nep-cna New Economics Papers
on China
Issue of 2015‒07‒11
ten papers chosen by
Zheng Fang
Ohio State University

  1. Relaxing Migration Constraints for Rural Households By Cynthia Kinnan; Shing-Yi Wang; Yongxiang Wang
  2. Remittances and Relative Concerns in Rural China By Akay, Alpaslan; Bargain, Olivier; Giulietti, Corrado; Robalino, Juan David; Zimmermann, Klaus F.
  3. Solving Shortage in a Priceless Market: Insights from Blood Donation By Tianshu Sun; Susan Feng Lu; Ginger Zhe Jin
  4. The implications for trade and FDI flows from liberalisation of China's capital account By George Verikios
  5. Related variety in Chinese cities: local and Foreign Direct Investment related variety and impacts on urban growth By Junsong Wang; Martha Prevezer
  6. Trends and cycles in China's macroeconomy By Chang, Chun; Chen, kaiji; Waggoner, Daniel F.; Zha, Tao
  7. Towards Recoupling? Assessing the Global Impact of a Chinese Hard Landing through Trade and Commodity Price Channels. By L. Gauvin; C. Rebillard
  8. From One to Many Central Plans: Drug Advertising Inspections and Intra-National Protectionism in China By Markus Eberhardt; Zheng Wang; Zhihong Yu
  9. The Limits of Career Concerns in Federalism: Evidence from China By Persson, Petra; Zhuravskaya, Ekaterina
  10. Economic transition and speculative urbanisation in China: gentrification versus dispossession By Hyun Bang Shin

