nep-cna New Economics Papers
on China
Issue of 2009‒02‒28
seven papers chosen by
Zheng Fang
Ohio State University

  1. Towards a System of Open Cities in China: Home Prices, FDI Flows and Air Quality in 35 Major Cities By Siqi Zheng; Matthew E. Kahn; Hongyu Liu
  2. Growing like China By Song, Zheng Michael; Storesletten, Kjetil; Zilibotti, Fabrizio
  3. Financial Constraints in China: Firm-Level Evidence By Poncet, Sandra; Steingress, Walter; Vandenbussche, Hylke
  4. The Current State of Research on Networks in China’s Business System By Meuer, J.; Krug, B.
  5. The Impact on IPO Performance of Reforming IPO Allocation Regulations: An Event Study of Shanghai Stock Exchange A-Shares By Fei Jiang; Lawrence Leger
  6. Agglomeration, Backward and Forward Linkages: Evidence from South Korean Investment in China By Debaere, Peter; Lee, Joonhyung; Paik, Myungho
  7. Anthropometry of Love: Height and Gender Asymmetries in Interethnic Marriages By Belot, Michèle; Fidrmuc, Jan

  1. By: Siqi Zheng; Matthew E. Kahn; Hongyu Liu
    Abstract: Over the last thirty years, China's major cities have experienced significant income and population growth. Much of this growth has been fueled by urban production spurred by world demand. Using a unique cross-city panel data set, we test several hypotheses concerning the relationship between home prices, wages, foreign direct investment and ambient air pollution across major Chinese cities. Home prices are lower in cities with higher ambient pollution levels. Cities featuring higher per-capita FDI flows have lower pollution levels.
    JEL: F21 Q53 R31
    Date: 2009–02
  2. By: Song, Zheng Michael; Storesletten, Kjetil; Zilibotti, Fabrizio
    Abstract: This paper constructs a growth model that is consistent with salient features of the Chinese growth experience since 1992: high output growth, sustained returns on capital investments, extensive reallocation within the manufacturing sector, falling labor share and accumulation of a large foreign surplus. The theory makes only minimal deviations from a neoclassical growth model. Its building blocks are financial imperfections and reallocation among firms with heterogeneous productivity. Some firms use more productive technologies than others, but low-productivity firms survive because of better access to credit markets. Due to the financial imperfections, high-productivity firms - which are run by entrepreneurs - must be financed out of internal savings. If these savings are sufficiently large, the high-productivity sector outgrows the low-productivity sector, and attracts an increasing employment share. During the transition, low wage growth sustains the return to capital. The downsizing of the financially integrated sector forces a growing share of domestic savings to be invested in foreign assets, generating a foreign surplus. We test some auxiliary implications of the theory and find robust empirical support.
    Keywords: China; Economic Growth; Entrepreneurs; Foreign Surplus; Investment; Productivity Heterogeneity; Rate of Return on Capital; Reallocation; State-Owned Firms.
    JEL: G18 O11 O16 O47 O53 P31
    Date: 2009–01
  3. By: Poncet, Sandra; Steingress, Walter; Vandenbussche, Hylke
    Abstract: This paper uses a unique micro-level data-set on Chinese firms to test for the existence of a 'political-pecking order' in the allocation of credit. Our findings are threefold. Firstly, private Chinese firms are credit constrained while State-owned firms and foreign-owned firms in China are not; Secondly, the geographical and sectoral presence of foreign capital alleviates credit constraints faced by private Chinese firms. Thirdly, geographical and sectoral presence of state firms aggravates financial constraints for private Chinese firms ('crowding out'). Therefore it seems that ongoing restructuring of the state-owned sector and further liberalization of foreign capital inflows in China can help to circumvent financial constraints and can boost the investment of private firms.
    Keywords: China; firm level data; foreign direct investment; Investment-cashflow sensitivity; pecking-order
    JEL: E22 G32
    Date: 2009–01
