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on China |
| By: | Joshua Aizenman; Yothin Jinjarak; Huanhuan Zheng |
| Abstract: | The Global Financial Crisis (GFC) brought to the fore the limits of the Chinese export led-growth strategy and the need for Chinese rebalancing. The Chinese export-led growth strategy of the 2000s coincided with the country becoming one of the largest net global creditors. Intriguingly, the Chinese net income from its global creditor position was negative, reflecting the large share of its low-yielding assets (mostly international reserves), and its high share of high-yielding liabilities (mostly foreign direct investment in China). Our paper takes stock of what may be the next new chapter of Chinese outward-mercantilism, which aims at securing a higher rate of returns on its net foreign asset position, leveraging its success in becoming the global manufacturing hub and the supplier of swap-lines. The emerging new trend has been manifested by Chinese outward-oriented FDI in natural resources, commodities and mining, and providing a wide spectrum of infrastructure and construction services to developing countries. These activities are frequently bundled with access to finance and the export of Chinese capital products and labor services. We trace and analyze these trends, identifying the positive associations between Chinese outward FDI, trade, and finance. The positive association between Chinese outward FDI and commodities imports increases with the provision of RMB swap-lines to China’s trading partners. The association between Chinese FDI outflows in the natural resources sector and commodities imports has become stronger since the GFC. The association of RMB swap-lines with the Chinese outward FDI in the natural resources sector is especially large, thus supporting the conjecture that in the aftermath of the GFC Chinese outward FDI is bundled with trade and financial linkages. |
| JEL: | F4 O2 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21089&r=cna |
| By: | Marcel Schroder |
| Abstract: | This paper is motivated by the popular view that the surge in China’s foreign exchange reserves is due to a distortionary exchange rate policy aimed at keeping the real exchange rate undervalued to support export-led growth. It undertakes an in-depth empirical investigation to quantify how much "mercantilist" and "precautionary" motives have contributed to the reserve build-up in China during 1998Q4-2011Q4. A substantial problem is that theory is consistent with employing two vastly differing approaches to defining and estimating the role of mercantilist reserve accumulation. A priori, either method could generate misleading results. The study shows, however, that the distinction between the two approaches is immaterial in China’s case. The results suggest that mercantilism accounts for less than 10 percent of reserve accumulation. Precautionary motives and other factors seem to be the dominant determinants of the surge in China’s international reserves. |
| Keywords: | international reserves, precautionary demand, mercantilism, China |
| JEL: | E58 F31 F36 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2015-04&r=cna |
| By: | Raphael W. Lam; Philippe Wingender |
| Abstract: | Revenue reforms can contribute to more inclusive, green, and sustainable growth in China. Relative to OECD economies, fiscal policy in China is less redistributive. Options for promoting more inclusive growth include improving the progressivity of labor taxes (individual income tax and social security contributions), introducing a recurrent property tax, and finishing the transition to a comprehensive value-added tax. Higher environmental taxes, meanwhile, would promote more environment-friendly economy. These reforms could also significantly boost revenue, potentially by as much as 6½ percent of GDP. Such increases in revenue could help reduce the deficit, finance priority social and infrastructure spending, and offset cuts in other taxes. We illustrate how these revenue reforms could be part of a comprehensive fiscal package that achieves the needed consolidation in the (augmented) deficit and foster higher quality growth. |
| Keywords: | Tax revenues;China;Tax reforms;Fiscal reforms;Inclusive growth;Tax systems;fiscal Policy, China, tax reforms, government debt, social security |
| Date: | 2015–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/66&r=cna |
| By: | Serhan Cevik; Carolina Correa-Caro |
| Abstract: | This paper investigates the empirical characteristics of income inequality in China and a panel of BRIC+ countries over the period 1980–2013, with a focus on the redistributive contribution of fiscal policy. Using instrumental variable techniques to deal with potential endogeneity, we find evidence supporting the hypothesis of the existence of a Kuznets curve—an inverted Ushaped relationship between income inequality and economic development—in China and the panel of BRIC+ countries. In the case of China, the empirical results indicate that government spending and taxation have opposing effects on income inequality. While government spending appears to have a worsening impact, taxation improves income distribution. Even though the redistributive effect of fiscal policy in China appears to be stronger than what we identify in the BRIC+ panel, it is not large enough to compensate for the adverse impact of other influential factors. |
