports through China, i.e., the parts and components that East Asian economies exported to China and subsequently re-exported to other countries. A unique firm-level database is utilised to get an accurate measure for such indirect exports. The main findings are: (i) US consumers still account for more exports from East Asian economies than Chinese consumers do, and the total gross exports from East Asian economies to China overstate the importance of final demand from China; and (ii) the share of exports from East Asia that were consumed by the US, Japan, other OECD countries, and China did not change drastically from 2000 to 2006. Chinese consumers did become more important, noticeably for Japan and Korea, but even in these two countries, the magnitude of change is only about 5-6 percentage of their total exports. These findings indicate that the final demand side of trade in East Asia has changed only moderately since 2002.
    Keywords: vertical integration; intra-Asia trade
    JEL: F13 F43 O24 O11
    Date: 2008–12
  6. By: Prema-chandra Athukorala
    Abstract: This paper examines how China’s emergence as a major player in the global economy is affecting export performance of and FDI flows to its East Asian neighbours against the backdrop of the ongoing process of global production sharing. The findings indicate that the ‘China threat’ has been vastly exaggerated in the contemporary policy debate. China’s rapid market penetration in traditional labour intensive manufactured goods has occurred mostly at the expense of the high-wage East Asian countries, without crowding out export opportunities of low-wage countries in the region. More importantly, China’s emergence as a major assembly centre within global production networks has created new opportunities for the other East Asian countries to engage in various segments of the production chian in line with their comparative advantage in international production. FDI flows to the other Asian countries seem to be stimulated, rather than crowded out by FDI flows to China.
    Keywords: China, East Asia, exports, global production sharing
    JEL: F14 F23 O53
    Date: 2009
  7. By: Yifu, Justin (The World Bank); Wang, Yan (The World Bank)
    Abstract: The process of development is full of uncertainties, especially if it is a process of transition from a planned economy to a market oriented one. Because of uncertainties and country specificity, development must be a process of learning, selective adaptation, and industrial upgrading. This paper attempts to distill lessons from China's reform and opening up process, and investigate the underlying reasons behind China's success in trade expansion and economic growth. From its beginnings with home-grown and second-best institutions, China has embarked on a long journey of reform, experimentation, and learning by doing. It is moving from a comparative advantage-defying strategy to a comparative advantage-following strategy. The country is catching up quickly through augmenting its factor endowments and upgrading industries; but this has been only partially successful. Although China is facing several difficult challenges -- including rising inequality, an industrial structure that is overly capital and energy intensive, and related environmental degradation -- it is better positioned to tackle them now than it was 30 years ago. This paper reviews the drivers behind China's learning and trade integration and provides both positive and negative lessons for developing countries with diverse natural endowments, especially those in Sub-Saharan Africa.
    Keywords: patterns of trade; learning; innovation and growth
    JEL: F13 F14 O50 O53
    Date: 2009–02–02
  8. By: Belton Fleisher (Department of Economics, Ohio State University); Haizheng Li (School of Economics, Georgia Institute of Technology); Min-Qiang Zhao (Department of Economics, Ohio State University)
    Abstract: We show how regional growth patterns in China depend on physical,, human, and infrastructure capital; foreign direct investment (FDI); and market reforms, especially the reforms that followed Deng Xiaoping’s South Trip in 1992 those that resulted from serious hardening of budget constraints of state enterprises around 1997. We find that FDI had a much larger effect on TFP growth before 1994 than after, and we attribute this to the encouragement of and increasing success of private and quasi-private enterprises. We find that human capital positively affects output per worker and productivity growth in our cross-provincial study. Moreover, we find both direct and indirect effects of human capital on TFP growth. The direct effect is hypothesized to come from domestic innovation activities, while the indirect impact is a spillover effect of human capital on TFP growth. We conduct cost-benefit analysis of hypothetical investments in human capital and infrastructure. We find that, while investment in infrastructure generates higher returns in the developed, eastern regions than in the interior, investing in human capital generates slightly higher or comparable returns in the interior regions. We conclude that human capital investment in less-developed areas can improve economic efficiency, neither investment strategy is a magic bullet for reducing China’s regional income disparities.
    JEL: O15 O18 O47 O53
    Date: 2008–08
  9. By: Ang, James
    Abstract: Although the economy of China has grown very strongly over the last few decades, this spectacular performance has come at the expense of rapid environmental deterioration. Amidst animated debate on the issue of global warming, this study attempts to explore the determinants of CO2 emissions in China using aggregate data for more than half a century. Adopting an analytical framework that combines the environmental literature with modern endogenous growth theories, the results indicate that CO2 emissions in China are negatively related to research intensity, technology transfer and the absorptive capacity of the economy to assimilate foreign technology. Our findings also indicate that more energy use, higher income and greater trade openness tend to cause more CO2 emissions.
    Keywords: Environmental pollution; endogenous growth theory; R&D; China.
    JEL: Q50 O53 O30 Q40 O40
    Date: 2009–02–09
  10. By: Lu Shi (IAO - Institut d'Asie Orientale - CNRS : UMR5062 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Bernard Ganne (GLYSY-SAFA - Sociologies et anthropologies des formes d'action - CNRS : FRE2749 - Université Lumière - Lyon II, GLYSI-SAFA - Groupe Lyonnais de Sociologie Industrielle - Sociologies et Anthropologies des Formes d'Action - CNRS : FRE2749 - Université Lumière - Lyon II, MODYS - MOndes et DYnamiques des Sociétés - CNRS : UMR5264 - Université Lumière - Lyon II - Université Jean Monnet - Saint-Etienne)
    Abstract: In this study, we have chosen to focus on the cluster of business conglomerates, mainly comprising SMEs engaging in the same type of activity – similar to those observed in Europe (and Italy in particular) some thirty years ago. There are numerous zones of highly specialised development in China. However, among these, Zhejiang province is undoubtedly considered the most remarkable, and is seen as a role model in modern evolution towards a market economy. How have the Zhejiang clusters developed? What are the characteristics of this development? Is it possible to talk about a “third China” along the same lines as the former “3rd Italy” with regard to industrial districts? Do Chinese clusters in fact have any specific characteristics? These are some of the questions that we will look to address today.
    Keywords: cluster, Asia
    Date: 2009
  11. By: Francis , Bill B (Lally School of Management and Technology); Hasan, Iftekhar (Lally School of Management, Rensselaer Polytechnic Institute and Bank of Finland); Sun, Xian (Office of the Comptroller of the Currency, US Department of the Treasury)
    Abstract: We examine how political connections impact the process of going public. Specifically, we test how political connections impact the pricing of newly offered shares, the magnitude of underpricing, and the fixed cost of going public. Based on experiences of the new public firms in the Chinese security markets and using multiple measures of political connections, we find robust evidence that issuing firms with political connections reap significant preferential benefits from going public. To be specific, we find that firms – irrespective of ownership arrangements – with greater political connections have higher offering prices, less underpricing, and lower fixed costs during the going-public process.
    Keywords: political connections; IPO; emerging markets
    JEL: G24 G30 G32 G34 G38 H00
    Date: 2009–02–03

This nep-cna issue is ©2009 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.