nep-cna New Economics Papers
on China
Issue of 2014‒07‒28
fourteen papers chosen by
Zheng Fang
Ohio State University

  1. The Gradients of Power: Evidence from the Chinese Housing Market By Hanming Fang; Quanlin Gu; Li-An Zhou
  2. Made in China, Sold in Norway: Local Labor Market Effects of an Import Shock By Balsvik, Ragnhild; Jensen, Sissel; Salvanes, Kjell G.
  3. Conspicuous Consumption in the United States and China By Jinkins, David
  4. Forecasting Chinese GDP Growth with Mixed Frequency Data: Which Indicators to Look at? By Heiner Mikosch; Ying Zhang
  5. The innovation process of a privately-owned enterprise and a state-owned enterprise in China By Kang, Byeongwoo
  6. Hong Kong: A Bridge Connecting Mainland China and the International Market By Zhenxi CHEN; Jan F. KIVIET; Weihong Huang
  7. The socioeconomic drivers of China's primary PM2.5 emissions By Dabo Guan; Xin Su; Qiang Zhang; Glen Peters; Zhu Liu; Yu Lei; Kebin He
  8. Returns to Schooling for Urban Residents and Migrants in China: New IV Estimates and a Comprehensive Investigation By Chris SAKELLARIOU; Fang ZHENG
  9. Mismeasurement in Pay-for-Performance: Evidence from an Intervention to Reduce Health Care Spending in China By Bingxiao Wu
  10. Internationalization of the Renminbi: The Role of Trade Settlement By Joseph E. Gagnon; Kent Troutman
  11. China’s CO2 Emissions from Power Generating Stations – A First Exploration By Limin Du; Aoife Hanley; Katrin Rehdanz
  12. China-U.S. Trade: A global outlier By THORBECKE, Willem
  13. Understanding Financial Inclusion in China By Zuzana Fungácová; Laurent Weill
  14. Green-to-Grey China: Determinants and Forecasts of its Green Growth By You, Jing; Huang, Yongfu

  1. By: Hanming Fang; Quanlin Gu; Li-An Zhou
    Abstract: Using a large, unique dataset on the Chinese housing market, we propose to measure corruption using the price differences paid by bureaucrat buyers and non-bureaucrat buyers in the housing market. We find that the housing price paid by bureaucrat buyers is on average 1.05 percentage points lower than non-bureaucrat buyers, after controlling for a full set of characteristics of buyers, houses and mortgage loans. More interestingly, we find that the bureaucrat price discounts exhibit interesting gradients with respect to their hierarchical ranks, the criticality of their government agencies to real estate developers, and geography. We argue that the bureaucrat price discounts and the gradients of these discounts are unlikely to be driven by alternative explanations, thus they are evidence of corruption and measures of the market value of government power.
    JEL: D73 H1 O18
    Date: 2014–07
  2. By: Balsvik, Ragnhild (Norwegian School of Economics); Jensen, Sissel (Norwegian School of Economics); Salvanes, Kjell G. (Norwegian School of Economics)
    Abstract: We analyze whether regional labor markets are affected by expo- sure to import competition from China. We find negative employment effects for low-skilled workers, and observe that low-skilled workers tend to be pushed into unemployment or leave the labor force altogether. We find no evidence of wage effects. We partly expect this in a Nordic welfare state where firms are flexible at the employment margin, while centralized wage bargaining provides less flexibility at the wage margin. Our estimates suggest that import competition from China explains almost 10% of the reduction in the manufacturing employment share from 1996 to 2007 which is half of the effect found by Autor, Dorn and Hanson (2013) for the US.
    Keywords: import competition, local labor markets, Norway
    JEL: F16 H53 J23 J31
    Date: 2014–07
  3. By: Jinkins, David (Pennsylvania State University)
    Abstract: I develop a model of conspicuous consumption to empirically measure the importance of peer beliefs to Americans and Chinese. In the model, a consumer cares not only about the direct utility she receives from consumption, but also about the way her consumption pattern affects her peer group's belief about her well-being. I estimate the model on household budget surveys. According to model estimates, a Chinese consumer cares 20% more than an American consumer about peer beliefs. The absolute size of the conspicuous consumption motive in both countries is relatively small. I use the estimated model to evaluate the welfare effect of the 1990-2002 American luxury tax on automobiles. The luxury tax benefited nearly all Americans a small amount, but hurt the small fraction of consumers who love automobiles the most.
