nep-cna New Economics Papers
on China
Issue of 2015‒02‒22
eleven papers chosen by
Zheng Fang
Ohio State University

  1. Who Is Coming to the Artefactual Field Experiment? Participation Bias among Chinese Rural Migrants By Paul Frijters; Tao Sherry Kong; Elaine M. Liu
  2. State Capitalism vs. Private Enterprise By Donghua Chen; Dequan Jiang; Alexander Ljungqvist; Haitian Lu; Mingming Zhou
  3. The Internationalization of the RMB, Capital Market Openness, and Financial Reforms in China By Joshua Aizenman
  4. The Literary Inquisition: The Persecution of Intellectuals and Human Capital Accumulation in China By Koyama, Mark; Xue, Melanie Meng
  5. R&D returns, spillovers, and firm incentives : evidence from China By Goh, Chorching; Li, Wei; Xu, Lixin Colin
  6. Toward a US-China Investment Treaty By C. Fred Bergsten; Cathleen Cimino; Gary Clyde Hufbauer; J. Bradford Jensen; Sean Miner; Theodore H. Moran; Jeffrey J. Schott
  7. Empowering cities : good for growth ? evidence from China By Zhu, T. Juni; Mukim, Megha
  8. Where is the value added? China's WTO entry, trade and value chains By Aichele, Rahel; Heiland, Inga
  9. Who Will Feed China in the 21st Century? Income By Martin, Will; Fukase, Emiko
  10. The effects of Chinese competition and demand on Peruvian Exporters By Jean Paul Rabanal; Olga A. Rabanal
  11. A comparative analysis of China and India’s manufacturing sectors By Yingqi Wei; Vudayagi Balasubramanyam

  1. By: Paul Frijters; Tao Sherry Kong; Elaine M. Liu
    Abstract: In this paper, we compare participants in an artefactual field experiment in urban China with the survey population of migrants from which they were recruited. The experimental participants were more educated, more likely to lend money to friends, and worked fewer hours than the general population. They differ significantly from non-participants in terms of regression coefficients, such as the effects of wealth and marital status on the probability of being self-employed and distance migrated. We thus find that there was selection into our experiments on the basis of both observable characteristics and on unobserved differences in behavioral relations.
    JEL: C81 C90 C93
    Date: 2015–02
  2. By: Donghua Chen; Dequan Jiang; Alexander Ljungqvist; Haitian Lu; Mingming Zhou
    Abstract: We study the efficiency of internal capital markets at state-controlled and privately owned business groups in China. Using highly granular data on within-group capital flows, we document stark differences: while private groups allocate more capital to units with better investment opportunities, state groups do the opposite. Minority shareholders in state owned firms suffer as a result. Product market competition and external monitoring by outside investors help discipline state groups’ tendency to ignore investment opportunities. We conjecture that capital allocations at state groups reflect the private career objectives of their chairmen. We show that promotion depends not on increasing profitability but on avoiding layoffs. Consistent with a career motive, we find that capital allocations are used to prop up large and struggling employers, but only if the chairman has a realistic chance of being promoted and if the cost of self-interested behavior is not too high.
    JEL: G15 G31 G32 G34 P1 P31
    Date: 2015–02
  3. By: Joshua Aizenman
    Abstract: This paper provides an overview of Chinese financial and trade integration in recent decades, and the challenges facing China in the coming years. China had been a prime example of exported growth, benefiting from learning by doing, and by adopting foreign know-how, supported by a complex industrial policy. While the resultant growth has been spectacular, it comes with hidden but growing costs and distortions. The Chinese export-led growth path has been challenged by its own success, and the Global Financial Crisis forced China toward rebalancing, which is a work in progress. Reflecting on the internationalization of the CNY, one expects the rapid accelerating of the commercial internationalization of the CNY.
    JEL: F3 F32 F36 F4 F41
    Date: 2015–02
  4. By: Koyama, Mark; Xue, Melanie Meng
    Abstract: Imperial China used an empire-wide system of examinations to select civil servants. Using a semiparametric matching-based difference-in-differences estimator, we show that the persecution of scholar-officials led to a decline in the number of examinees at the provincial and prefectural level. To explore the long-run impact of literary inquisitions we employ a model to show that persecutions could reduce the provision of basic education and have a lasting effect on human capital accumulation. Using the 1982 census we find that literary inquisitions reduced literacy by between 2.25 and 4 percentage points at a prefectural level in the early 20th century. This corresponds to a 69% increase in the probability of an individual being illiterate. Prefectures affected by the literary inquisition had a higher proportion of workers in agriculture until the 1990s.
