nep-cna New Economics Papers
on China
Issue of 2015‒01‒03
seven papers chosen by
Zheng Fang
Ohio State University

  1. Unified China; Divided Europe By Ko, Chiu Yu; Koyama, Mark; Sng, Tuan-Hwee
  2. Decoding the Growth-Nutrition Nexus in China: Inequality, Uncertainty and Food Insecurity By Jing You; Katsushi Imai; Raghav Gaiha
  3. Growth-cycle phases in China’s provinces: A panel Markov-switching approach By Roberto Casarin; Komla Mawulom Agudze; Monica Billio; Eric Girardin
  4. Local government debt and economic growth in China By Wu , Yanrui
  5. Estimation and Determinants of Chinese Banks’ Total Factor Efficiency: A New Vision Based on Unbalanced Development of Chinese Banks and Their Overall Risk By Shiyi Chen; Wolfgang K. Härdle; Li Wang;
  6. Language, News and Volatility By Byström, Hans
  7. Measuring the Effects of Decollectivization on China's Agricultural Growth: A Panel GMM Approach, 1970-1987 By Shengmin Sun; Qiang Chen

  1. By: Ko, Chiu Yu; Koyama, Mark; Sng, Tuan-Hwee
    Abstract: This paper studies the causes and consequences of political centralization and fragmentation in China and Europe. We argue that the severe and unidirectional threat of external invasion fostered political centralization in China while Europe faced a wider variety of smaller external threats and remained politically fragmented. We test our hypothesis using data on the frequency of nomadic attacks and the number of regimes in China. Our model allows us to explore the economic consequences of political centralization and fragmentation. Political centralization in China led to lower taxation and hence faster population growth during peacetime than in Europe. But it also meant that China was relatively fragile in the event of an external invasion. Our results are consistent with historical evidence of warfare, capital city location, tax levels, and population growth in both China and Europe.
    Keywords: China; Europe; Great Divergence; Political Fragmentation; Political Centralization
    JEL: H0 H1 H56 N0 N13 N15 N40 N43 N45
    Date: 2014–12–05
  2. By: Jing You; Katsushi Imai; Raghav Gaiha
    Abstract: Abstract Chinese households have experienced significant income growth, while their nutrition intake has not increased pari passu. This paper uses household data in both rural and urban China over the period 1989-2009 to explain the paradox of higher income but lower nutrition. In addition to traditional inputs into nutrition intake, we emphasise different sources of income, the heterogeneous income effects across households, and the price effects under rising and volatile food prices. The instrumental variable estimation shows that, although nutrition is not responsive to aggregate income, pro-agriculture income growth in terms of proportionally more crop income raises rural households’ nutrient intake, while business and wage income improves urban households’ nutrition. The estimation of a quantile instrumental variable fixed-effects panel model further documents a nutrition-improving effect of income for the least nourished and only the better-nourished are able to benefit from widely believed contributors of nutrition intake such as dietary knowledge, local off-farm employment and out-migration. Uncertainties attached to prices of meat, eggs and oil and fat accentuate nutrition poverty and can off-set the positive income effect, raising the risk of food insecurity despite growing income.
    Date: 2014
  3. By: Roberto Casarin (Department of Economics, University of Venice Cà Foscari); Komla Mawulom Agudze (Department of Economics, University of Venice Cà Foscari); Monica Billio (Department of Economics, University of Venice Cà Foscari); Eric Girardin (Aix-Marseille University, CNRS & EHESS)
    Abstract: This paper analyses features of 28 provincial growth-cycles in China’s economy from March 1989 to July 2009. We study the multivariate synchronization of provincial cycles and the selection of the number of cycles phases’ by means of panel Markov-switching models. We obtain evidence that growth cycles in China and its provinces’ are characterized by distinct episodes of ‘growth-recession’, ‘normal-growth’ and ‘rapid-growth’. We find a demarcation between coastal and interior provinces in term of level of ‘normal-growth’ and ‘rapid-growth’ rates. The results, also, show evidence supporting interior provinces catching up on coastal provinces proving efficient economic policy coordination to reduce the gap between the Chinese coastal and interior. However, in terms of concordance, coastal provinces have cycles that are more synchronized with the national cycle than the interior provinces. Thus, China’s national and subnational officials have to take further effective measures to achieve high degree of concordance between national and interior provinces. The geographic pattern of the national growth-recessions and rapid-growth periods have substantially changed over time. The number of provinces experiencing growth-recession at the middle of the nation’s growth-recession has reduced over time while the number of provinces in rapid-growth at the middle of the nation’s rapid-growth has increased over time.
    Keywords: Bayesian inference, China’s provinces, growth-cycles, multivariate-synchronization, panel Markov-switching.
