nep-cna New Economics Papers
on China
Issue of 2015‒12‒08
fifteen papers chosen by
Zheng Fang
Ohio State University

  1. Slower Growth and Vulnerability to Recession: Updating China’s Global Impact By Rod Tyers
  2. Exploring the geography of China's airport networks: a hybrid complex-network approach By Zhengbin Dong; Wenjie Wu
  3. Testing the Predictability of Consumption Growth: Evidence from China By Liping Gao; Hyeongwoo Kim
  4. China’s Capital Stock Series by Region and Sector By Yanrui Wu
  5. Energy efficiency of China's industry sector: An adjusted network DEA-based decomposition analysis By Yingnan Liu; Ke Wang
  6. Is the price elasticity of demand for coal in China increasing? By Paul J. Burke; Hua Liao
  7. China's Investment Rate: Implications and Data Reliability By Holz, Carsten A.
  8. Internationalising the currency while leveraging massively: the case of China By Alicia García-Herrero
  9. China's Seasonal Influenza Vaccination Policy in a Post-Health Care Reform Era By Ningzhen Ruan; Thao Nguyen; Kellynn Khor
  10. China as a Global Force By Feng Zhang
  11. Trade, Migration and Regional Income Differences: Evidence from China By Xiaodong Zhu; Trevor Tombe
  12. Identifying Competition Neutrality of SOEs in China By WATANABE Mariko
  13. The China Syndrome in US: Import Competition, Crime, and Government Transfer By Che, Yi; Xu, Xun
  14. Where Have China’s State Monopolies Gone? By Paul Hubbard
  15. The Tragedy of Corruption. Corruption as a social dilemma By Ye-Feng Chen; Shu-Guang Jiang; Marie Claire Villeval

  1. By: Rod Tyers (Business School, University of Western Australia)
    Abstract: Central to the global impacts of China’s emergence has been its structural imbalance (its excess product supply and excess saving), but this has diminished considerably in the transition years since 2010. These imbalances are now reversed as its consumption expands faster than its GDP and so the global implications are qualitatively different. Moreover, higher income, slower growth, and therefore increasing similarity with the advanced economies, implies that consumer and business confidence are now more central to performance, rendering recession possible, and more likely as the growth slowdown raises the intensity of the domestic spotlight on political performance. The international effects of the transition and a possible recession are here quantified using a global macro model with national portfolio rebalancing. The transition to consumption-led growth is shown to foster employment abroad, particularly in the US, while a major Chinese recession is shown to be damaging to the advanced economies and particularly to the US, the more so if China’s policy response is expansionary and includes floating the RMB.
    Date: 2015
  2. By: Zhengbin Dong; Wenjie Wu
    Abstract: Air networks are normal examples of transportation systems among ubiquitous big data networks in the dynamic nature. This is particularly the case in developing countries with rapid airport network expansions. This paper explores the structure and evolution of the trunk airport network of China (ANC) in major years during 1980s-2000s. We generalise the complex network approach developed in existing studies and further test for statistical properties of weighted network characteristics by using pair-wise traffic flows. The spatiotemporal decomposition of network metric plots and the visualization maps leads to a rich harvest of stylized ANC structures: (i) national hub-and-spoke patterns surrounding mega-cities; (ii) regional broker patterns surrounding Kunming and Urumqi, and (iii) local heterogeneous disparity patterns in isolated geographical cities, such as Lhasa, Lijiang, Huangshan, etc. These findings have important implications towards understanding the geo-political and economic forces at stake in shaping China's urban systems.
    Keywords: airport system; complex network; regional development; China
    JEL: O18 P25 R12
    Date: 2015–03
  3. By: Liping Gao; Hyeongwoo Kim
    Abstract: Chow (1985, 2010, 2011) reports indirect evidence in favor of the permanent income hypothesis using time series observations in China. We revisit this issue by evaluating direct measures of the predictability of consumption growth in China during the post-economic reform regime (1978-2009) as well as the postwar US data for comparison. Our in-sample analysis provides strong evidence against the PIH for both countries. Out-of-sample forecast exercises show that consumption changes are highly predictable, which sharply contrasts the implication of Chow (1985, 2010, 2011).
    Keywords: Permanent Income Hypothesis; Consumption; Diebold-Mariano-West Statistic
    JEL: E21 E27
    Date: 2015–12
  4. By: Yanrui Wu (Business School, University of Western Australia)
    Abstract: The lack of capital stock statistics for empirical research of the Chinese economy has for a long time been one of the major impediments in the profession. Professor Gregory Chow is one of the pioneers who attempted to deal with this matter. His seminal paper on China’s capital formation and economic growth was published in 1993 (Chow 1993). Since then many authors have estimated their own capital stock data series. However, most authors have focused on investigations at the national level and their findings are not without controversies. In particular, few studies have provided estimates of capital stock for China’s regional economies. This paper adds to the existing literature in several ways. First, it presents a critical review of the methods and findings in the existing literature. Second, it proposes an alternative approach to estimate China’s capital stock series by region as well as across three economic sectors (agriculture, industry and services). Finally, preliminary analyses of the derived capital stock statistics are conducted to examine growth, disparity and convergence in China’s regional economies.
