nep-cna New Economics Papers
on China
Issue of 2014‒08‒25
nine papers chosen by
Zheng Fang
Ohio State University

  2. No. 233 Is China Different? A Meta-Analysis of the Growth-enhancing Effect from R&D Spending in China. By Ljungwall, Christer; Gustavsson Tingvall, Patrik
  3. Gone for Good? Subsidies with Export Share Requirements in China: 2002-2013 By Fabrice Defever; Alejandro Riano
  4. China’s African financial engagement, real exchange rates and trade between China and Africa By Sylviane GUILLAUMONT JEANNENEY; Ping HUA
  5. Vertical Specialization, Tariff Shirking, and Trade By Ma, Alyson C.; Van Assche, Ari
  6. Relative Pay and its Underlying Determinants for Domestic Eldercare Workers in Urban China By Xiao-yuan Dong; Jin Feng; Yangyang Yu
  7. Measuring the Competitiveness of China's Processed Exports By THORBECKE, Willem
  8. Strategies for Financing Large-scale Carbon Capture and Storage Power Plants in China By Xi Liang; Hengwei Liu; David Reiner
  9. Corporate Preferences for Domestic Policy Instruments under a Sectoral Market Mechanism: A Case Study of Shanxi Province in China By Shuai Gao; Wenjia Cai; Wenling Liu; Can Wang; ZhongXiang Zhang