  1. By: Cynthia Kinnan; Shing-Yi Wang; Yongxiang Wang
    Abstract: There are an estimated 750 million internal migrants in the world, yet the effects of access to internal migration for rural households are not well understood. Internal migrants may provide wealth transfers, insurance or credit to households remaining in rural areas. This paper exploits two unique features of China's history to study the impact of relaxing migration constraints on the outcomes and choices of agricultural households: reforms to the household registration (hukou) system that relaxed restrictions on migration, and historical, centrally-planned migration flows. We show that historical flows of temporary migration due to a government policy called the "sent-down youth" (SDY) program created lasting inter-province links, so that decades later, reforms to the hukou system in cities which sent SDY increased migration in provinces where those SDY were sent. Using this variation, we find that improved access to migration leads to higher levels of consumption and lower consumption volatility for rural households. Furthermore, household production decisions change, with a shift into high-risk, high-return activities including animal husbandry and fruit farming.
    JEL: O15
    Date: 2015–07
  2. By: Akay, Alpaslan (University of Gothenburg); Bargain, Olivier (University of Aix-Marseille II); Giulietti, Corrado (IZA); Robalino, Juan David (Cornell University); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: The paper investigates the impact of remittances on the relative concerns of households in rural China. Using the Rural to Urban Migration in China (RUMiC) dataset we estimate a series of well-being functions to simultaneously explore the relative concerns with respect to income and remittances. Our results show that although rural households experience substantial utility loss due to income comparisons, they gain utility by comparing their remittances with those received by their reference group. In other words, we find evidence of a "status-effect" with respect to income and of a "signal-effect" with respect to remittances. The magnitudes of these two opposite effects are very similar, implying that the utility reduction due to relative income is compensated by the utility gain due to relative remittances. This finding is robust to various specifications, controlling for the endogeneity of remittances and selective migration, as well as a measure of current migrants' net remittances calculated using counterfactual income and expenditures.
    Keywords: positional concerns, remittances, subjective well-being
    JEL: C90 D63
    Date: 2015–06
  3. By: Tianshu Sun; Susan Feng Lu; Ginger Zhe Jin
    Abstract: Shortage is common in many markets, such as those for human organs or blood, but the problem is often difficult to solve through price adjustment, given safety and ethical concerns. In this paper, we investigate whether market designers can use non-price methods to address shortage. Specifically, we study two methods that are used to alleviate shortage in the market for human blood. The first method is informing existing donors of a current shortage via a mobile message and encouraging them to donate voluntarily. The second method is asking the patient’s family or friends to donate in a family replacement (FR) program at the time of shortage. We are interested in both the short-run and long-run effects of these methods on blood supply. Using 447,357 individual donation records across 8 years from a large Chinese blood bank, we show that both methods are effective in addressing blood shortage in the short run but have different implications for total blood supply in the long run. Specifically, we find that a shortage message leads to significantly more donations among existing donors within the first six months but has no effect afterwards. In comparison, a family replacement program has a small positive effect in encouraging existing donors (who donated before the FR) to donate more blood voluntarily after their FR donation, but discourages no-history donors (whose first donation is the FR) from donating in the long run. We compare the effect and efficiency of these methods and discuss their applications under different scenarios to alleviate shortage.
    JEL: D83 I18
    Date: 2015–07
  4. By: George Verikios
    Abstract: We model the partial liberalisation of the capital account by China using a dynamic CGE model of the world economy. Our results indicate that a reduced capital controls on FDI would lead to a significant increase in FDI capital in China and a significant reduction in the cost of capital in China relative to the rest of the world. Further, we observe an increase in capital stocks in all regions, which benefits all regions in terms of GDP and GNP. The economies of China (1.7%), East Asia (1.3%) and Australia/New Zealand (0.5%) grow most strongly. The rental price of capital falls significantly in these regions, which lowers domestic costs and they experience a real depreciation of the exchange rate and thus increased exports relative to other regions. We also observe an across-the-board increase in the saving rate driven by the rise in the price of consumption relative to investment (saving) in all regions.
    Keywords: capital controls, China, computable general equilibrium, FDI, multinational firms, trade
    JEL: C68 E22 F21 F23 F40
    Date: 2014–01
  5. By: Junsong Wang; Martha Prevezer
    Abstract: The paper measures agglomeration economies through related variety and their impact on growth and employment in Chinese cities, using prefecture level city-industry data from 2003 to 2010.
    Keywords: Related variety; Jacobs externalities; FDI-knowledge spillovers; Urban growth in China
    JEL: O2 R1
    Date: 2015–06
  6. By: Chang, Chun (Shanghai Jiaotong University); Chen, kaiji (Emory University); Waggoner, Daniel F. (Federal Reserve Bank of Atlanta); Zha, Tao (Federal Reserve Bank of Atlanta)
    Abstract: We make four contributions in this paper. First, we provide a core of macroeconomic time series usable for systematic research on China. Second, we document, through various empirical methods, the robust findings about striking patterns of trend and cycle. Third, we build a theoretical model that accounts for these facts. Fourth, the model's mechanism and assumptions are corroborated by institutional details, disaggregated data, and banking time series, all of which are distinctive Chinese characteristics. We argue that preferential credit policy for promoting heavy industries accounts for the unusual cyclical patterns as well as the post-1990s economic transition featured by the persistently rising investment rate, the declining labor income share, and a growing foreign surplus. The departure of our theoretical model from standard ones offers a constructive framework for studying China's modern macroeconomy.
    Keywords: reallocation; between-sector effect; total factor productivity growth; heavy versus light sectors; long-term versus short-term loans; labor share; lending frictions; incentive compatibility
    JEL: E2 E3 E5 F4 G1
    Date: 2015–06–01
  7. By: L. Gauvin; C. Rebillard
    Abstract: China’s rapid growth over the past decade has been one of the main drivers of the rise in mineral commodity demand and prices. At a time when concerns about the sustainability of China’s growth model are rising, this paper assesses to what extent a hard landing in China would impact other countries, with a focus on trade and commodity price channels. After reviewing the main arguments pointing to a hard landing scenario – historical rebalancing precedents, overinvestment, unsustainable debt trends, and a growing real estate bubble – we focus on a sample of thirty-six countries, and use a global VAR methodology adapted to conditional forecasting to simulate the impact of a Chinese hard landing. We model metal and oil markets separately to account for their different end-use patterns and consumption intensity in China, and we identify three specific transmission channels to net commodity exporters: through real exports, through income effects (related to commodity prices), and through investment (a fall in commodity prices reducing incentives to invest in the mining and energy sectors); we also look at the role played by the exchange rate as a shock absorber. According to our estimates, emerging economies (ex. China) would be hardest hit – with a 7.5 percent cumulated growth loss after five years –, in particular in South-East Asia but also in commodity-exporting regions such as Latin America; advanced economies would be less affected. The "growth gap" between emerging and advanced economies would be considerably reduced, leading to partial recoupling.
    Keywords: China, hard landing, spillovers, global VAR, conditional forecast, commodities, recoupling
    JEL: C32 F44 E32 E17 F47 Q02
    Date: 2015
  8. By: Markus Eberhardt; Zheng Wang; Zhihong Yu
    Abstract: This paper provides the first micro-level evidence for the existence and patterns of intra-national protectionism in China. We demonstrate that drug advertising inspections are used by provincial governments to discriminate against firms from outside the province. We further reveal how the degree of discrimination could be mitigated for nonlocal firms under certain circumstances: those from neighbouring areas, those without political ties to rival provincial governments, those from regions with more economic links to the destination province, and those from provinces with stronger presence in the market, are less likely to be targeted. Our findings highlight the unique politico-economic structure in China and confirm that giving local governments strong incentives to compete with each other may exacerbate the market distortions inherent in a partially reformed economy.
    Keywords: Intra-national protectionism; Drug advertising; China JEL Classification: F15, L25, P26
    Date: 2015
  9. By: Persson, Petra; Zhuravskaya, Ekaterina
    Abstract: Performance-based promotion schemes in administrative hierarchies have limitations. Chinese provincial leaders, despite facing strong career concerns, make different policy decisions depending on their career backgrounds. Provincial party secretaries who rose from low to high positions within the province they govern ("locals") spend a higher share of budgetary resources on education and health care and invest less in construction infrastructure than party secretaries who made their most significant career advancements in other provinces ("outsiders"). Identification comes from variation in central leadership and term limits. As the promotion mechanism rewards infrastructure investments, locals are less likely to be promoted at the end of the term. We explore various mechanisms and provide evidence that the difference between locals and outsiders is not driven by knowledge or experience. Several pieces of evidence suggest that locals cater to low-level provincial elites, who helped them rise to power. Thus, local career trajectories limit the power of career concerns by fostering competing allegiances.
    Keywords: autocracy; career concerns; China; federalism; hierarchies; public goods
    Date: 2015–02
  10. By: Hyun Bang Shin
    Abstract: Gentrification requires properties to be available for investment through market transactions. In mainland China which has gone through transition from a planned to a market economy, it is necessary to unleash decommodified real estate properties and make them amenable to investment. This entails inhabitants’ dispossession to dissociate them from claiming their rights to the properties and to their neighbourhoods. This paper argues that while China’s urban accumulation may have produced new-build gentrification, redevelopment projects have been targeting dilapidated urban spaces that are yet to be fully converted into commodities. This means that dispossession is a precursor to gentrification. Dispossession occurs through both coercion and co-optation, and reflects the pathdependency of China’s socialist legacy. The findings contribute to the debates on contextualising the workings of gentrification in the global South, and highlight the importance of identifying multiple urban processes at work to produce gentrification and speculative urban accumulation.
    Keywords: Gentrification; dispossession; economic transition; speculative urbanisation; China
    JEL: N0
    Date: 2015

This nep-cna issue is ©2015 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.