nep-cna New Economics Papers
on China
Issue of 2016‒06‒14
twenty-one papers chosen by
Zheng Fang
Ohio State University

  1. The internationalization of the RMB, capital market openness, and financial reforms in China By Aizenman, Joshua
  2. Monetary policy transmission in China: A DSGE model with parallel shadow banking and interest rate control By Funke, Michael; Mihaylovski, Petar; Zhu, Haibin
  3. Too big to fault? Effects of the 2010 Nobel Peace Prize on Norwegian exports to China and foreign policy By Ivar Kolstad
  4. China's economic growth and convergence By Jong-Wha Lee
  5. Who gains from credit granted between firms? Evidence from inter-corporate loan announcements made in China By He, Qing; Lu, Liping; Ongena, Steven
  6. Does consuming more make you happier? Evidence from Chinese panel data By Wang, Haining; Cheng, Zhiming; Smyth, Russell
  7. Effects of China's Rural Insurance Scheme on Objective Measures of Health By Rokicki, Slawa; Donato, Katherine Elizabeth
  8. China’s Slowdown and Global Financial Market Volatility: Is World Growth Losing Out? By Paul Cashin; Kamiar Mohaddes; Mehdi Raissi
  9. A Dynamic Model of Effects of Effects of Trade and Environmental Policies on Firms' Offshoring and Clean Technology Adoption Decisions By Meng, Xianwei; Wei, Xuan
  10. Potential Scenarios for China’s Future Grain Sorghum Excess Demand By Wang, Haiyan; Malaga, Jaime
  11. China’s Regional Agricultural Productivity Growth: Catching Up or Lagging Behind By Wang, Sun Ling; Huang, Jikun; Wang, Xiaobing; Tuan, Francis
  12. Chinese Rural Consumers’ Online Shopping By Zhong, Hua; Qing, Ping; Hu, Wuyang
  13. Estimating the impact of monetary policy on inequality in China By Sánchez-Fung, José R.
  14. Assessing Off-farm Employment Decisions of Rural Households in China By Chen, Xuan; Chen, Jing; Huang, Chien-Yu
  15. Chinese Consumer Preference for Red Wine Attributes By Qing, Ping; Hu, Wuyang
  16. Protectionism through Exporting: Subsidies with Export Share Requirements in China By Fabrice Defever; Alejandro Riaño
  17. Analysis of Farmers’ Willingness to Adopt Genetically Modified Insect-resistant Rice in China By Ruomei Xu; Yanrui Wu; Jingdong Luan
  18. Relative-deprivation effects on child health in China By Sun, Yu; You, Wen
  19. The Impact of Fiscal Subsidy on China’s New Rural Pension System By Lin, Benxi; Zhang, Yu Yvette; Lin, Zongjian; Wang, Yongli; Liu, Weiping
  20. The Role of Climate Factors in Shaping China’s Crop Mix: An Empirical Exploration By Zhang, Yuquan W.; Mu, Jianhong E.; Musumba, Mark
  21. It’s Not You, It’s Me” : Breakups in U.S.-China Trade Relationships By Monarch, Ryan

  1. By: Aizenman, Joshua
    Abstract: ​This paper provides an overview of Chinese financial and trade integration in recent decades, and the challenges facing China in the coming years. China had been a prime example of export-led growth, benefiting from learning by doing, and by adopting foreign know-how, supported by a complex industrial policy. While the resultant growth has been spectacular, it comes with hidden but growing costs and distortions. The Chinese export-led growth path has been challenged by its own success, and the Global Financial Crisis forced China toward rebalancing, which is a work in progress. Reflecting on the internationalization of the CNY, one expects the rapid accelerating of the commercial internationalization of the CNY. In contrast, there are no clear-cut reasons to rush with the full CNY financial internationalization: The gains from CNY financial internationalization are overrated. Publication keywords: export led growth, CNY internationalization, mercantilism, financial integration, FDI
    JEL: E60 F36 F40 F60 O24 O40
    Date: 2015–02–12
  2. By: Funke, Michael; Mihaylovski, Petar; Zhu, Haibin
    Abstract: The paper sheds light on the interplay between monetary policy, the commercial banking sector and the shadow banking sector in mainland China by means of a nonlinear stochastic general equilibrium (DSGE) model with occasionally binding constraints. In particular, we analyze the impacts of interest rate liberalization on monetary policy transmission as well as the dynamics of the parallel shadow banking sector. Comparison of various interest rate liberalization scenarios reveals that monetary policy results in increased feed-through to the lending and investment under complete liberalization. Furthermore, tighter regulation of interest rates in the commercial banking sector in China leads to an increase in loans provided by the shadow banking sector.
