nep-cna New Economics Papers
on China
Issue of 2016‒04‒04
seven papers chosen by
Zheng Fang
Ohio State University

  1. Implications of Chinese Yuan on China’s competitiveness By Uddin, Md Akther; Baddou, Mehdi; Gulzar Mohd, Rosana
  2. Consistency of Risk Preference Measures and the Role of Ambiguity: An Artefactual Field Experiment from China By Pan He; Marcella Veronesi; Stefanie Engel
  3. Measuring the Stringency of Land-Use Regulation: The Case of China's Building-Height Limits By Brueckner, Jan; Fu, Shihe; Gu, Yizhen; Zhang, Junfu
  4. China’s slowdown and global financial market volatility: is world growth losing out? By Cashin, Paul; Mohaddes, Kamiar; Raissi, Mehdi
  5. CEO Dismissal, Compensation and Topics of Board Meetings: The Case of China By Ji, Jiao; Talavera, Oleksandr; Yin, Shuxing
  6. Impact of the People’s Republic of China’s Growth Slowdown on Emerging Asia: A General Equilibrium Analysis By Zhai, Fan; Morgan, Peter
  7. China’s Imports Slowdown; Spillovers, Spillins, and Spillbacks By Alexei Kireyev; Andrei Leonidov

  1. By: Uddin, Md Akther; Baddou, Mehdi; Gulzar Mohd, Rosana
    Abstract: The stability and level of strength or weakness in exchange rates are prime considerations of monetary authorities and businesses, both domestic and international. This paper thus analyses the RMB’s appreciation and depreciation against its major trading partners’ currencies namely the USD, EUR, JPY, AUD and MYR. It also includes a review of their volatilities and most importantly, the economic implications of the RMB rates on exports and foreign investment flows. The Renminbi has come a long way since its pegged days of 1994 to 2005. Most recently, head of the International Monetary Fund (IMF), Christine Lagarde herself, has endorsed its inclusion into an elite basket of the fund’s reserve currencies. The Renminbi is now on a managed floating system and allegations of manipulation remain, especially with notable pauses in the currency’s rises during the global financial crisis and in the second quarter of 2015. But the upward trend is undeniable, given that the Chinese economy is now the world’s number two in size and the Renminbi is now the world’s second most-used currency for trade finance. Its volatility has similarly picked up with the end of the peg and its increasing use worldwide. Ironically, an appreciating currency, albeit a managed one, bodes well for China’s economy now as it is engineering a shift away from being led by exports to being driven by domestic consumption. A strong Renminbi will encourage more import consumption, something that the government would like to see. But challenges remain. China’s still largely closed markets and questions about the country’s political, legal and economic institutions may constrain the international use of its currency. And while the Renminbi has shot up in use, international sales in the currency still account for less than 3% of global transactions. The greenback continues to dominate as the currency for trade settlements. Thus while the wind is definitely beneath the Renminbi’s sails, officials will likely need to skilfully navigate through potential turbulences ahead.
    Keywords: currency volatility, exchange rate, devaluation, RMB, USD, EUR, AUD and MYR
    JEL: A1 A3 F3 F31
    Date: 2015–11–18
  2. By: Pan He (ETH Zurich); Marcella Veronesi (Department of Economics (University of Verona)); Stefanie Engel (Institute for Environmental Decisions, ETH Zurich)
    Abstract: A variety of measures have been developed to elicit individual risk preferences. How these measures perform in the field, in particular in developing countries with non-student subjects, is still an open question. We implement an artefactual field experiment using a large sample of Chinese farmers to investigate (i) whether subjects behave in a consistent manner across incentivized experimental risk measures, (ii) whether non-incentivized survey measures can elicit actual risk preferences, and (iii) possible explanations for risk preference inconsistency across measures. We find that inconsistent risk preferences across survey and experimental measures may be explained by ambiguity preferences. In the survey, subjects seem to mix risk and ambiguity preferences.
    Keywords: risk preferences, ambiguity preferences, field experiments, socio-economic survey, China
    JEL: C93 D81 O1
    Date: 2016–03
  3. By: Brueckner, Jan; Fu, Shihe; Gu, Yizhen; Zhang, Junfu
    Abstract: This paper develops a new approach for measuring the stringency of a major form of land-use regulation, building-height restrictions, and it applies the method to an extraordinary dataset of land-lease transactions from China. Our theory shows that the elasticity of land price with respect to the foor-area ratio (FAR), an indicator of the allowed building height for the parcel, is a measure of the regulation's stringency (the extent to which FAR is kept below the free-market level). Using a national sample, estimation that allows this elasticity to be city-specific shows substantial variation in the stringency of FAR regulation across Chinese cities, and additional evidence suggests that stringency depends on certain city characteristics in a predictable fashion. Single-city estimation for the large Beijing subsample, where site characteristics can be added to the regression, indicates that the stringency of FAR regulation varies with certain site characteristics, again in a predictable way (being high near the Tiananmen historical sites). Further results using a different dataset show that FAR limits in Beijing are adjusted in response to demand forces created by new subway stops.