| Keywords: | Income inequality;China;Brazil;Russian Federation;India;Fiscal policy;Income distribution;Economic growth;Cross country analysis;Time series;Panel analysis;Income distribution, income inequality, fiscal policy |
| Date: | 2015–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/68&r=cna |
| By: | Liu, Taoxiong; Huang, Mengdan |
| Abstract: | China has experienced several episodes of inflation in recent years. Popular arguments attribute these episodes to relatively high growth rates of money, which were then primarily explained by China’s accumulation of foreign exchange reserves and the undervaluation of RMB. We attempt to explain China’s high monetary growth rates through the supply of land. Under China’s land system, the supply of land is controlled by the government and can be viewed as exogenous to the monetary system. An increase in the money supply stimulates bank loans and thereby monetary growth. Both an error correction model and a simultaneous equations model are developed to explore the effect of the land supply on monetary growth. The empirical results show that the effect of the land supply on the money supply is significantly positive and even exceeds that of foreign exchange reserves. The significance for monetary policy is that, under China’s existing political economy, both the central bank and local governments should be responsible for monetary policy and price levels. |
| Keywords: | land supply, money supply, foreign exchange reserves |
| JEL: | E50 R10 R14 |
| Date: | 2015–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62781&r=cna |
| By: | Pierre-Philippe Combes (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, 2, Rue de la Charité,13002 Marseille, France; Sciences Po, Department of Economics, 28, Rue des Saints-Pères, 75007 Paris, France. Also affiliated to the CEPR.); Sylvie Démurger (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Shi Li (School of Business, Beijing Normal University, China; IZA, Bonn, Germany) |
| Abstract: | We analyse the impact of internal migration in China on natives’ labour market outcomes. We find evidence of a large positive correlation of the city share of migrants with natives’ wages. Using different sets of control variables and instruments suggests that the effect is causal. The large total migrant impact (+10% when one moves from the first to the third quartile of the migrant variable distribution) arises from gains due to complementarity with natives in the production function (+6.4%), and from gains due to agglomeration economies (+3.3%). Finally, we find some evidence of a stronger effect for skilled natives than for unskilled, as expected from theory. Overall, our findings support large nominal wage gains that can be expected from further migration and urbanisation in China. |
| Keywords: | Migration, urban development, agglomeration economies, wage disparities, China |
| JEL: | O18 J61 R23 J31 O53 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1503&r=cna |
| By: | Richard B. Freeman; Wei Huang |
| Abstract: | In the past two decades China leaped from bit player in global science and engineering (S&E) to become the world's largest source of S&E graduates and the second largest spender on R&D and second largest producer of scientific papers. As a latecomer to modern science and engineering, China trailed the US and other advanced countries in the quality of its universities and research but was improving both through the mid-2010s. This paper presents evidence that China's leap benefited greatly from the country's positive response to global opportunities to educate many of its best and brightest overseas and from the deep educational and research links it developed with the US. The findings suggest that global mobility of people and ideas allowed China to reach the scientific and technological frontier much faster and more efficiently. |
| JEL: | I2 I23 J0 J24 O3 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21081&r=cna |
| By: | Chunxin Jia; Yaping Wang; Wei Xiong |
| Abstract: | This paper uses the segmented dual-class shares issued by several dozen Chinese firms---A shares to local Chinese investors and H shares to foreign investors---to compare reactions of local and foreign investors to the same public news. We find that local investors react more strongly to earnings forecasts by local analysts, while foreign investors react more strongly to forecasts of foreign analysts. This finding highlights social trust as a force driving people with different social backgrounds to react differently to the same information. |
| JEL: | F3 G02 G14 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21075&r=cna |
| By: | Mali Chivakul; Raphael W. Lam |
