nep-cna New Economics Papers
on China
Issue of 2015‒09‒11
eleven papers chosen by
Zheng Fang
Ohio State University

  1. Reduced carbon emission estimates from fossil fuel combustion and cement production in China By Zhu Liu; Dabo Guan; Wei Wei; Steven J. Davis; Philippe Ciais; Jin Bai; Shushi Peng; Qiang Zhang; Klaus Hubacek; Gregg Marland; Robert J. Andres; Douglas Crawford-Brown; Jintai Lin; Hongyan Zhao; Chaopeng Hong; Thomas A. Boden; Kuishuang Feng; Glen P. Peters; Fengming Xi; Junguo Liu; Yuan Li; Yu Zhao; Ning Zeng; Kebin He
  2. Urbanization and Economic Development: A Tale of Two Barriers By Raymond Riezman; Ping Wang; Eric Bond
  3. Assessing Default Risks for Chinese Firms: A Lost Cause? By Daniel Law; Shaun K. Roache
  4. Hong Kong’s Growth Synchronization with China and the U.S.: A Trend and Cycle Analysis By Dong He; Wei Liao; Tommy Wu
  5. People's Republic of China: 2015 IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for the People's Republic of China By International Monetary Fund. Asia and Pacific Dept
  6. Happiness in the Air: How Does a Dirty Sky Affect Subjective Well-being? By Zhang, Xin; Zhang, Xiaobo; Chen, Xi
  7. The Great Expectations: Impact of One-Child Policy on Education of Girls By Huang, Wei; Lei, Xiaoyan; Sun, Ang
  8. China’s Growth: Can Goldilocks Outgrow Bears? By Wojciech Maliszewski; Longmei Zhang
  9. Be a Good Samaritan to a Good Samaritan: Field Evidence of Interdependent Other-Regarding Preferences in China By Chang, Simon; Dee, Thomas S.; Tse, Chun-Wing; Yu, Li
  10. China’s Labor Market in the “New Normal†By Raphael W. Lam; Xiaoguang Liu; Alfred Schipke
  11. Understanding Residential Real Estate in China By Mali Chivakul; Raphael W. Lam; Xiaoguang Liu; Wojciech Maliszewski; Alfred Schipke

  1. By: Zhu Liu; Dabo Guan; Wei Wei; Steven J. Davis; Philippe Ciais; Jin Bai; Shushi Peng; Qiang Zhang; Klaus Hubacek; Gregg Marland; Robert J. Andres; Douglas Crawford-Brown; Jintai Lin; Hongyan Zhao; Chaopeng Hong; Thomas A. Boden; Kuishuang Feng; Glen P. Peters; Fengming Xi; Junguo Liu; Yuan Li; Yu Zhao; Ning Zeng; Kebin He
    Abstract: Nearly three-quarters of the growth in global carbon emissions from the burning of fossil fuels and cement production between 2010 and 2012 occurred in China1, 2. Yet estimates of Chinese emissions remain subject to large uncertainty; inventories of China?s total fossil fuel carbon emissions in 2008 differ by 0.3 gigatonnes of carbon, or 15 per cent1, 3, 4,5. The primary sources of this uncertainty are conflicting estimates of energy consumption and emission factors, the latter being uncertain because of very few actual measurements representative of the mix of Chinese fuels. Here we re-evaluate China?s carbon emissions using updated and harmonized energy consumption and clinker production data and two new and comprehensive sets of measured emission factors for Chinese coal. We find that total energy consumption in China was 10 per cent higher in 2000?2012 than the value reported by China?s national statistics6, that emission factors for Chinese coal are on average 40 per cent lower than the default values recommended by the Intergovernmental Panel on Climate Change7, and that emissions from China?s cement production are 45 per cent less than recent estimates1, 4. Altogether, our revised estimate of China?s CO2emissions from fossil fuel combustion and cement production is 2.49 gigatonnes of carbon (2 standard deviations = ±7.3 per cent) in 2013, which is 14 per cent lower than the emissions reported by other prominent inventories1, 4, 8. Over the full period 2000 to 2013, our revised estimates are 2.9 gigatonnes of carbon less than previous estimates of China?s cumulative carbon emissions1, 4. Our findings suggest that overestimation of China?s emissions in 2000?2013 may be larger than China?s estimated total forest sink in 1990?2007 (2.66 gigatonnes of carbon)9 or China?s land carbon sink in 2000?2009 (2.6 gigatonnes of carbon)10.
