nep-cna New Economics Papers
on China
Issue of 2014‒11‒12
ten papers chosen by
Zheng Fang
Ohio State University

  1. The cleansing effect of minimum wages Minimum wages, firm dynamics and aggregate productivity in China By Florian MAYNERIS; Sandra PONCET; Tao ZHANG
  2. Why Give it Away When You Need it Yourself? Understanding Public Support for Foreign Aid in China By Cheng, Zhiming; Smyth, Russell
  3. International Patenting Strategies of Chinese Residents: an analysis of foreign-oriented patent families By Mila Kashcheeva; Sacha Wunsch-Vincent; Hao Zhou
  4. Superstition and financial decision making By Hirshleifer, David; Jian, Ming; Zhang, Huai
  5. Bank capital, adjustment and ownership: Evidence from China By Molyneux , Philip; Liu, Hong; Jiang , Chunxia
  6. Can Mutual Funds Pick Stocks in China? Evidence from the IPO Market By Johansson, Anders C.; Feng, Xunan
  7. Did China Tire Safeguard Save U.S. Workers? By Chung, Sunghoon; Lee, Joonhyung; Osang, Thomas
  8. Decomposition of productivity considering multi-environmental pollutants in Chinese industrial sector By Hidemichi Fujii; Jing Cao; Shunsuke Managi
  9. What Measures Chinese Monetary Policy? By Sun, Rongrong
  10. Distortion Effects of Export Quota Policy: an Analysis of the China - Raw Materials Dispute By Christophe Charlier; Sarah Guillou

  1. By: Florian MAYNERIS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE)); Sandra PONCET (Paris School of Economics (University of Paris 1), CEPII and FERDI); Tao ZHANG (Shanghai University of International Business and Economics)
    Abstract: We here consider how Chinese firms adjust to higher minimum wages and how these affect aggregate productivity, exploiting the 2004 minimum-wage reform in China. We find that higher city-level minimum wages reduced the survival probability of firms which were the most exposed to the reform. For the surviving firms, thanks to significant productivity gains, wage costs rose without any negative employment effect. At the city-level, our results show that higher minimum wages affected aggregate productivity growth via both productivity growth in incumbent firms and the net entry of more productive firms. Hence, in a fast-growing economy like China, there is a cleansing effect of labor-market standards.
    Keywords: minimum wages, firm-level performance, aggregate TFP, China
    JEL: O14 J38 O47
    Date: 2014–10–20
  2. By: Cheng, Zhiming; Smyth, Russell
    Abstract: Public support for foreign aid in donor countries is highly correlated with how much donor countries are willing to give. There is, perhaps surprisingly, relatively little evidence on the determinants of public support for foreign aid in donor countries. And the evidence that does exist is for donors that are developed democratic countries. In this study we examine the determinants of public support for foreign aid in China. China is a particularly interesting case because it is both a recipient and donor of foreign aid. Thus, one would expect that the public’s perceptions of China’s own development needs would influence its support for China donating to other countries. We find that while political ideology and sense of national identity are the most important determinants of support for foreign aid, several demographic characteristics are also important. We also find that those living in the lower income western provinces and in provinces with higher poverty rates express less support for giving foreign aid. We draw policy implications from the findings for better targeting engagement strategies designed to garner support for foreign aid.