  4. By: Meuer, J.; Krug, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The purpose of the paper is to assess the current state of network research in China’s business system. Research on networks has developed significantly during the last decades in regards to analytic techniques, number of research projects, and accumulated findings. While research on networks in China has always received much attention – not least because networks are (still) considered one of the major forces behind the country’s socio-economic change – this development has also had an effect on how research on generic networks in China is being conducted. How Chinese networks are modelled, which aspects remain controversial in the academic debate, and which conclusions the different studies offer asks for a systematic comparison. The paper, based on an extensive literature research, therefore relies on a framework of theoretical concepts underlying the study of networks which allows a categorization of the dominant (generic) forms of Chinese networks as discussed in major journals. The study on the one hand is descriptive by filtering the diverse literature of network research on China’s business system. On the other hand, it serves to identify gaps and shortcomings of the current literature in this field pointing to future research directions. We identify four generic types of networks, Chinese business groups (qiyejituan), Overseas Chinese Communities, networks of social relations (guanxi), and Network Capitalism, as an alternative economic model. As the study shows, the research approaches to these networks are extremely diverse both in description and analysis. A focus on the identified gaps within each type of network and a convergence between the types of networks should yield to further insights into the study of networks as well as their implications for economic systems.
    Keywords: China;organizational networks;social networks
    Date: 2009–02–18
  5. By: Fei Jiang (Department of Economics, Loughborough University); Lawrence Leger (Department of Economics, Loughborough University)
    Abstract: Initial public offerings in China are distinguished from IPOs in other markets by their extremely high abnormal initial returns and so-called 'Chinese Characteristics'. We examine the effect on IPO underpricing and short-run performance of significant changes in Chinese IPO regulations implemented in May 2002. The significant event was a regulatory change in the method of allocating IPO shares. Event study analysis reveals that abnormal initial returns decreased by 43.3% after the change in regulations, that beta risks of the IPOs increased and that an evenly-upward trend of cumulative abnormal initial returns was reversed to become evenly-downward. The results appear to be consistent with Information Cascades (Welch 1992) and Bandwagon (Ritter 1998) models of underpricing.
    Keywords: IPO underpricing, IPO allocation, Policy impact, Chinese stock market, Shanghai Stock Exchange A-shares.
    JEL: G14 G28
    Date: 2009–02
  6. By: Debaere, Peter; Lee, Joonhyung; Paik, Myungho
    Abstract: With a firm-level dataset, we study the location decision of all South Korean multinationals across China's regions between 1992 and 2004, taking into account spatial aspects. Our conditional logit estimates confirm previous studies that stress the agglomeration effects along industry and along national lines in firms' location choice. In particular, South Korean investors target the place where there are more firms irrespective of their nationality and, at the same time, more affiliates from South Korean multinationals. More importantly, we decompose these agglomeration effects into a pure agglomeration effect and an upstream and downstream (backward and forward) linkage effect. We find that the presence of upstream and downstream South Korean affiliates significantly increases the likelihood that a South Korean multinational invests there. At the same time, however, backward and forward linkages with the companies irrespective of their nationality do not seem to matter. As such, our analysis of investors' location choice brings together two perspectives: (backward and forward) linkages and agglomeration along national lines.
    Keywords: agglomeration; multinationals
    JEL: F1 F2
    Date: 2008–12
  7. By: Belot, Michèle; Fidrmuc, Jan
    Abstract: Both in the UK and in the US, we observe puzzling gender asymmetries in the propensity to outmarry: Black men are substantially more likely to have white spouses than Black women, but the opposite is true for Chinese: Chinese men are half less likely to be married to a White person than Chinese women. We argue that differences in height distributions, combined with a simple preference for a taller husband, can explain a large proportion of these ethnic-specific gender asymmetries. Blacks are taller than Asians, and we argue that this significantly affects their marriage prospects with whites. We provide empirical support for this hypothesis using data from the Health Survey for England and the Millenium Cohort Study, which contains valuable and unique information on heights of married couples.
    Keywords: Gender; Height; Intermarriage
    JEL: J12 J15
    Date: 2009–01

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