| Abstract: | This paper documents and assesses the risk stemming from rising corporate indebtedness in China using a firm-level dataset of listed firms. It finds that while leverage on average is not high, there is a fat tail of highly leveraged firms accounting for a significant share of total corporate debt, mainly concentrated in the real estate and construction sector and state-owned enterprises in general. The real estate and construction firms tend to face lower borrowing costs and could withstand a modest increase of interest rate shocks despite their high leverage. The corporate sector is however vulnerable to a significant slowdown in the real estate and construction sector. Our sensitivity analysis suggests that the share of debt that would be in financial distress would rise to about a quarter of total listed firm debt in the event of a 20 percent decline in real estate and construction profits. |
| Keywords: | Corporate sector;China;Borrowing;Interest rate increases;Public enterprises;Construction services;Debt burden;Corporate sector, leverage, China, state-owned enterprise (SOE), real estate, interest rate shock |
| Date: | 2015–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/72&r=cna |
| By: | Nikita A. Vul (National Research University Higher School of Economics) |
| Abstract: | When the Qing Empire collapsed in 1911, military groups moved to the forefront. The power of regional warlords bloomed during 1916–28, splitting China into disparate fiefdoms. The fragmentation of China largely defined the course of events in this country through all 20 century, so explaining the origins of the warlord era is important. This paper documents the prerequisites of Republican warlordism during 1850s–1900s. Through their analysis the paper argues for the direct linkage between Qing-era literati governors and Republican-era military warlords. Since the imperial government failed to crush the Taiping Rebellion, local elites gained military experience and influence, thus becoming a cradle for China’s future break-up |
| Keywords: | Qing Empire, power, warlords, elites, disintegration |
| JEL: | Z19 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:95hum2015&r=cna |
| By: | Xiaoping He; David Reiner |
| Abstract: | An increasing block tariff (IBT) has been implemented nationwide in the residential sector in China since July 2012 as part of a process towards liberalizing electricity prices. However, knowledge about IBT design is still limited, particularly how to determine the electricity volume for the first block of an IBT scheme. Assuming the first block should be set based on some measure of electricity poverty, we attempt to model household electricity demand such that the range of basic needs can be established. We find that in Chinese households there exists a threshold for electricity consumption with respect to income, which might be considered a measure of electricity poverty, and the threshold differs between rural and urban areas. For rural (urban) families, electricity consumption at the level of 7th (5th) income decile households can be considered the threshold for basic needs or a measure of electricity poverty since household electricity demand in rural (urban) areas does not respond to income changes until after the 7th (5th) income decile. Further, for the case of China’s electricity consumption, we find that if there is a saturation point, after which household energy needs would not rise further proportionately with increasing income, it is far from having been reached. Whereas the first IBT block was set at 240 kWh per household for Beijing, we estimate basic needs to be roughly 90 kWh per month for rural households and 150 kWh for urban households. The first IBT block therefore appears to have been set at a level that is too high, roughly equivalent to the average consumption of the top decile of urban residents. Over time however, given continued rapid growth, the IBT will begin to better reflect actual basic needs. |
| Keywords: | - |
| JEL: | N55 P28 Q41 O13 I3 |
| Date: | 2014–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1442&r=cna |
| By: | Matthieu CLEMENT; Céline BONNEFOND |
| Abstract: | The purpose of this article is to analyse the influence of social class on nutrition knowledge and food preferences among Chinese urban adults with an emphasis on the middle class. The empirical investigations conducted as part of this research are based on data from the China Health and Nutrition Survey for 2009. First, we propose a multidimensional definition of social class that combines income, occupation and education to highlight the heterogeneity of the Chinese middle class. We identify four distinct groups: the elderly and inactive middle class, the old middle class, the lower middle class and the new middle class. In a second step, we assess the influence of social class on nutrition knowledge and food preference indices. Our results show that adults belonging to the elderly and inactive middle class and to the new middle class have better nutrition knowledge and healthier food preferences than their poorer counterparts. |
| Keywords: | nutrition knowledge, food preferences, social stratification, middle class, China |
| JEL: | I12 O53 Z13 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:tac:wpaper:2014-2015_10&r=cna |