    Keywords: DSGE model, monetary policy, financial market reform, shadow banking, China
    JEL: E32 E42 E52 E58
    Date: 2015–03–09
  3. By: Ivar Kolstad
    Abstract: Abstract In October 2010, the Norwegian Nobel Committee awarded the Nobel peace prize to Chinese dissident Liu Xiaobo. The Chinese government responded by freezing political and economic relations with Norway, introducing sanctions against imports of fish and other products, and limiting diplomatic interaction. Using a synthetic control approach, this paper estimates the effect of Chinese sanctions following the peace prize on Norwegian exports to China, and on Norwegian foreign policy. Allowing for potential interference (effects of the sanctions on control units), we find that the sanctions reduced direct exports of fish to China by between 125 and 176 million USD in the period 2011–13, and direct total exports from Norway to China by between 780 and 1300 million USD. By 2014, however, exports had rebounded to normal levels. One possible explanation for this normalization could be Norwegian government efforts to distance itself from the peace prize committee, and a weakening of the Norwegian foreign policy position on human rights. This paper shows that immediately following the peace prize, Norwegian agreement with Chinese voting in the United Nations on human rights resolutions increased. The results suggest that the Chinese government can effectively use economic sanctions to affect the foreign policy positions of democratic governments, with potentially chilling effects for international progress on human rights. China has become too big to fault. Keywords: Sanctions, trade, foreign policy, international political economy, China, Norway JEL codes: F14, F51, F53, P33
    Keywords: Nobel peace prize Liu Xiaobo foreign policy exports United Nations fish trade sanctions foreign policy international political economy
    Date: 2016
  4. By: Jong-Wha Lee
    Abstract: This study explores China's economic growth performance and prospects in global and Asian comparative perspectives. Using a general framework of cross-country analysis, the study identifies and discusses major factors underlying China's strong growth over the past decades and those contributing to its recent growth slowdown. The study also adopts detailed industry-level data to assess structural changes and sectoral growth in the Chinese economy. China's low initial per capita income relative to its own long-run potential provided the opportunity for faster capital accumulation and technology diffusion. Good policy and institution factors, such as a high investment rate, strong human capital, high trade openness, and improved institutions, guided the economy to realize its strong potential for convergence to advanced economy income level. China's average potential GDP growth will decline significantly over the coming decade due to convergence effect and structural problems, unless China substantially upgrades institutions and policy factors and improves productivity, particularly in its services sector.
    Keywords: Economic growth, convergence, productivity, structural change, China
    JEL: O11 O14 O19 O47 O53 O57
    Date: 2016–05
  5. By: He, Qing; Lu, Liping; Ongena, Steven
    Abstract: ​Who gains from inter-corporate credit? To answer this question we investigate the reactions of the stock prices of both the issuing and receiving firms to the announcements of 719 inter-corporate loans that took place between 2005 and 2012 in China. We find that the average abnormal return for the issuers of inter-corporate loans is significantly negative, whereas the corresponding return for those firms receiving credit is positive. Investors may worry that issuing firms may have run out of other worthwhile projects to finance, while at the same time they may view credit-receiving firms as being certified as worthy borrowers. The issuance of intra-group loans, especially those with higher interest rates, is associated with lower returns overall since such loans may signal a spreading of financial distress to the rest of the group. After issuing inter-corporate loans, firms are also found to have lower accounting performance, which confirms the aforementioned signaling interpretation.