    Keywords: China; public support; foreign aid; donor country
    JEL: D70 F50 P33
    Date: 2014–10–03
  3. By: Mila Kashcheeva (Research Fellow, BB&T Center for Education and Economic Policy Studies, and Center for China Studies, Clemson University, USA.); Sacha Wunsch-Vincent (Economics and Statistics Division, WIPO); Hao Zhou (Economics and Statistics Division, WIPO)
    Abstract: In terms of the number of its patent applications, in 2012 China has emerged as the country with the largest IP office in the world. The performance of the Chinese IP system is thus increasingly in the spotlight. While significant economic studies have been devoted to the rise of domestic patenting in China, hardly any study has focused on Chinese patent filings in foreign countries. This paper analyzes Chinese patenting abroad by using WIPO’s foreign-oriented patent family dataset and a respective enterprise questionnaire. It finds that by the turn of the century China emerged as major actor in terms of international patenting. While this is changing rapidly, the share of Chinese patents which get filed abroad is still a fraction of total patents filed at home and most patents still also only target one foreign IP office. Chinese foreign-oriented patent families are concentrated in a few technology fields, notably those related to the ICT sector, “Digital communication”, followed by “Computer technology”, “Nanotechnology”, and similar fields. A few Chinese firms are responsible for a large share of total Chinese patents filed abroad. The paper however also highlights that some of these trends are changing rapidly towards more intensive and broad-based filing abroad. Initial results from a selective firm survey also show a shift from the desire to protect technologies abroad to more strategic motives: (i) the desire to build patent portfolios avoiding litigation, (ii) facilitating collaboration with other firms, but also to (iii) license and sell IP abroad, and to (iv) further the firm’s reputation as true innovator.
    Keywords: China, innovation, intellectual property, patents, patent families, information technology
    JEL: F20 F23 L86 O3 O31 O34
    Date: 2014–09
  4. By: Hirshleifer, David; Jian, Ming; Zhang, Huai
    Abstract: In Chinese culture, certain digits are lucky and others unlucky. We test how such numerological superstition affects financial decision in the China IPO market. We find that the frequency of lucky numerical stock listing codes exceeds what would be expected by chance. Also consistent with superstition effects, newly listed firms with lucky listing codes are initially traded at a premium after controlling for known determinants of valuation multiples, the lucky number premium dissipates within three years of the IPO, and lucky number firms experience inferior post-IPO abnormal returns.
    Keywords: Finance; Asset pricing; Investment
    JEL: G12 G14 G15
    Date: 2014–09–15
  5. By: Molyneux , Philip (BOFIT); Liu, Hong (BOFIT); Jiang , Chunxia (BOFIT)
    Abstract: We investigate ownership effects on capital and adjustments speed to the target capital ratio in China from 2000 to 2012 and find that state-owned banks hold higher levels of capital than banks of other ownership types. Foreign banks are more highly capitalized than local non-state banks but under-capitalized compared with the bigger non-state banks with nationwide presence. Foreign banks adjust risk-weighted capital towards their optimal targets at a slower speed than domestic banks, while foreign minority ownership results in a faster adjustment process. Capital is positively influenced by profitability, asset diversification and liquidity risk, but negatively influenced by bank market power. Capital ratios typically co-move with the business cycle although this relationship is reversed during the crisis period due to active government intervention. Our results are robust to various modelling specifications and have important policy implications.
    Keywords: banking; capital; adjustment; ownership; China
    JEL: C32 G21 G28
    Date: 2014–09–15
  6. By: Johansson, Anders C. (Stockholm China Economic Research Institute); Feng, Xunan (Southwestern University of Finance and Economics)
    Abstract: This study examines the stock-picking ability of mutual funds in China using evidence from the IPO market. We hypothesize that the decision to invest in the IPO market contains positive information about a fund’s underlying expectation of newly listed firms’ future prospects. Using residuals from a model on the determinants of mutual funds purchases in the IPO market as proxy for consensus expectations, we find that IPO firms with high residual funds have significantly better stock returns and operating performance than those with low residual funds. In other words, residual funds can predict IPO future performance. This result is also robust to different specifications and alternative explanations such as mutual fund preferences or monitoring effects.