  2. By: Raymond Riezman (University of Iowa); Ping Wang (Washington University in St. Louis); Eric Bond (Vanderbilt University)
    Abstract: In this paper we determine the main driving forces underlying the rapid structural transformation and urbanization process in newly industrialized countries. We use a dynamic, small open economy model with an abundant supply of surplus labor in rural areas, two types of traded goods manufactured in urban areas, and barriers to both trade and migration. The model is supplemented with quantitative analysis using Chinese data. There we focus on determining the role that reductions in trade and migration barriers played in China's growth and urbanization. We find that the primary drivers for real per capita GDP growth are migration cost reduction and skill accumulation. While trade liberalization is important for urbanization during the transition toward China's admission to the WTO (particularly for the employment measure), it does not contribute much to real per capita GDP growth relative to other major changes throughout the development process in China. During this transition process, migration cost reduction and TFP changes are both important, accounting for a significant proportion of increased urbanization.
    Date: 2015
  3. By: Daniel Law; Shaun K. Roache
    Abstract: Assessing default risks for Chinese firms is hard. Standard measures of risk using market indicators may be unreliable because of implicit guarantees, the large role played by less-informed investors, and other market imperfections. We test this assertion by estimating stand-alone 1-year default probabilities for non-financial firms in China using an equity-based structural model and debt costs. We find evidence that the equity measure of default risk is sensitive to a firm’s balance sheet health, profitability, and ownership; specifically, default probabilities are higher for weaker, less profitable, and state-owned firms. In contrast, measures based on the cost of debt seem largely detached from fundamentals and instead determined by implicit guarantees. We conclude that for individual firms, equity-based measures, while far from perfect, provide a better measure of stand-alone default risks than borrowing costs.
    Keywords: Default;Corporate sector;Credit risk;China;Public non-financial corporations;default probabilities, equity, market, Asset Pricing, Financial Forecasting and Simulation,
    Date: 2015–06–26
  4. By: Dong He; Wei Liao; Tommy Wu
    Abstract: This paper investigates the synchronization of Hong Kong SAR’s economic growth with mainland China and the United States. This paper identifies trends of economic growth based on the permanent income hypothesis. Specifically, the paper confirms whether real consumption in Hong Kong SAR and mainland China satisfy the permanent income hypothesis, at least in a weak form. It then identifies the permanent and transitory components of income of each economy using a simple state-space model. It uses structural vector autoregression models to analyze how permanent and transitory shocks originating from mainland China and the United States affect the Hong Kong economy, and how such influences evolve over time. The paper’s main findings suggest that transitory shocks from the United States remain a major driving force behind Hong Kong SAR’s business cycle fluctuations. On the other hand, permanent shocks from mainland China have a larger impact on Hong Kong SAR’s trend growth.
    Keywords: Economic growth;China;Consumption;Business cycles;Economic integration;Hong Kong Special Administrative Region of China;Hong Kong SAR;Income;United States;United States;Business cycle synchronization, permanent income hypothesis, stochastic trend, structural vector autoregression, permanent income, exports, economy, International Business Cycles, structural vector autoregression.,
    Date: 2015–04–28
  5. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: China is moving to a ‘new normal,’ characterized by slower yet safer and more sustainable growth. The transition is challenging, but the authorities are committed to it. They have made progress in reining in vulnerabilities built-up since the global financial crisis and embarked on a comprehensive reform program. With China now the globe’s largest economy, success is critical for both China and the world.
    Keywords: Article IV consultation reports;Economic conditions;Economic growth;Spillovers;Fiscal reforms;Public enterprises;Monetary policy;Economic indicators;Balance of payments statistics;Debt sustainability analysis;Staff Reports;Press releases;China;
    Date: 2015–08–14
  6. By: Zhang, Xin (Peking University); Zhang, Xiaobo (Peking University); Chen, Xi (Yale University)
    Abstract: Existing studies that evaluate the impact of pollution on human beings understate its negative effect on cognition, mental health, and happiness. This paper attempts to fill in the gap via investigating the impact of air quality on subjective well-being using China as an example. By matching a unique longitudinal dataset at the individual level, which includes self-reported happiness and mental well-being measures, with contemporaneous local air quality and weather information according to the exact date of interview, we show that worse air quality reduces shorter-term hedonic happiness and increases the rate of depressive symptoms. However, life satisfaction, an evaluative measure of happiness, is largely immune from immediate bad air quality.