    Keywords: China, Human Capital, Institutions, Persecutions, Persistence
    JEL: N0 N45 O1 O15
    Date: 2015–02–11
  5. By: Goh, Chorching; Li, Wei; Xu, Lixin Colin
    Abstract: This paper uses a new data set of 12,000 firms in China to estimate the returns to research and development investment and its spillover effects, and investigates how the returns to research and development depend on firm incentives. For the firms in the sample, the results show that on average firm output increases around 0.4 yuan for each additional 1 yuan spent on research and development in the previous year, and there is high research and development return regardless of whether the analysis deals with the endogeneity of research and development intensity. Interestingly, the marginal return to research and development is significantly higher in firms whose chief executive officers were not appointed by the government and lower when the chief executive officer's pay is directly related to annual performance. The return to research and development is higher in relatively poor regions and for firms with worse access to finance. There are also non-trivial research and development spillover effects.
    Keywords: E-Business,Agricultural Knowledge and Information Systems,Scientific Research&Science Parks,Science Education,Rural Development Knowledge&Information Systems
    Date: 2015–02–01
  6. By: C. Fred Bergsten (Peterson Institute for International Economics); Cathleen Cimino (Peterson Institute for International Economics); Gary Clyde Hufbauer (Peterson Institute for International Economics); J. Bradford Jensen (Peterson Institute for International Economics); Sean Miner (Peterson Institute for International Economics); Theodore H. Moran (Peterson Institute for International Economics); Jeffrey J. Schott (Peterson Institute for International Economics)
    Abstract: The United States and China are among the world's largest trading nations. They serve as the destination and source of the world's largest flows of foreign direct investment, and they participate in regional economic arrangements on trade and investment in the Asia-Pacific region and other parts of the world. Yet when it comes to direct investment in each other's economies, China and the United States are among the world's underperformers. The successful conclusion of the negotiation of a US-China bilateral investment treaty (BIT) could change this situation. In this PIIE Briefing, experts examine prospects for a US-China BIT now that negotiations have revived after a hiatus following the 2008 election of President Barack Obama, whose economic team had other economic priorities upon taking office. After spending its first years holding internal debates about trade deals, the administration completed an internal US government review of investment issues in 2012 and resumed talks with China in 2013. The essays in this study focus on recent developments that could inform and possibly set precedents for the investment pact. They also examine issues that pose challenges to a successful negotiation. Jeffrey J. Schott and Cathleen Cimino analyze the recent China-Japan-Korea investment pact and compare it with investment provisions that the United States has developed in its model BIT. Sean Miner and Gary Clyde Hufbauer discuss how a US-China BIT should address US concerns in China regarding subsidies, unfair advantages for state-owned enterprises, and uneven application of competition policy. J. Bradford Jensen analyzes the potential for increased trade in business services. Hufbauer, Miner, and Theodore H. Moran analyze review procedures of the Committee on Foreign Investment in the United States (CFIUS). In a concluding overview, C. Fred Bergsten assesses the broader context of US-China economic relations.
    Date: 2015–02
  7. By: Zhu, T. Juni; Mukim, Megha
    Abstract: This paper utilizes a countrywide, county-to-city upgrade in the 1990s to identify whether extending the powers of urban local governments leads to better firm outcomes. The paper hypothesizes that since local leaders in newly-promoted cities have an incentive to utilize their new administrative remit to maximize gross domestic product and employment growth, there should be improvements in economic outcomes. The analysis finds that aggregate firm-level outcomes do not necessarily improve after county-to-city graduation. However, it does find that state-owned enterprises perform better post-graduation, with increased access to credit through state-owned banks as a possible explanation for the improvement in performance. The most important finding is that newly-promoted cities with high capacity generally produce better aggregate firm outcomes compared with newly-promoted cities with low capacity. The conclusions are twofold. First, in terms of access to credit, the paper provides evidence that relaxing credit constraints for firms could lead to large increases in firm operation and employment. Second, increasing local government's administrative remit is not enough to lead to better firm and economic outcomes; local capacity is of paramount importance.
