nep-cna New Economics Papers
on China
Issue of 2015‒03‒13
eight papers chosen by
Zheng Fang
Ohio State University

  1. Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China By Chang-Tai Hsieh; Zheng (Michael) Song
  2. Did China Tire Safeguard Save U.S. Workers? By Chung, Sunghoon; Lee, Joonhyung; Osang, Thomas
  3. Mechanization outsourcing clusters and division of labor in Chinese agriculture: By Zhang, Xiaobo; Yang, Jin; Reardon, Thomas Anthony
  4. A DSGE Model for China’s Monetary and Macroprudential Policies By Sinclair, Peter; Sun, Lixn
  5. Assessing the CNH-CNY pricing differential: role of fundamentals, contagion and policy By Michael Funke; Chang Shu; Xiaoqiang Cheng; Sercan Eraslan
  6. Rural household income mobility in transitional China: Evidence from China Household Income Project By Yang, Sui
  7. Decomposing the effect of height on income in China: The role of market and political channels By Eiji Yamamura; Russell Smyth; Yan Zhang
  8. China’s Strategies in Economic Diplomacy: A Survey of Updated Lessons for Africa, the West and China By Simplice Asongu; Jacinta C. Nwachukwu; Gilbert A. A. Aminkeng

  1. By: Chang-Tai Hsieh; Zheng (Michael) Song
    Abstract: Starting in the late 1990s, China undertook a dramatic transformation of the large number of firms under state control. Small state-owned firms were privatized or closed. Large state-owned firms were corporatized and merged into large industrial groups under the control of the Chinese state. The state also created many new and large firms. We use detailed firm-level data to show that from 1998 to 2007, (i) state-owned firms that were closed were smaller and had low labor and capital productivity; (ii) the labor productivity of state-owned firms converged to that of private firms; (iii) the capital productivity of state-owned firms remained significantly lower than that of private firms; and (iv) total factor productivity (TFP) growth of state-owned firms was faster than that of private firms. We find the reforms of the state sector were responsible for 20 percent of aggregate TFP growth from 1998 to 2007.
    JEL: N15 O0
    Date: 2015–03
  2. By: Chung, Sunghoon; Lee, Joonhyung; Osang, Thomas
    Abstract: It has been well documented that trade adjustment costs to workers due to globalization are significant 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 deficiency, we evaluate the China-specific safeguard case on consumer tires petitioned by the United States. Contrary to claims made by the Obama administration, we find 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 find 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
  3. By: Zhang, Xiaobo; Yang, Jin; Reardon, Thomas Anthony
    Abstract: Most of the poor in the developing countries are smallholder farmers. Improving their productivity is essential for reducing poverty. Despite small landholdings, a high degree of land fragmentation, and rising labor costs, agricultural production in China has steadily increased. If one treats the farm household as the unit of analysis, it would be difficult to explain the conundrum. When seeing agricultural production from the lens of division of labor, the puzzle can be easily solved. In response to rising labor costs, farmers outsource some power-intensive stages of production, such as harvesting, to specialized mechanization service providers, which are often clustered in a few counties and travel throughout the country to harvest crops at very competitive service charges. Through such an arrangement, smallholder farmers can stay viable in agricultural production.
    Keywords: Agriculture, mechanization, microeconomics, Wages, Economic development, lewis turning point, outsource,
  4. By: Sinclair, Peter; Sun, Lixn
    Abstract: This paper develops a calibrated DSGE model for simulating China’s monetary policy and macroprudential policy. The empirical results show, first, that the interest rate is a better instrument for China’s monetary policy than the required reserve ratio when the central bank is solely concerned by the price stability; second, that the loan-to-value (LTV) ratio is a very useful macroprudential tool for China’s financial stability, and the required reserve ratio could be used as an instrument for both objectives. Whether macroprudential policy complements or conflicts with monetary policy depends upon the instruments choices of two policies. Our policy experiments suggest three combination choices of instruments for China’s monetary and macroprudential policies.
    Keywords: DSGE Model, Monetary Policy, Macroprudental Policy, China’s Economy
    JEL: E5 E6 G1
    Date: 2014–05
  5. By: Michael Funke; Chang Shu; Xiaoqiang Cheng; Sercan Eraslan
    Abstract: Renminbi internationalisation has brought about an active offshore market where the exchange rate frequently diverges from the onshore market. Using extended GARCH models, we explore the role of fundamentals, global factors and policies related to renminbi internationalisation in driving the pricing differential between the onshore and offshore exchange rates. Differences in the liquidity of the two markets play an important role in explaining the level of the differential, while rises in global risk aversion tend to increase the differential's volatility. On the policy front, measures permitting cross-border renminbi outflows have a particularly discernible impact in reducing the volatility of the pricing gap between the two markets.
    Keywords: renminbi exchange rates, China, onshore and offshore markets, GARCH models
    Date: 2015–02
  6. By: Yang, Sui
    Abstract: Based on China Household Income Project rural data, this paper aims to study the changes of rural household income mobility in transitional China. The results show that with the economic reform and development, income mobility between 2007 and 2009 was mu
    Keywords: income mobility, inequality, rural China
    Date: 2015
  7. By: Eiji Yamamura; Russell Smyth; Yan Zhang
    Abstract: It is well known that height is positively associated with earnings. Based on individual level data, this paper investigates the channels through which height influences income in China. Our first key finding is that taller people are more likely to become members of the Communist Party, resulting in an increase in their income level. We label this the height premium in earnings through the political channel. Second, controlling for the political channel of the height premium, height is positively associated with income in the labor market. We label this the height premium through the market channel. Third, the height premium in earnings through the market channel is larger than that through the political channel.
    Date: 2015–03
  8. By: Simplice Asongu (Yaoundé/Cameroun); Jacinta C. Nwachukwu (Huddersfield, HD1 3DH, UK); Gilbert A. A. Aminkeng (Yaoundé/Cameroon)
    Abstract: The Washington consensus, the hitherto dominant scheme is being encroached by the Beijing model. Many African nations are increasingly embracing this Beijing approach because the dominant Western model has failed to deliver on a number of fronts. This is increasingly evident because China’s economic diplomacy has been politely and strategically coined to achieve just that. A case study is used here to articulate the currents of the survey. The paper puts some structure on China’s economic diplomatic strategies and discusses lessons for Africa, China and the West. It contributes to existing literature by critically engaging on why it is necessary for the West to adjust the conception and definition of the Washington Consensus as a complement to the Beijing model. In order to remain relevant in the 21st century and beyond, the Washington consensus can incorporate the Moyo (2013) conjecture which postulates that, while the Beijing model is optimal in the short-run, the Washington Consensus remains the optimal long-term development model because it is more inclusive.
    Keywords: Economic relations; China; Africa
    JEL: F19 F21 O10 O19 O55
    Date: 2014–12

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