    Keywords: entrusted loan, inter-corporate loan, credit misallocation, certification
    JEL: G30 G14 G21
    Date: 2015–01–17
  6. By: Wang, Haining; Cheng, Zhiming; Smyth, Russell
    Abstract: This study examines the relationship between consumption and happiness, using panel data from China Family Panel Studies (CFPS). We find that total consumption expenditure has a significant and positive effect on happiness, but we find no evidence of a non-linear relationship between consumption and happiness. There are heterogeneous effects of consumption on happiness across subsamples and for different types of consumption expenditure. We find that relative consumption matters, irrespective if the reference group is de-fined in terms of consumption at the community or county level or on the basis of age, education and gender. However, the extent to which comparison effects are upward looking, or asymmetric, depend on how the comparison group is defined. We also find that comparison with one’s past consumption has no significant effect on an individual’s happiness.
    Keywords: happiness, consumption, China
    JEL: A13 E21 I31 N35
    Date: 2015–07–24
  7. By: Rokicki, Slawa; Donato, Katherine Elizabeth
    Abstract: Background In 2003, the Chinese government established the New Cooperative Medical Scheme (NCMS) with the goal of improving health for the country’s 800 million mostly uninsured rural residents. Using new data on objective health measures, we analyzed the program’s effectiveness in improving health for enrollees. Methods Using longitudinal data from the China Health and Nutritional Survey from 2000 to 2009 (12 080 observations across four waves), we analyzed the impact of the NCMS on objective measures of health such as blood pressure, HbA1c, and cholesterol, as well as use of preventive care. In order to overcome inherent selection bias where less healthy people are more likely to enroll in the voluntary health insurance scheme, we used intent-to-treat and instrumental variable analysis strategies, and offered evidence that these approaches can mitigate this bias. Results For every additional year of NCMS coverage, the probability of seeking preventive health care increased by 0.6 percentage points (95% CI 0.1-1.0). However, we did not find evidence that the NCMS resulted in consistent improvements in objective measures of health. Sub-group analysis suggested that lower-income communities benefited more from the program, implying that the program may have resulted in some lessening of the wealth-based disparity in health. Conclusions The NCMS does not appear to significantly improve objective measures of health. This is consistent with evaluations of health insurance programs in other countries, but in contrast to some previously reported improvements in self-reported health resulting from the NCMS.
    Date: 2016
  8. By: Paul Cashin; Kamiar Mohaddes; Mehdi Raissi
    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.
    Keywords: China’s slowdown, global financial market volatility, international business cycle, and Global VAR
    JEL: C32 E32 F44 O53
    Date: 2016–03–18
  9. By: Meng, Xianwei; Wei, Xuan
    Abstract: This paper develops a dynamic general equilibrium model to analyze the effects of changes in trade and environmental policies on firms' production location choices and clean technology adoptions to reduce emission. During this process, the equilibrium worker's wages and environmental quality of related countries are determined. In addition, this model is applied to the trade and production relocation issues between the United States and China over 1999-2013 to quantify the pollution haven effects and the total production offshoring directly and indirectly from the U.S. to China. Further, the long-run predictions on offshoring and emission levels in both countries and counterfactual policy analysis are discussed in this paper.
    Keywords: offshoring, technology adoption, trade policy, environment, Environmental Economics and Policy, Industrial Organization, International Relations/Trade, Labor and Human Capital, Productivity Analysis, Research and Development/Tech Change/Emerging Technologies, F18, F23, D21, J31, Q52, Q56,
    Date: 2016
  10. By: Wang, Haiyan; Malaga, Jaime
    Abstract: China’s sorghum imports have shown an unexpected increase since 2013 mainly due to the Chinese government “temporary reserve program” implemented on corn. The objective of this study is an attempt to provide a reference for sorghum exporters to prepare for China’s future sorghum import trends when the Chinese government policy changes. This study developed a sorghum supply and demand structure model to estimate and forecast China’s future sorghum excess demand. The results of this study suggested that China imports will decrease when government eliminates the subsidy policy for corn, but will not decrease to the levels that occurred before the year 2013.
