nep-cna New Economics Papers
on China
Issue of 2016‒08‒07
thirteen papers chosen by
Zheng Fang
Ohio State University

  1. Industrialization in China By Brandt, Loren; Ma, Debin; Rawski, Thomas
  2. Energy saving potential of natural ventilation in China: The impact of ambient air pollution By Zheming Tong; Yujiao Chen; Malkawi, Ali; Zhu Liu; Richard B. Freeman
  3. Political Turnover, Ownership, and Corporate Investment By Cao, Jerry; Julio, Brandon; Leng, Tiecheng; Zhou, Sili
  4. Emissions trading and abatement cost savings: An estimation of China's thermal power industry By Ke Wang; Xian Zhang; Xueying Yu; Yi-Ming Wei; Bin Wang
  5. Unemployment Duration and Job-Match Quality in Urban China: The Dynamic Impact of 2008 Labor Contract Law By You, Jing; Wang, Shaoyang
  6. China's New Lost Generation: The Casualty of China's Economic Transformation By Gary Jefferson
  7. China’s Foreign Investment By McGrattan, Ellen R.
  8. The End of Cheap Labour: Are Foreign Investors Leaving China? By Donaubauer, Julian; Dreger, Christian
  9. Impact of China’s slowdown on the Global Economy: Modified GVAR Approach By Dinda, Soumyananda
  10. Testing for Financial Market Integration of the Chinese Market with the US Market By Hatemi-J, Abdulnasser; Mustafa, Alan
  11. Deconstructing Informality: A Response to Vulnerability or an Optimal Choice? By Song, Lina; Appleton, Simon; Liang, Zhe
  12. Where is the future of China’s biogas? Review, forecast, and policy implications By Lei Gu; Yi-Xin Zhang; Jian-Zhou Wang; Gina Chen; Hugh Battye
  13. How Do Pre-School and/or School-Age Children Affect Parents' Likelihood of Migration and Off-Farm Work in Rural China's Minority Regions? By Ding, Sai; Dong, Xiao-Yuan; Maurer-Fazio, Margaret

  1. By: Brandt, Loren (University of Toronto); Ma, Debin (London School of Economics); Rawski, Thomas (University of Pittsburgh)
    Abstract: We see industrialization in China the last 150 years as an ongoing process through which firms acquired and deepened manufacturing capabilities. Two factors have been consistently important to this process: openness to the international economy and domestic market liberalization. Openness and market liberalization are usually complementary: One without the other can seriously limit benefits. For a latecomer like China, modern industry initially finds its most success in more labor-intensive products that require only modest capabilities. Gradual upgrading entails the shift into more skilled-labor and capital-intensive products and processes. China's experience shows that government can both support and obstruct this process. Our review of long-term data shows that i) China's industrial growth rate has consistently exceeded that of Japan, India and Russia/USSR not just in recent decades but throughout most of the 20th century; ii) China's shift from textiles and other light industry toward defense-related industries began before rather than after 1949, as did the geographic spread of industry beyond the initial centers in the Lower Yangzi and the Northeast (formerly Manchuria) regions; iii) the state sector has consistently been a brake on industrial upgrading, highlighting the significance of current reform initiatives in determining China's future industrial path.
    Keywords: China, industrial development, structural change
    JEL: O N
    Date: 2016–07
  2. By: Zheming Tong; Yujiao Chen; Malkawi, Ali; Zhu Liu; Richard B. Freeman
    Abstract: Natural ventilation (NV) is a key sustainable solution for reducing the energy use in buildings, improving thermal comfort, and maintaining a healthy indoor environment. However, the energy savings and environmental benefits are affected greatly by ambient air pollution in China. Here we estimate the NV potential of all major Chinese cities based on weather, ambient air quality, building configuration, and newly constructed square footage of office buildings in the year of 2015. In general, little NV potential is observed in northern China during the winter and southern China during the summer. Kunming located in the Southwest China is the most weather-favorable city for natural ventilation, and reveals almost no loss due to air pollution. Building Energy Simulation (BES) is conducted to estimate the energy savings of natural ventilation in which ambient air pollution and total square footage at each city must be taken into account. Beijing, the capital city, displays limited per-square-meter saving potential due to the unfavorable weather and air quality for natural ventilation, but its largest total square footage of office buildings makes it become the city with the greatest energy saving opportunity in China. Our analysis shows that the aggregated energy savings potential of office buildings at 35 major Chinese cities is 112 GWh in 2015, even after allowing for a 43 GWh loss due to China?s serious air pollution issue especially in North China. 8?78% of the cooling energy consumption can be potentially reduced by natural ventilation depending on local weather and air quality. The findings here provide guidelines for improving current energy and environmental policies in China, and a direction for reforming building codes.