    JEL: C1 C11 C15 C32 E32 E37
    Date: 2014
  4. By: Wu , Yanrui (BOFIT)
    Abstract: China’s local government debt (LGD) has recently become the focus of economic policy debates. However, information about LGD and its impact on economic growth in the Chinese economy is scarce. This paper attempts to present an empirical investigation of the impact of China’s LGD on economic growth. It is probably the first of its kind to focus on China and thus contributes to the general literature on the relationship between government debt and economic growth. The paper first provides an assessment of LGD in China’s regional economies, using recently released auditing statistics and other available secondary information. It then applies conventional growth analysis methods to examine the impact of LGD on regional growth in China. Various scenario and sensitivity analyses are also conducted, to accommodate the inadequacy and potentially poor quality of debt statistics.
    Keywords: local government debt; regional growth; China
    JEL: H74 O11 O53
    Date: 2014–12–02
  5. By: Shiyi Chen; Wolfgang K. Härdle; Li Wang;
    Abstract: The development of shadow banking system in China catalyzes the expansion of banks’ off-balance-sheet activities, resulting in a distortion of China’s traditional credit expansion and underestimation of its commercial banks’ overall risk. This paper is the first to incorporate banks’ overall risk, endogenously into bank’s production process as undesirable by-product for the estimation of banks’ total factor efficiency (TFE) as well as TFE of each production factor. A unique data sample of 171 Chinese commercial banks, which is the largest data sample concerning with Chinese banking efficiency issues until now as far as we know, making our results more convincing and meaningful. Our results show that, compared with a model incorporated with banks’ overall risk, a model considering on-balance-sheet lending activities only may over-estimate the overall average TFE and under-estimate TFE volatility as a whole. Higher overall risk taking of banks tends to decrease bank TFE through ‘diverting effect’. However, significant heterogeneities of bank integrated TFE (TFIE) and TFE of each production factor exist among banks of different types or located in different regions, as a result of still prominent unbalanced development of Chinese commercial banks today. Based on newly estimated TFIE, the paper also investigates the determinants of bank efficiency, and finds that a model with risk-weighted assets as undesirable outputs can better capture the impact of shadow banking involvement.
    Keywords: Total Factor Efficiency, Unbalanced Development, Shadow Banking, Global SBM
    JEL: C14 C33 G21
    Date: 2014–11
  6. By: Byström, Hans (Department of Economics, Lund University)
    Abstract: I use Google News TM to study the relation between news volumes and stock market volatilities. More than nine million stock market-related news stories in English and (Mandarin) Chinese are collected and the dynamics of the news volume and the stock market volatility is compared in both the Anglophone world and the Sinophone world. I find that the stock market volatility and the number of publicly available global news stories are strongly linked to each other in both languages. Contemporaneous correlations between news and volatility are positive and highly significant, and regressions tell us that the directional link between news and volatility rather is from news to volatility than vice versa. In out-of-sample evaluations of volatility forecasts I find news volumes to improve forecasts, regardless of language. The relationship between news and volatility is weakest in mainland China and a possible reason for this is that Chinese retail investors do not read (traditional) news, neither in Chinese nor in English. The results suggest that news could be used in volatility-related financial applications such as GARCH-models or VIX-like fear indexes.
    Keywords: news aggregator; news; language; volatility; stock market; Chinese; Mandarin; GARCH; VIX
    JEL: C82 D80 G10
    Date: 2014–11–27
  7. By: Shengmin Sun (Center for Economic Research, Shandong University); Qiang Chen (School of Economics, Shandong University)
    Abstract: The mainstream view that decollectivization significantly contributed to China's agricultural growth has recently been challenged by revisionists, who emphasize the positive effects of the socialist legacy, such as irrigation and mechanization. This study contributes to this debate by explicitly recognizing the endogeneity of institutional changes and uses lagged weather shocks as valid instruments. With improved data on irrigation and mechanization in a provincial-level dataset covering the1970-1987 period, the results of panel GMM estimations reveal that the Household Responsibility System had a significantly positive effect on China's agricultural growth, which is larger than that indicated by OLS estimates..
    Keywords: Decollectivization, Household Responsibility System, Agricultural Growth, China
    JEL: O13 O43 Q15 N55
    Date: 2014–10

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