    Keywords: behavioral economics, conspicuous consumption, applied microeconomics
    JEL: D12
    Date: 2014–07
  4. By: Heiner Mikosch (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Ying Zhang (Partners Group AG, Baar, Switzerland)
    Abstract: Building on a mixed data sampling (MIDAS) model we evaluate the predictive power of a variety of monthly macroeconomic indicators for forecasting quarterly Chinese GDP growth. We iterate the evaluation over forecast horizons from 370 days to 1 day prior to GDP release and track the release days of the indicators so as to only use information which is actually available at the respective day of forecast. This procedure allows us to detect how useful a specific indicator is at a specific forecast horizon relative to other indicators. Despite being published with an (additional) lag of one month the OECD leading indicator outperforms the leading indicators published by the Conference Board and by Goldman Sachs. Albeit being smaller in terms of market volume, the Shenzhen Composite Stock Exchange Index outperforms the Shanghai Composite Stock Exchange Index and several Hong Kong Stock Exchange indices. Consumer price in flation is especially valuable at forecast horizons of 11 to 7 months. The reserve requirement ratio for small banks proves to be a robust predictor at forecast horizons of 9 to 5 months, whereas the big banks reserve requirement ratio and the prime lending rate have lost their leading properties since 2009. Industrial production can be quite valuable for now- or even forecasting, but only if it is released shortly after the end of a month. Neither monthly retail sales, investment, trade, electricity usage, freight traffic nor the manufacturing purchasing managers' index of the Chinese National Bureau of Statistics help much for now- or forecasting. Our results might be relevant for experts who need to know which indicator releases are really valuable for predicting quarterly Chinese GDP growth, and which indicator releases have less predictive content.
    Keywords: Forecasting, mixed frequency data, MIDAS, China, GDP growth
    JEL: C53 E27
    Date: 2014–07
  5. By: Kang, Byeongwoo
    Abstract: This study compares the innovation process of a privately-owned enterprise and a state-owned enterprise in China using their patent data. Huawei and ZTE were selected for this study because they experienced the same historical environment in the same industry from the same region in China leaving their owner types as their critical difference. This study investigates the difference in the innovation process in R&D between a privately-owned and a state-owned enterprise by analyzing (1) domestic and international patent application pattern, (2) co-application and co-applicants, (3) knowledge accumulation inside Huawei and ZTE, and (4) knowledge spillover to domestic and foreign firms.
    Keywords: China, Business enterprises, Government enterprises, Telecommunication, Research & development, Technological innovations, Patent data, Privately-owned enterprise, State-owned enterprise
    JEL: L25 L96 O31
    Date: 2014–07
  6. By: Zhenxi CHEN (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.); Jan F. KIVIET (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.); Weihong Huang (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)
    Abstract: Chow et al. (2011) apply three time-varying parameter methods to investigate the relationship between the stock markets of Shanghai and New York and find that the mutual influence between the two markets has increased since 2002. We reconsider their approaches and find that two suffer from parameter underidentification and all three from underspecification of the parameter variation. We include Hong Kong in an analysis based on standard and partial correlations over a running window in order to depict the change in the mutual relationships between these three markets. It is found that the observed increasing co-movement between Shanghai and New York is mainly due to the channel of Hong Kong. So Hong Kong appears to connect mainland China with the global market.
    Keywords: China; Co-movement, Globalization; Specification analysis, Stock markets
    JEL: C29 C58 G14
    Date: 2014–06
  7. By: Dabo Guan; Xin Su; Qiang Zhang; Glen Peters; Zhu Liu; Yu Lei; Kebin He
    Abstract: Primary PM2.5�emissions contributed significantly to poor air quality in China. We present an interdisciplinary study to measure the magnitudes of socioeconomic factors in driving primary PM2.5�emission changes in China between 1997–2010, by using a regional emission inventory as input into an environmentally extended input–output framework and applying structural decomposition analysis. Our results show that China's significant efficiency gains fully offset emissions growth triggered by economic growth and other drivers. Capital formation is the largest final demand category in contributing annual PM2.5�emissions, but the associated emission level is steadily declining. Exports is the only final demand category that drives emission growth between 1997–2010. The production of exports led to emissions of 638 thousand tonnes of PM2.5, half of the EU27 annual total, and six times that of Germany. Embodied emissions in Chinese exports are largely driven by consumption in OECD countries.
  8. By: Chris SAKELLARIOU (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.); Fang ZHENG (Southwestern University of Finance and Economics, China)
    Abstract: This paper uses a new dataset, the 2009 Rural Urban Migration in China (RUMiC) to estimate returns to schooling in China using an instrumental variable (IV) methodology. After identifying a set of instruments, we conduct comprehensive validity and relevance testing of different combinations of instruments as well as robustness analysis of our estimates for rural to urban migrants and urban residents in China. We find that our estimates are in a fairly tight band for all four sub-samples examined (urban men, urban women, migrant men and migrant women). Estimates for men range from about 9.5% for urban workers to about 10-10.5% for migrant workers and are slightly higher than the corresponding estimates for women, which range from 7.5% for female urban workers to 8-9.5% for female migrant workers. Thus, private returns to education in urban China in 2009 were substantial and of similar magnitude to those for other transition countries, as well as to worldwide and developing country averages. We also find that the attenuation bias due to measurement error is generally large and more important in the migrant sample compared to the urban sample.