    Keywords: Floor-area ratio, density restriction, urban development
    JEL: R14 R52
    Date: 2016–03–23
  4. By: Cashin, Paul (International Monetary Fund); Mohaddes, Kamiar (University of Cambridge); Raissi, Mehdi (International Monetary Fund)
    Abstract: China’s GDP growth slowdown and a surge in global financial market volatility could both adversely affect an already weak global economic recovery. To quantify the global macroeconomic consequences of these shocks, we employ a GVAR model estimated for 26 countries/regions over the period 1981Q1 to 2013Q1. Our results indicate that (i) a one percent permanent negative GDP shock in China (equivalent to a one-off one percent growth shock) could have significant global macroeconomic repercussions, with world growth reducing by 0:23 percentage points in the short-run; and (ii) a surge in global financial market volatility could translate into a fall in world economic growth of around 0:29 percentage points, but it could also have negative short-run impacts on global equity markets, oil prices and long-term interest rates.
    JEL: C32 E32 F44 O53
    Date: 2016–03–17
  5. By: Ji, Jiao; Talavera, Oleksandr; Yin, Shuxing
    Abstract: Our paper examines the relationship between the frequency of board meetings on particular topics, and CEO dismissal/compensation and performance sensitivities. We utilize a unique dataset of specific topics discussed at board meetings, drawn from the reports of independent directors of listed firms in China over the period of 2003 to 2010. Our results show that turnover-performance sensitivity is weaker when there is a higher frequency of board meetings discussing the nomination of directors and top management. Moreover, the link between CEO compensation and firm performance is enhanced only when directors meet more often to discuss growth strategies for the use of IPO proceeds, investment and acquisitions. The paper provides support for agency theories on the effectiveness of board monitoring. It sheds lights on what makes boards more effective, and how board monitoring of different decisions at board meetings modifies the connection between CEO interests and firm performance.
    Keywords: Board Effectiveness, Board Meeting Topics, Agency Costs, CEO Compensation, CEO Dismissal
    JEL: G30 G34
    Date: 2016–03–23
  6. By: Zhai, Fan (Asian Development Bank Institute); Morgan, Peter (Asian Development Bank Institute)
    Abstract: As an important global and regional economic power, the PRC’s growth slowdown may cause large spillover effects to its neighboring economies. Using a multi-sectoral global computable general equilibrium model, this paper quantitatively investigates the impacts of a growth slowdown in the PRC for emerging Asian economies through trade linkages. The results suggest that a growth slowdown of 1.6 percentage points in the PRC would bring about a growth deceleration of 0.26 percentage points in developing Asia as a whole. However, the impacts vary dramatically by economy within developing Asia, reflecting their difference in economic and trade structure.
    Keywords: People’s Republic of China; economic slowdown; spillover effects; emerging economies
    JEL: C68 F44 F47
    Date: 2016–03–25
  7. By: Alexei Kireyev; Andrei Leonidov
    Abstract: The paper models international spillovers from a hypothetical drop of China’s imports as a result of China’s rebalancing of its growth model. A network-based model used in the paper allows capturing higher round network effects of the shock, which are largely unaccounted for in the existing literature. Such effects include direct spillovers from China on its trading partners, subsequent spillins among them, and spillbacks on China itself. The paper finds that the network effects most likely will be substantial, may amplify initial shock, and change the direction of its propagation. The impact on Asia and Pacific will be the strongest followed by the Middle East and Central Asia. The impact on sub-Saharan Africa would be noticeable only for some countries. Spillovers on Europe, including the Euro area, will be moderate, and spillovers on the Western Hemisphere, including the United States, would be very marginal. Metal and non-fuel commodity exporters may experience the largest negative impact.
    Keywords: Asia and Pacific;China, People's Republic of;Trade;shocks, spillover, spillin, spillback, network, gdp, revenue, demand, Neural Networks and Related Topics, Country and Industry Studies of Trade, Open Economy Macroeconomics, International Policy Coordination and Transmission, Forecasting and Simulation, and spillback, network.,
    Date: 2016–03–07

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