  3. By: Cao, Jerry (Singapore Management University); Julio, Brandon (University of Oregon); Leng, Tiecheng (Singapore Management University); Zhou, Sili (Singapore Management University)
    Abstract: We examine the impact of political influence and ownership on corporate investment by exploiting the unique way provincial leaders are selected and promoted in China. The tournament-style promotion system creates incentives for new provincial governors to exert their influence over capital allocation, particularly during the early years of their term. Using a neighboring-province difference-in-differences estimation approach, we find that there is a divergence in investment rates between state owned enterprises (SOEs) and non-state owned enterprises (non-SOEs) following political turnover. SOEs experience an abnormal increase in investment by 6.0% in the year following the turnover, consistent with the incentives of a new governor to stimulate investment. In contrast, investment rates for non-SOEs decline significantly post-turnover, suggesting that the political influence exerted over SOEs crowds out private investment. The effects of political turnover on investment are mainly driven by normal turnovers, and turnovers with less-educated or local-born successors. Finally, we provide evidence that the political incentives around the turnover of provincial governors represent a misallocation of capital as measures of investment efficiency decline post-turnover.
    Keywords: Corporate investment, Political turnover, China, SOE, Political uncertainty, Grabbing-hand, Crowding out, Investment efficiency
    JEL: G30 G31 G38
    Date: 2016–07–08
  4. By: Ke Wang; Xian Zhang; Xueying Yu; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology); Bin Wang
    Abstract: This study evaluates the efficiency advantage of a market-based emission permit trading policy instrument over a command and control policy instrument in the case of China's thermal power industry. We estimate the unrealized gains achievable through emission permit trading with an optimization frontier analysis. These unrealized gains include potential recoveries of electricity generation through eliminating spatial and temporal regulatory rigidity on emission permit trading. The results of an ex post estimation during 2006 and 2010 indicate a potential gain of 8.48% increase in electricity generation if both the intra- and inter-period regulatory rigidities CO2 emission permits trading had been eliminated. In addition, if the permit trading systems for three air pollutions, CO2, SO2, and NOx, had been completely integrated, a positive net synergy effect of 1.43% increase in electricity generation could have been secured. The unrealized gains identified in this study provide supports for establishing a nationwide emission permit trading system in China.
    Keywords: Data envelopment analysis, CO2 emissions, Regulatory rigidity, Synergy effect, Tradable permits
    JEL: Q54 Q40
    Date: 2016–07–01
  5. By: You, Jing; Wang, Shaoyang
    Abstract: We assess the unemployment duration-dependent impact of the 2008 Labor Contract Law on job finding probabilities and subsequently job-match quality, including job security, wages and employer-provided social insurance. Dynamic endogeneity underlying individuals’ sequential labor market outcomes is addressed by sharp regression discontinuity and correlated individual unobservables settling into non-parametric joint distribution. The law protracts employment only in the short-term. After job match, the law stabilizes employment and increases wages and insurance coverage, all in the short-term with substantial differences between urban locals and migrant workers and heterogeneity in gender.