    Keywords: Mutual funds; Stock picking ability; IPO; China
    JEL: G15 G23 G30 L25
    Date: 2014–09–12
  7. By: Chung, Sunghoon; Lee, Joonhyung; Osang, Thomas
    Abstract: It has been well documented that trade adjustment costs to workers due to globalization are signiï¬cant and that temporary trade barriers have been progressively used in many countries, especially during periods with high unemployment rates. Consequently, temporary trade barriers are perceived as a feasible policy instrument for securing domestic jobs in the presence of increased globalization and economic downturns. However, no study has assessed whether such temporary barriers have actually saved domestic jobs. To overcome this deï¬ciency, we evaluate the China-speciï¬c safeguard case on consumer tires petitioned by the United States. Contrary to claims made by the Obama administration, we ï¬nd that total employment and average wages in the tire industry were unaffected by the safeguard using the ‘synthetic control’ approach proposed by Abadie et al. (2010). Further analysis reveals that this result is not surprising as we ï¬nd that imports from China are completely diverted to other exporting countries partly due to the strong presence of multinational corporations in the world tire market.
    Keywords: China Tire Safeguard, Temporary Trade Barriers, Trade Diversion, Synthetic Control Method
    JEL: F13 F14 F16
    Date: 2014–06
  8. By: Hidemichi Fujii (Graduate School of Fisheries Science and Environmental Studies, Nagasaki University); Jing Cao (Tsinghua University); Shunsuke Managi (Graduate School of Environmental Studies, Tohoku University)
    Abstract: The objective of this study is to calculate and decompose productivity incorporating multi-environmental pollutants in Chinese industrial sectors from 1992 to 2008. We apply a weighted Russell directional distance model to calculate productivity from both the economic and environmental performance. Main findings are, 1) Chinese industrial sectors increased productivity, with the main contributing factors being labor saving prior to 2000. 2) The main contributing factors for productivity growth in coastal areas include both economic and environmental performance improvement. While central and west regions improved productivity due to economic development, they have a trade-off relationship between economic and environmental performance.
    JEL: O47 Q53 Q56
    Date: 2014–10
  9. By: Sun, Rongrong
    Abstract: This paper models the People’s Bank of China’s operating procedures in a two-stage vector autoregression model to search for a valid good policy indicator for Chinese monetary policy. The model disentangles endogenous components in changes in monetary policy that are driven either by demand for money or the liquidity management needs arising from foreign exchange purchases. There are four main findings. First, the PBC’s procedures appear to have changed over time, and hence no single indicator represents Chinese monetary policy well for the 2000-2013 time period. Second, its operating procedure is neither pure interest-rate targeting nor pure reserves targeting, but a mixture. Third, a set of indicators all contain information about the policy stance. It is hence preferred to use a composite measure to measure Chinese monetary policy. Finally, we construct a new composite indicator of the overall policy stance, consistent with our model. A comparison with several existing measurement approaches suggests that the composite indices, rather than individual indicators, perform better in measuring Chinese monetary policy.
    Keywords: monetary policy, VAR, operating procedures, exogenous (endogenous) components
    JEL: E52 E58
    Date: 2014–08
  10. By: Christophe Charlier (Université Nice Sophia Antipolis and GREDEG/CNRS); Sarah Guillou (OFCE - Sciences-Po Paris, GREDEG/CNRS and SKEMA Business School)
    Abstract: The China - Raw Materials dispute recently arbitrated by the WTO opposed China as defendant to the US, the EU and Mexico as claimants on the somewhat unusual issue of export restrictions on natural resources. For the claimants, Chinese export restrictions on various raw materials, of which the country is a major producer, create shortages in foreign markets increasing the prices of these goods. China defends export limitations by presenting them as a natural resource conserving policy. This paper offers a theoretical analysis of the dispute with the help of a model of a monopoly extracting a non-renewable resource and selling it on both the domestic and foreign markets. The theoretical results focus on the effects of imposing an export quota on quantities, prices and price distortion. Given the crucial importance of demand elasticity in this theoretical understanding of the conflict, the empirical part of the paper provides estimates of import demand elasticity of the parties for each product concerned in the case. The model and the empirical results challenge the ideas that an export quota always favours conservation of natural resource, that a higher foreign price necessarily follows this policy and that it inherently increases price distortion and therefore discrimination.
    Keywords: Export Restrictions, WTO, Exhaustible Natural Resources, Price Discrimination, Article XX of the GATT 1994
    JEL: F13 F18 F51 K33 Q37
    Date: 2014–10

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