    Keywords: Excess Demand, Sorghum, Policy, China, Agricultural and Food Policy, International Relations/Trade, F17, Q18,
    Date: 2016
  11. By: Wang, Sun Ling; Huang, Jikun; Wang, Xiaobing; Tuan, Francis
    Abstract: In this study, we use a multilateral total factor productivity (TFP) panel data, spanning 1985-2011 period, to test the hypotheses of convergence to a single TFP level (σ convergence) or to a region-specific steady state TFP growth rate (β convergence) for China’s farm sector. Results show that there is no evidence of an overall σ convergence across all provinces. However, we find robust evidences of β convergence. Estimated rates of β convergence are conditional on how we capture the heterogeneity across regions. Overall, the rate of β convergence ranges from 0.016 to 0.028. Estimates also show that higher growth rate of education, R&D, capital/labor ratio, or intermediate goods/labor ratio can boost the rate of TFP growth.
    Keywords: Total Factor Productivity (TFP), σ convergence, β convergence, multilateral comparison, China agricultural sector., Agricultural and Food Policy, International Development, Production Economics, Productivity Analysis, Research and Development/Tech Change/Emerging Technologies, O13, O47, Q16,
    Date: 2016–05
  12. By: Zhong, Hua; Qing, Ping; Hu, Wuyang
    Abstract: This study attempts to investigate Chinese rural consumer online expenditures and factors explaining their purchasing decisions. Through a survey of rural consumers in China, we investigate their perceptions and attitudes on online shopping, such as the most often purchased items, reasons of shopping online, the most favorite online store, the most often used payment method, online expenditures, online shopping frequencies, and daily online viewing activities. Our results show that if consumer incomes are mainly from migrant labors or local non-agriculture related small businesses, they will shop online more frequently. If consumers’ main monthly expenditures are medical expenses and clothing, they will spend 74 and 57 yuan less per month, respectively, to shop online. The more time consumers spend on online activities, the more frequently they will purchase online, and the more money they will spend on online shopping.
    Keywords: Expenditure, Online shopping, Rural consumer, Consumer/Household Economics, Marketing, D12, Q12,
    Date: 2016–07
  13. By: Sánchez-Fung, José R.
    Abstract: ​The paper estimates the impact of monetary policy on income inequality in China. The empirical modelling finds that a battery of monetary indicators, including a monetary overhang measure derived from a money demand equation, and the change in the unemployment rate lead to increases in the Gini coefficient. However, only unemployment is statistically significant. The lack of significance of the monetary indicators is robust to alternative specifications with variability in nominal aggregate demand instead of unemployment.
    Keywords: monetary policy, inequality, inflation, unemployment, China
    JEL: E52 D31
    Date: 2015–05–13
  14. By: Chen, Xuan; Chen, Jing; Huang, Chien-Yu
    Keywords: This paper investigates the off-farm employment decisions of farm households in China. A rigorous theoretical framework which incorporates agricultural risks is constructed and comparative statistics are derived and assessed. Associated empirical models are developed to quantify households’ decisions on supplying off-farm labor using a sample of household finance survey in 2010. Our empirical results show that farm income variability significantly impacts off-farm labor supply by farm households and individual farmers, which implies off-farm employment is a risk adaption behavior among Chinese farmers., Farm Management, Labor and Human Capital, Risk and Uncertainty, off-farm employment, rural household, production risk, agricultural economics,
    Date: 2016–05
  15. By: Qing, Ping; Hu, Wuyang
    Abstract: China has risen to be the largest red wine consumer in the world but related studies using disaggregated and consumer-based data are scarce. This article examines Chinese preferences and willingness to pay for different wine attributes through a recent national survey including a choice experiment. Results indicate that country of origin is still one of the most important attributes for wine. Taste of wine and organic production are also relevant to consumers. Wine vintage is not as important as expected. Key implications on Chinese domestic and imported wines are discussed under the context of recent profound structural changes in wine consumption induced by policy shifts.
    Keywords: China, wine, Agribusiness, Agricultural and Food Policy, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Marketing, Q13,
    Date: 2016–05
  16. By: Fabrice Defever; Alejandro Riaño
    Abstract: We study the effect of subsidies subject to export share requirements (ESR) — that is, conditioned on a firm exporting at least a given fraction of its output — on exports, the intensity of competition and welfare, through the lens of a two-country model of trade with heterogeneous firms. Our calibrated model suggests that this type of subsidy boosts exports more and provides greater protection for domestic firms than a standard unconditional export subsidy, albeit at a substantial welfare cost.