    Keywords: Returns to Schooling, Instrumental Variables, Rural-to-Urban Migrants, China
    JEL: I21
    Date: 2014–07
  9. By: Bingxiao Wu (Rutgers University)
    Abstract: This paper examines how physicians in China respond to a pay-for-performance scheme that mismeasures performance. In 2005, China imposed a policy that penalizes hospitals with high drug sale percentage in the total revenue, with the intent to decrease drug expenditure. Using a unique patient-level data from a large Chinese hospital, I find that physicians responded not by decreasing drug prescription, but by increasing non-drug services, especially diagnostic tests. There is no significant impact on length of stay. The overall effect was to increase total expenditures. This finding is consistent with the inducement hypothesis as physicians in China may receive under-the-counter commission for prescribing certain drugs. I also find that increased non-drug expenditures were concentrated among insured patients, suggesting that physicians have stronger incentives to act in the patients’ interests than in the interests of the third-party payer.
    Keywords: pay-for-performance, physician incentives, drug prescription, China’s health care system
    JEL: I11 I18 M52
    Date: 2014–06–10
  10. By: Joseph E. Gagnon (Peterson Institute for International Economics); Kent Troutman (Peterson Institute for International Economics)
    Abstract: The renminbi (RMB) is not yet an international currency that could challenge the position of the dollar or the euro, but it is heading in that direction. Chinese officials support the limited goal of increasing usage of the RMB in international transactions, but they do not publicly advocate full reserve-currency status and free convertibility that such status would require. Yet international use of the RMB is an important element of China's reform agenda. China has announced the opening of offshore RMB centers in Hong Kong, Singapore, Taipei, London, Frankfurt, Paris, and Luxembourg, to the delight of offshore investors eager to invest in the RMB, which has not depreciated significantly against the dollar since 1994 and is widely viewed as having further room for appreciation given China's strong economic fundamentals. The ability of Chinese exporters and importers to make and accept payments in RMB is helping to drive the growth of offshore RMB markets. The excess of settlements in RMB by Chinese importers over RMB settlement by Chinese exporters leads to growing volumes of RMB deposits offshore. But the RMB cannot become a true international currency until Chinese authorities drop their strict limits on capital flows between China and the rest of the world.
    Date: 2014–05
  11. By: Limin Du; Aoife Hanley; Katrin Rehdanz
    Abstract: Our analysis is the first of its kind to explore patterns of subsidization and CO2 emissions in China’s electricity producing sector. Applying data for all power plants across China and controlling for the age, capacity and location of generating stations, we find that plants attracting a higher government subsidy are also worryingly the plants generating a disproportionate share of CO2 emissions. This distortion is incongruent with China’s aspiration for a greener economy but may be eliminated if China delivers on its November 2013 announcement to review many industry subsidies on its way to a fully-fledged market economy (Bloomberg News, 28.02.2014)
    Keywords: CO2 emissions, China, energy sector, plant-level data
    JEL: Q53 Q48
    Date: 2014–06
  12. By: THORBECKE, Willem
    Abstract: China's computer exports to the United States increased 38 times between 1996 and 2013, growing from 4% to 66% of U.S. computer imports. China's exports of phones to the United States increased 32 times over this period, growing from 11% to 57% of U.S. phone imports. China's total exports to the United States also increased rapidly and are four or five times larger than U.S. exports to China. Cointegration evidence indicates that exchange rate depreciations in both China and in supply chain countries significantly increase China's exports. Evidence from gravity models indicates that China's exports to the United States have been twice as large as predicted every year since 2004. Thus, China's exports to the United States are a global outlier.
    Date: 2014–07
  13. By: Zuzana Fungácová (Bank of Finland); Laurent Weill (LaRGE Research Center, Université de Strasbourg)
    Abstract: We use data from the World Bank Global Findex database for 2011 to analyze financial inclusion in China, including comparisons with the other BRICS countries. We find a high level of financial inclusion in China manifested by greater use of formal account and formal saving than in the other BRICS. Financial exclusion, i.e. not having a formal account, is mainly voluntary. The use of formal credit is however less frequent in China than in the other BRICS. Borrowing through family or friends is the most common way of obtaining credit in all the BRICS countries, but other channels for borrowing are not very commonly used by individuals in China. We find that higher income, better education, being a man, and being older are associated with greater use of formal accounts and formal credit in China. Income and education influence the use of alternative sources of borrowing. Overall financial inclusion does not constitute a major problem in China, but such limited use of formal credit can create a challenge for further economic development.
    Keywords: financial inclusion, financial institutions, China
    JEL: G21 O16 P34
    Date: 2014
  14. By: You, Jing; Huang, Yongfu
    Abstract: This paper investigates the determinants China’s green growth and its pathways in the future. We use the OECD conceptual framework for green growth to measure green growth rates for 30 provinces over the period 1998-2011. By estimating a spatial dynamic panel model at provincial level, we find that China has experienced green growth, but with slower speed in the sample period. The average green growth rate is forecast to decline first and then fluctuate around zero over the next two decades. There appears to be a conditional convergence in provincial green growth and positive spatial influence across neighboring areas, yielding a cap of the country’s level of green development in the future. Mass innovation financed by the government and green structural reforms achieved at firm level are likely to stimulate green growth, while political shocks in terms of reappointment of provincial officials could retard China’s progress to a green economy.
    Keywords: Green growth, spatial dynamic panel model, forecasting, China
    JEL: C33 O10 O13 O53
    Date: 2013–12–19

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