    Keywords: hedonic happiness, life satisfaction, mental well-being, air quality, China
    JEL: I31 Q51 Q53
    Date: 2015–08
  7. By: Huang, Wei (Harvard University); Lei, Xiaoyan (Peking University); Sun, Ang (Renmin University of China)
    Abstract: The rise in education of women relative to men is an emerging worldwide phenomenon in recent decades. This paper investigates the impact of the birth control policies on teenage girls' education attainment. The estimates suggest that the policies explain 30 percent of the education increase for women born in 1945-1980 and 50 percent of the gender gap narrowing in China. Further analysis provides some suggestive evidence for potential mechanisms, including the policy-induced expectations for labor and marriage market and subjective attitudes on children and gender-equality. These findings highlight the role of fertility policies in women's empowerment of last century.
    Keywords: One-Child Policy, education of girls, expectation
    JEL: D84 I20 J13 J16 J18
    Date: 2015–08
  8. By: Wojciech Maliszewski; Longmei Zhang
    Abstract: The paper analyzes the recent growth dynamics in China, evaluating both cyclical positions and long-term growth prospects. The analysis shows that financial cycles play a more important role than traditional inflation-based cycles in shaping the dynamics of growth. Currently, the ‘finance-neutral’ gap—our measure of the financial cycle—is large and positive, reflecting imbalances accumulated in the economy since the Global Financial Crisis. A period of slower growth is therefore both likely and needed in the near term to restore the economy to equilibrium. In the medium term, growth will slow as China moves closer to the technology frontier, but a steadfast implementation of reforms can ensure that China follows the path of the “Asia Tigers†and achieves successful convergence to high-income status.
    Keywords: China;Total factor productivity;potential growth, output gap, production, investment, inflation, credit, potential output, Macroeconomic Analyses of Economic Development,
    Date: 2015–05–27
  9. By: Chang, Simon (University of Western Australia); Dee, Thomas S. (Stanford University); Tse, Chun-Wing (Central University of Finance and Economics); Yu, Li (Central University of Finance and Economics)
    Abstract: We conducted large-scale lost letter experiments in Beijing, a megacity with more than 21 million residents, to test if the observed altruistic attribute of the letter recipient would induce more passersby to return the lost letters. The treatment letters were addressed to a nationally renowned charitable organization in China, while the control letters were intended to an invented individual. A total of 832 ready-to-be-posted letters were distributed in 208 communities across eight districts in the city. The overall return rate was only about 13%. Yet, the return rate of the treatment letters (17%) was nearly twice as high as that of the control letters (9%). The finding adds large-scale field experiment evidence in support of the interdependent other-regarding preferences theory. In addition, we also found that the lost letters were more likely to be returned if they were dropped in communities with a relatively higher income or a postal box located closer.
    Keywords: other-regarding preferences, lost letter technique, altruism, China
    JEL: C93 D03
    Date: 2015–08
  10. By: Raphael W. Lam; Xiaoguang Liu; Alfred Schipke
    Abstract: As China implements reforms under the “new normal,†maintaining stability in the labor market is a priority. The country’s demography and labor dynamics are changing, after benefitting in past decades from ample cheap labor. So far, the labor market appears to be resilient, even as growth slows, driven in part by expansion of the services sector. Migrant flows and possible labor hoarding in overcapacity sectors may also help explain this. Yet, while the latter two factors help serve as shock absorbers— contributing to labor market stability in the short term—if they persist, they may delay the needed adjustment process, contributing to an inefficient allocation of resources and curtailing productivity gains. This paper quantifies to what extent structural trends and the reform pace affect employment growth under the new normal. Delays in reform implementation would weaken growth prospects in the medium term, running the risk that job creation will fall below policy targets, leading to labor market pressures in the future. In contrast, successful transition might require faster reforms, including in the overcapacity and state-owned enterprise sectors, supported by well targeted social safety nets.
    Keywords: Unemployment;Migration;Labor markets;China;Mobility, labor market, labor, employment, General, General, General, General, General, General,
    Date: 2015–07–13
  11. By: Mali Chivakul; Raphael W. Lam; Xiaoguang Liu; Wojciech Maliszewski; Alfred Schipke
    Abstract: China’s residential real estate sector plays an important role in the economy and has been a key driver of growth. Since 2014 the sector has softened visibly, reflecting overbuilding across many cities. An orderly adjustment of the sector is welcome. The key questions are how severe the adjustment will be and how long it will last. This paper uses various datasets, an analytical framework to estimate demand and supply conditions, and develops a number of scenarios to determine the oversupply both at the national level and by city tiers. It highlights that the adjustment will be a multiyear process with adverse implications for investment and growth. Smaller cities, as well as those in the Northeast region, face more challenging demand-supply dynamics. The key will be to allow the adjustment to take place, while avoiding a too sharp of an economic slowdown.
    Keywords: China;Economic growth;Investment;Real estate prices;Supply and demand;Real estate, Property, Growth, price, cities, prices, market, General,
    Date: 2015–04–28

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.