    Keywords: Export Subsidies; Export Share Requirements; Trade Policy; Heterogeneous
    Date: 2016
  17. By: Ruomei Xu (College of Economics and Management, Anhui Agricultural University, Hefei, China); Yanrui Wu (Business School, University of Western Australia); Jingdong Luan (College of Economics and Management, Anhui Agricultural University, Hefei, China)
    Abstract: Genetically modified (GM) crops, particularly GM grain crops, have been controversial since their commercialization in 1996. However, only a few studies have investigated farmers’ attitudes toward adopting GM grain crops in China. This study explores farmers’ willingness to adopt GM insect-resistant rice prior to its commercial release in China and determines the factors that affect farmers’ prospective adoption decisions. The analysis is based on data collected by using a questionnaire. The results of econometric analyses show that increasing output and income, and simplicity in crop management, have positive effects on prospective adoption, whereas the high seed price of GM rice has a significantly negative effect. Health implications also have a significantly positive effect on the farmers’ decision to adopt GM grain crops. A comparative analysis of ordered and binary probit models also demonstrates that farmers are more deliberate in their decisions when they have fewer choices.
    Date: 2016
  18. By: Sun, Yu; You, Wen
    Keywords: Relative deprivation, child health, BMI, two-stage collective household production, Health Economics and Policy,
    Date: 2016
  19. By: Lin, Benxi; Zhang, Yu Yvette; Lin, Zongjian; Wang, Yongli; Liu, Weiping
    Abstract: This paper studied the impact of fiscal subsidies on the participation rate and contributions of the rural residents in the China’s New Rural Pension Scheme (NRPS) program, where the fiscal subsidies include the incentive pension and the matching subsidy. The results showed that incentive Pension can significantly improve the rural residents' participation rates, but participation rate of young residents are less than the older residents. We also showed that matching subsidy does not affect the rural residents' participation significantly. Our results suggest that the current fiscal subsidies play an important role in the establishment and expansion of the NRPS program, but have not increased the participation rate of younger people, which was one of the initial goals of NRPS.
    Keywords: Pension System, Rural Economy, Fiscal Subsidy, China, Community/Rural/Urban Development, Institutional and Behavioral Economics, International Development, Public Economics, O1, O2, I3, I38, H3,
    Date: 2016
  20. By: Zhang, Yuquan W.; Mu, Jianhong E.; Musumba, Mark
    Abstract: Climate change (CC) can influence farmers’ crop choices and result in changes in the regionally varying crop mixes. Using a data set including sown area shares for each crop at province level over the most recent time period of 2000 through 2013 in China, this study employed a seemingly unrelated regression (SUR) system to investigate the effects of climate variables on regional crop mixes. The influence of economic and land use intensity on crop area shares were also examined. Results show that winter temperature appears to be a more determining factor than growing season temperature for a region’s crop mix. Also regions with comparatively high farming values tend to see larger percentages of vegetables and orchards. As temperature rises, grains and soybeans that are linked to traditional food security may encounter compromises in production, whereas tubers, small oil crops, vegetables, and orchards would very likely see increases in area shares. Nonetheless, vegetables and orchards may not necessarily step in under future CC due to cost and land use intensity reasons.
    Keywords: Climate Change, Crop Mix, Seeming Unrelated Regression, Multi-Cropping Index, Environmental Economics and Policy, Land Economics/Use, Production Economics,
    Date: 2016
  21. By: Monarch, Ryan
    Abstract: Costs to switching suppliers can affect prices by discouraging buyer movements from high to low cost sellers. This paper uses confidential U.S. Customs data on U.S. importers and their Chinese exporters to investigate these costs. I find considerable barriers to supply chain adjustments: 45% of arm’s-length importers keep their partner, and one-third of switching importers remain in the same city. Guided by these regularities, I propose and structurally estimate a dynamic discrete exporter choice model. Cost estimates are large and heterogeneous across products. These costs matter for trade prices: halving switching costs reduces the U.S.- China Import Price Index by 14.7%.
    Keywords: International Trade ; Import Price ; Transactional Relationships
    JEL: F14 F23 L14 D21
    Date: 2016–05

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