    Keywords: Subnational Economic Development,Banks&Banking Reform,City Development Strategies,Access to Finance,Public Sector Management and Reform
    Date: 2015–02–01
  8. By: Aichele, Rahel; Heiland, Inga
    Abstract: In the 2000s, China's WTO entry constituted a major trade shock. In this paper, we analyze its eff ects on trade and value chains. The fragmentation of the global value chain makes it hard to disentangle who produces for whom. Value added trade contains this information. We build a multi-sector gravity model of the Eaton and Kortum (2002) type with inter-sectoral linkages that gives rise to a gravity equation for value added trade flows. As in Koopman et al. (forthcoming), exports can be decomposed into value added exports, exports of foreign value added and double counting. We construct a panel database of value added trade for 40 countries and the years 1995-2009 from the World Input-Output database. With WIOD and tariff data, we estimate the gravity model's key parameters. The simulation then hypothetically sets tari s w.r.t. China back to their pre-accession levels. We find that China's WTO entry strengthend the Asian production network. Chinese value added in exports reduced and increasingly foreign value added - most prominently from Japan and Korea - is assembled and exported.
    JEL: F13 F14 F17
    Date: 2014
  9. By: Martin, Will; Fukase, Emiko
    Abstract: This paper uses resource-based cereal equivalent measures to explore the evolution of China’s demand and supply for food. Although demand for food calories is probably close to its peak level in China, the ongoing dietary shift to animal-based foods, induced by income growth, is likely to impose considerable pressure on agricultural resources. Estimating the relationship between income growth and food demand with data from a wide range of countries, China’s demand growth appears to have been broadly similar to the global trend. On the supply side, output of food depends strongly on the productivity growth associated with income growth and on the country’s agricultural land endowment, with China appearing to be an out-performer. The analyses of income-consumption-production dynamics suggest that China’s current income level falls in the range where consumption growth outstrips production growth, but that the gap is likely to begin to decline as China’s population growth and dietary transition slow down. Continued agricultural productivity growth through further investment in research and development, and expansion in farm size and increased mechanization, as well as sustainable management of agricultural resources, are vital for ensuring that it is primarily China that will feed China in the 21st century.
    Keywords: cereal equivalents, China, food self-sufficiency, livestock, income growth, International Development, International Relations/Trade, Q11, Q17, Q18,
    Date: 2014
  10. By: Jean Paul Rabanal (Ball State University); Olga A. Rabanal (Ball State University)
    Abstract: China’s role in the global economy has grown tremendously over the past two decades, significantly altering the nature of world markets. In this paper, we study the impact of Chinese supply and demand shocks to the international markets on Peruvian firm-product exports across destinations from 2000 to 2011. In particular, the demand shock has been notably absent from literature on the recent impact of China. We present evidence using both channels, focusing primarily on within firm-product and across destinations specification. The results indicate that for most part, an increase in Chinese supply and demand has had a significant and positive effect on Peruvian firm exports. From the supply side, this suggests that firms are either (i) concentrating on markets where competition is tougher, (ii) increasing R&D efforts to enhance the productivity as well as the competitiveness, (iii) benefiting from a comparative advantage in certain sectors that helps mitigate the competition presented by Chinese exporters, or (iv) a combination of these three explanations. From the demand side, this indicates that firms are possibly redirecting their exports from other markets to China.
    Keywords: Competition, Demand, Trade, Firm-heterogeneity, Peru, China
    JEL: F14 L25
    Date: 2015–02
  11. By: Yingqi Wei; Vudayagi Balasubramanyam
    Abstract: China’s manufacturing sector led by labour intensive manufactures has grown much faster than that of India both in terms of production and exports. It is often argued that India’s manufacturing sector that is relatively capital intensive must now follow China’s example and promote labour intensive manufactures. This is said to be essential if India were to promote growth and employment that are both essential for reducing the relatively high levels of poverty in the country. This paper argues that it may not be feasible for India to follow China’s growth strategy based on exports of labour intensive manufactures. India may have missed the boat and in any case it has failed to implement a strategy for agriculture of the sort that China put in place to provide its manufacturing sector with low wages and low cost raw materials. India, however, should utilise its services sector, mostly the IT services, to promote its nascent non- farm manufacturing sector in the rural areas. There may be lessons here from China’s town and village enterprises TVEs) programme.
    Keywords: Manufacturing, Foreign Direct Investment, Labour Regulations, Town and Village Enterprises (TVEs)
    Date: 2015

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