  1. By: C. Bram Cadsby (Department of Economics and Finance, University of Guelph); Ninghua Du (Shanghai University of Finance and Economics); Fei Song (Ryerson University); Lan Yao (Shanghai University of Finance and Economics)
    Abstract: We experimentally investigate a new variant of the trust/investment game that captures some key features of internet peer-to-peer (P2P) lending: the borrower specifies the amount of money required and makes a contingent promise about the value of the generally higher repayment prior to the investor’s decision to lend the required sum or not. We examine the role played by two factors related to traditional Chinese culture and ethics: whether (i) relational closeness between the actors and (ii) the ability of the actors to observe each other’s identity after the repayment decision (identifiability) affect the borrowers’ decisions to make the promised repayments and ultimately the consequent aggregate realized social benefits. Using a two-by-two factorial design, we conduct four treatments in China where these factors are hypothesized to be especially salient, and also perform the identifiability treatment in New Zealand as a cultural control. We find that in China both manipulations are positively and significantly related to the probability of a repayment promise being kept. Moreover, these two factors are substitutes for each other. In New Zealand, there was no significant identifiability effect on promise keeping. The effectiveness of identifiability in China but not in New Zealand resulted in a significantly higher proportion of promises being kept when agents were identifiable in China than in New Zealand. Over time, relational closeness and identifiability both led investors in China to accept more proposals, resulting in more investment and the creation of greater social surplus.
    Keywords: Promise-keeping, P2P lending, relational closeness, identifiability, China, guanxi, mianzi, business ethics, experimental.
    Date: 2014
  2. By: Ljungwall, Christer (Copenhagen Business School); Gustavsson Tingvall, Patrik (The Ratio Institute)
    Abstract: Abstract: In this paper we examine whether China has benefited more from spending on R&D than other countries by conducting a meta-analysis of the relevant literature on a large number of countries at different stages of economic development. The results suggest that the growth-enhancing effect of R&D spending in China has been significantly weaker than that of other countries. It is thus unlikely that R&D spending has been successful as a key contributing factor to economic growth in China.
    Keywords: meta-analysis; R&D; economic growth; China
    JEL: F43 O11 O33 O53
    Date: 2014–08–12
  3. By: Fabrice Defever; Alejandro Riano
    Abstract: This paper presents a simple model of subsidies with export share requirements (ESR) in a heterogeneous firm environment. A two-country general equilibrium version of the model with a single 100% ESR is calibrated using firm-level data from the 2002 wave of the Business Environment and Enterprise Performance Survey collected by the World Bank for China. The calibrated model is used to gauge the change in subsidies with ESR that is consistent with the fall in the share of ‘pure exporters’, firms exporting all their output, observed in China, from 25.7% in 2002 to 11.1% in 2013. Our results indicate that a 6.9% reduction in the ad-valorem subsidy rate available to firms that export all their output is consistent with the observed fall in their share of exporting firms. Expenditure in subsidies (as a share of value-added) falls by 66% and welfare in China increases by 1.76% while real income in the rest of the world falls by 0.59%.
    Keywords: Trade Policy; Export Subsidies; Export Share Requirements; China JEL classification: F12; F13; O47
    Date: 2014
  4. By: Sylviane GUILLAUMONT JEANNENEY (University of Auvergne); Ping HUA (FERDI)
    Abstract: In the last decade China’s trade with Africa increased faster than its overall foreign trade. This paper focuses on the role of real exchange rates in this growth. A “bilateral real exchange rate” augmented trade gravity model applied to China’s trade with 49 African countries over the period 2000 to 2011 shows that the real appreciation of most African currencies relative to the renminbi favoured China’s exports to these countries, but had no impact on China’s imports from Africa. This real appreciation of African currencies is explained by three main factors: 1) the decision to peg them to other currencies (in particular to the euro), 2) the amount of export of raw materials from African countries, and 3) the amount of financial assistance from international donors including China. Thus, a kind of detrimental sequence exists in Africa’s relationship with China: China’s imports of raw materials and its economic cooperation are among the factors explaining the appreciation of African real exchange rates, which itself stimulates China’s exports of manufactured goods, and so restricts Africa’s own industrial development.
    JEL: F12 F14 F31 F35
    Date: 2014–08
  5. By: Ma, Alyson C. (University of San Diego); Van Assche, Ari (HEC Montréal; CIRANO; Institute for Research on Public Policy)
    Abstract: The core idea behind the paper is that trade policy matters for the organization of global value chains, a notion largely neglected by economists but which has important implications for our understanding of trade and the international transmission of trade policy shocks. We develop a theoretical model in which a firm’s ability to spatially separate manufacturing from headquarter services gives them the flexibility to circumvent economy-specific tariff changes by switching their assembly location abroad. We show that tariff shirking increases the elasticity of bilateral trade to economy-specific tariff hikes due to an extra extensive margin effect. Furthermore, we show that tariff shirking affects the vulnerability of headquarter services and manufacturing to trade policy shocks in opposite ways. While tariff shirking dampens the vulnerability of headquarter services to trade policy shocks, it amplifies the vulnerability of manufacturing to trade policy shocks. Using firm-level and province-level export data from the People’s Republic of China, we provide evidence in line with the theoretical model.
    Keywords: vertical specialization; extensive margin; antidumping; tariff shirking; People’s Republic of China
    JEL: F12 F13 F14
    Date: 2014–02–01
  6. By: Xiao-yuan Dong; Jin Feng; Yangyang Yu
    Abstract: The market of domestic services in China has grown rapidly since the country embarked on market transition in the late 1970s. Domestic workers for eldercare are in especially high demand as a result of the aging population and the changing family structure. This paper examines the relative pay of domestic workers for eldercare and its underlying determinants. The estimates show that holding constant the observable individual characteristics, domestic workers for eldercare earn 24 percent less than do other types of workers in the service sector in Shanghai. The analysis attributes the low wage of eldercare workers to the fact that domestic work is culturally devaluated, that eldercare is performed by workers from the most marginalized segment of the labour force in the cities, and that the users of eldercare are relatively poor among the users of paid domestic services.
    Date: 2014–07
  7. By: THORBECKE, Willem
    Abstract: China's surplus in processing trade remains large. Processed exports are final goods produced using parts and components that are imported duty free. Since much of the value added of these exports comes from East Asia, exchange rates throughout the region should affect their foreign currency prices. This paper presents data on value-added exchange rates for processed exports over the 1993-2013 period and reports that they significantly affect exports. While the renminbi (RMB) appreciated by 36% between the beginning of 2005 and the end of 2013, exchange rates in supply chain countries have depreciated. This has mitigated the effect of the RMB appreciation on the price competitiveness of processed exports.
    Date: 2014–08
  8. By: Xi Liang; Hengwei Liu; David Reiner
    Abstract: Building on previous stakeholder consultations from 2006 to 2010, we conduct a financial analysis for a generic CCS power plant in China. In comparison with conventional thermal generation technologies, a coal-fired power plant with CCS requires either a 70% higher on-grid electricity tariff or carbon price support of approximately US$50/tonne CO2 in the absence of any other incentive mechanisms or financing strategies. Given the difficulties of relying on any one single measure to finance a large-scale CCS power plant in China, we explore a combination of possible financing mechanisms. Potential measures available for increasing the return on the CCS investment include: enhanced oil recovery (EOR), a premium electricity tariff, and operational investment flexibility (e.g. solvent storage, upgradability). A simulation found that combining several financing options could not only provide private investors with a 12% to 18% return on equity (ROE), but also significantly reduce the required on-grid tariff to a level that is very close to the tariff level of existing coal-fired power plants and much lower than the tariffs for natural gas combined cycle and nuclear power plants. Therefore, we suggest that a combination of existing financing measures could trigger private investment in a large-scale CCS power plant in China.
    Keywords: Carbon capture and storage, Coal-fired power plant, Electricity, Finance, China
    JEL: Q4 Q42 O3 O13 P48
    Date: 2014–08–04
  9. By: Shuai Gao (State Key Joint Laboratory of Environment Simulation and Pollution Control (SKLESPC), and School of Environment, Tsinghua University); Wenjia Cai (Ministry of Education Key Laboratory for Earth System Modeling, Center for Earth System Science, Tsinghua University); Wenling Liu (State Key Joint Laboratory of Environment Simulation and Pollution Control (SKLESPC), and School of Environment, Tsinghua University); Can Wang (State Key Joint Laboratory of Environment Simulation and Pollution Control (SKLESPC), and School of Environment, Tsinghua University); ZhongXiang Zhang (School of Economics, Fudan University)
    Abstract: Understanding companies' preferences for various domestic policy instruments is crucial to designing and planning Sectoral Market Mechanism (SMM) in China. Based on a detailed overview of domestic policy instruments under SMM, this paper evaluates corporate preferences for diverse domestic policy instruments and identifies potential influencing factors through econometric analysis. The data were collected from 113 respondents in all 11 prefecture-level cities of Shanxi province, China. Regarding policy instruments under the system of government receiving tradable units, corporate energy saving potential, learning capacity and companies' characteristics have shown significant influences on companies' preferences. Dissemination and the popularization of knowledge are also important to help companies learn how to improve energy efficiency. In terms of policy measures with voluntary installation-level targets, corporate competition level, organizational size and ownership are the main factors influencing companies' preferences. Reducing inequality in the distribution of responsibility is especially important to gain companies' support. Under the policy with mandatory installation-level targets, it suggests that policymakers should focus on status of energy use management and internationalization orientation. Policy instruments familiar to companies that are able to relieve corporate financial pressures might be good options to gain higher acceptance. Moreover, our results show that it is very important to choose an issuance frequency of one to three years under sectoral crediting.
    Keywords: sectoral market mechanism, domestic policy instruments, policy preference, company, China
    JEL: D22 O13 P28 Q43 Q48 Q53 Q58
    Date: 2014–08

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