    Date: 2015
  5. By: Yingnan Liu; Ke Wang
    Abstract: The process of energy conservation and emission reduction in China requires the specific and accurate evaluation of the energy efficiency of the industry sector because this sector accounts for 70 percent of China¡¯s total energy consumption. Previous studies have used a ¡°black box¡± data envelopment analysis (DEA) model to obtain the energy efficiency without considering the inner structure of the industry sector. However, differences in the properties of energy utilization (final consumption or intermediate conversion) in different industry departments may lead to bias in energy efficiency measures under such ¡°black box¡± evaluation structures. Using the network DEA model and efficiency decomposition technique, this study proposes an adjusted energy efficiency evaluation model that can characterize the inner structure and associated energy utilization properties of the industry sector so as to avoid evaluation bias. By separating the energy-producing department and energy-consuming department, this adjusted evaluation model was then applied to evaluate the energy efficiency of China¡¯s provincial industry sector.
    Keywords: Energy consumption, Energy conversion, Structure decomposition
    JEL: Q58 Q40
    Date: 2015–01–02
  6. By: Paul J. Burke; Hua Liao
    Abstract: China's dependence on coal is a major contributor to local and global environmental problems. In this paper we estimate the price elasticity of demand for coal in China using a panel of province-level data for 1998-2012. We find that provincial coal demand has become increasingly price elastic. As of 2012 we estimate that this elasticity was in the range -0.3 to -0.7 in point estimate terms when responses over two years are considered. The results imply that China's coal market is becoming more suited to price-based approaches to reducing emissions. The elimination of coal consumption subsidies could reduce national coal use and related emissions by around 2%.
    Keywords: coal, price elasticity, demand, China, provincial
    JEL: Q58 Q40
    Date: 2015–10–01
  7. By: Holz, Carsten A.
    Abstract: For the past nearly forty years, China has experienced average annual real GDP growth of close to ten percent, much of it driven by investment and capital accumulation. By 2014, gross capital formation had reached 46 percent of aggregate expenditures. This paper documents the role of investment in driving economic growth in China, questions how much longer China can sustain a relatively high investment rate, and examines the arguments that have been offered for an impending drastic reduction in investment. The quality of the investment statistics and of the gross fixed capital formation statistics (the latter as part of the national income and product accounts) is assessed; these data are potentially problematic with no easy way for researchers to improve the data. The paper finally makes the point that investment in China remains broad-based across all economic sectors, with little specialization in sight; the size of the Chinese economy would appear to allow comprehensive development across all economic sectors. At the same time, the relative size of foreign investment in China has become negligible and the China growth story thus has become a domestic one.
    Keywords: investment rate, capital-output ratio, ICOR, national investment strategy, economic growth
    JEL: E1 E22 E6 O11 O53
    Date: 2015–11–26
  8. By: Alicia García-Herrero
    Abstract: After a slowdown in reform momentum during the global financial crisis, there is a clear push towards reform, especially in terms of RMB internationalisation. During the same period, though, China’s debt has doubled, reaching levels that are clearly above those of most emerging markets. This increases the risks embedded in financial reform and, in particular, capital account liberalisation. At this juncture, however, China has no option but to press for reform since the current growth model is no longer working and China urgently needs to better allocate its savings.
    Date: 2015–10
  9. By: Ningzhen Ruan; Thao Nguyen; Kellynn Khor
    Abstract: Vaccination is recognised as one of the most effective ways to combat seasonal influenza—a disease that exerts significant social and economic costs, yet is often neglected by policy-makers and the vaccine target population in developing countries. The situation in China is no exception with seasonal influenza vaccine remaining as a class II vaccine and being financed by citizens' out-of-pocket payments. The different cultural backgrounds, climate patterns and living standards across China further complicate the policymaking process of developing national level policy guidelines. Nevertheless, China's recent health care reform that focuses on preventive care, elderly care and equitable health care access has motivated policy-makers at the local level to formulate policies facilitating seasonal influenza vaccination provision. This article seeks to understand this process at the city level under China's current economic transition background, and aims to identify policy experiences that may be applicable for the larger Asia-Pacific region.
    Keywords: China;public health policy;health care reform;seasonal influenza;vaccination
    Date: 2015–05–28
  10. By: Feng Zhang
    Abstract: Three foreign policy initiatives under President Xi Jinping over the past three years have considerably enhanced China's global influence: partnership diplomacy, the Silk Road economic diplomacy, and the new financial diplomacy. Partnership diplomacy seeks to forge a global network of partnership countries for China. The Silk Road economic diplomacy is the signature foreign policy proposal of Xi, and in some sense can be seen as the economic pillar of Xi's grand strategy for rejuvenating China on the world stage. Its stated objective is to promote common development between China and Eurasian countries, particularly in the field of infrastructure development. China has also been trying with very skillful and proactive diplomacy to create a new financial order to support the Silk Road project and China's economic diplomacy in general, including, but not limited to, the establishment of the much vaunted Asian Infrastructure Investment Bank.
    Keywords: Chinese foreign policy;partnership diplomacy;Silk Road economic diplomacy;One Belt–One Road;financial diplomacy
    Date: 2015–11–16
  11. By: Xiaodong Zhu (University of Toronto); Trevor Tombe (University of Calgary)
    Abstract: International trade is closely related to within-country trade and migration. To study these interrelationships, we develop a novel general equilibrium model of internal and external trade with migration, featuring both trade and migration frictions. We estimate these frictions using unique data on China's trade and migration; the costs are high, but declined after 2000. We quantify the consequences of lower trade costs (international and internal) and migration costs on welfare, internal migration, and regional income differences. External trade liberalization increases China's trade, but only modestly increases welfare while increasing regional income differences. Internal trade liberalization has large welfare gains and reduces regional income differences. Migration cost reductions dramatically increase migration and lower regional income differences but -- surprisingly -- only modestly increase trade and aggregate welfare, mainly because the migration costs remain very high. In a counterfactual exercise in which we lower the migration costs in China to the levels similar to those in the US, we find very large increases in both trade and aggregate welfare. Our results suggest internal reforms dominate external trade liberalization as a source of aggregate welfare gains and improvements in regional income inequality.
    Date: 2015
  12. By: WATANABE Mariko
    Abstract: This paper attempts to identify competition neutrality of state-owned enterprises (SOEs) in three consumer electronics industries in China. First, I draw a benefit-price indifference curve at the mode of consumer surplus for each year, and a benefit-price supply curve by manufacturers and ownership types based on the demand estimates for the color TV (CTV), mobile phone, and air conditioning industries in the 2000s. These exercises indicate heterogeneous situations of market neutrality of SOEs in the Chinese consumer electronics industries. The air conditioning market shows a clear positive relationship between benefit and price for all ownership types. At the same time, no clear correlation between ownership and strategies focusing on price or benefit is observed. On the other hand, SOEs and privately-owned enterprises (POEs) in CTV and mobile phone markets concentrate their products based on lower prices and lower benefit area, namely, cost advantage strategies. Ownership type and strategies appear to have a correlation. Furthermore, prices become independent to the level of benefit for local firms. These tendencies are clearly observed in the price-benefit supply curve of the two markets. A simple model of differentiated competition with one agent committing predatory pricing in expropriating soft financial constraint shows that the price set by the rivals of a soft constrained firm is independent to the benefit.
    Date: 2015–11
  13. By: Che, Yi; Xu, Xun
    Abstract: In this paper, we exploit the exogenous rise of Chinese imports in US to investigate the effect of import competition on crime at county level. Our results indicate that counties with high exposure to Chinese import competition are with high crime rates while the exposure effect on property crime is much larger than that for violent crime: one standard deviation increase of exposure will increase 2.1 more violent crimes in the county while such increase of exposure will cause 26.5 more property crimes. Interestingly, we find that the crime impact of exposure to Chinese import competition disappears in counties with high government transfer.
    Keywords: Chinese Import Competition; US Crime; Government
    JEL: F14 F16 K42
    Date: 2015–11
  14. By: Paul Hubbard (Crawford School, ANU)
    Abstract: If China’s economy is an example of ‘state-capitalism’, then its large, state-owned enterprises (SOEs) could be expected to monopolise key sectors. But previous estimates of industrial concentration using the Herfindahl-Hirschman Index (HHI) have suggested that the level of industrial concentration – and therefore the potential for the abuse of monopoly power – is very low. These studies have significantly underestimated HHI, since they do not consolidate subsidiary enterprises in Chinese survey data into larger business groups, or according to ultimate ownership. After making these adjustments, a measure of potential HHI shows that large state monopolies remain in oil and gas, electricity, tobacco and, potentially, automobiles. In particular, SOEs supervised by the central government are heavily invested in potentially concentrated industries. But aggregate profits of the state sector are driven more by the portfolio distribution of assets between resources, manufacturing and utilities, rather than industrial concentration within sectors.
    Keywords: Chinese economy, industrial concentration, state-owned enterprises
    JEL: L1 L3 L4 L6
    Date: 2015–11
  15. By: Ye-Feng Chen (College of Economics, Zhejiang University, China); Shu-Guang Jiang (Centre for Economic Research, Shandong University, China); Marie Claire Villeval (Université de Lyon, F-69007, France; CNRS, GATE Lyon St Etienne, 93, Chemin des Mouilles, F-69130, Ecully, France; Université Lyon 2, Lyon, F-69007, France)
    Abstract: We investigate corruption as a social dilemma by means of a bribery game in which a risk of collective failure is introduced when the number of public officials accepting a bribe from firms reaches a certain threshold. We show that, despite the social risk, the pursuit of individual interest prevails and leads to the elimination of honest officials over time. Reducing the size of the groups while increasing the probability of collective failure diminishes the public officials’ corruptibility but is not sufficient to eliminate the tragedy of corruption altogether.
    Keywords: Corruption, bribing, social dilemma, collective failure, coordination, experiment
    JEL: C92 D73 H41
    Date: 2015

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