    Keywords: unemployment, wage, social insurance, regression-discontinuity design, China
    JEL: C41 J64 J65 O53
    Date: 2016–07–28
  6. By: Gary Jefferson (Brandeis University)
    Abstract: China’s surge into global middle-income status over the space of three decades has been spectacular. However, a potentially large and burdensome cost has been imposed on a generation of adolescents and young adults who abandoned the countryside, and with it access to basic education, in order to seek the anticipated advantages of jobs in the country’s burgeoning urban-industrial sector. This large swath of off-farm migrants transformed China. It propelled China to the status of the “world’s factory” and created the scale and accumulated learning-by-doing enabling China’s transition to a “knowledge economy” that no longer depends on the labor of China’s new “Lost Generation.” As the Lost Generation and its left-behind children, who suffer from a chronic lack of schooling, thicken the lower tail of China’s income distribution, it may be the rising, prosperous urban middle class that ultimately incurs the social, economic, and political challenges associated with China’s generation of off-farm migrant households once essential for launching China’s economic ascent.
    JEL: J21 J24 J31 O15 O33
    Date: 2016–07
  7. By: McGrattan, Ellen R. (Federal Reserve Bank of Minneapolis)
    Abstract: Foreign investment into China has surged since the 1990s and become a topic of keen interest for both scholars and the media. While China has encouraged this investment with the goal of catching up technologically, close analysis reveals that only a small share of its foreign investment comes from the United States and other nations with the technology China seeks. Instead, inward foreign direct investment flows predominantly from Hong Kong and a few Caribbean nations. Two key factors behind this: China’s tax policy toward foreign investment and its “industrial” policies to encourage development and growth. Specifically, preferential tax treatment for foreign investment leads many Chinese businesses and households to “round-trip” investments; and policies requiring joint ventures between Chinese and foreign high-tech companies—while benefiting China enormously—discourage investment by multinationals from advanced countries.
    Date: 2016–07–26
  8. By: Donaubauer, Julian (Helmut Schmidt University, Hamburg); Dreger, Christian (DIW Berlin)
    Abstract: China's government is promoting the shift towards a consumption-based economy since a few years. The explicit goal to significantly raise the percentage of wages in the national household income is integral part of the 12th Five-Year Plan (2011-15). The changes in the economic strategy are likely to affect the attractiveness of the country to foreign investors. In this paper, we raise the hypothesis that soaring wages negatively affect FDI inflows to China and alter the distribution of FDI over Chinese provinces. In addition, low-wage countries in the geographical surrounding might benefit from the changed direction of FDI inflows. By performing panel models with spatial effects for both Chinese provinces and developing ASEAN countries, regional dependencies are explicitly addressed. We provide strong and robust evidence that the wage increases change the distribution of FDI within China. In addition, we show that the changes in China's economic strategy improve the chances of its low-income neighbours to attract FDI.
    Keywords: foreign direct investment, Chinese economic transformation, spatial correlation
    JEL: F15 F21 F63 E22
    Date: 2016–07
  9. By: Dinda, Soumyananda
    Abstract: Asia-Pacific region is much anxious about China’s slowdown, but the rest of the world has definite reason to worry about the consequences of the slowdown in China. During last few decades China is strongly integrated with Asia and also with the rest of the World. This paper investigates what the impact of China’s slowdown on the global economy is. If any crisis in China, how much does it affect developed and emerging or developing economies? Using modified Global VAR (GVAR) model, this paper focuses on these issues. This study considers more on international linking variables for the period of 2000-2012. Evidence based on GVAR analysis for six developed countries (G6: USA, UK, Germany, Japan, Canada and Australia) and BRICS (G4: Brazil, Russia, India and South Africa) show that the impact of China’s slowdown is more on emerging BRICS nations than that of developed economies. Impact of China’s GDP growth shock on the rest of emerging Asia is more since it has a strong production network in East and South East Asia. So, China’s slowdown certainly affects Asia more than western developed economies.
    Keywords: Panel data, GVAR, China’s economic slowdown, Global linking variable, GDP shock, BRICS, Developing Country, Developed Economy
    JEL: C32 C33 C54 F1 F6
    Date: 2015–08
  10. By: Hatemi-J, Abdulnasser; Mustafa, Alan
    Abstract: This paper investigates empirically whether or not the financial market of China is integrated with the financial market of the US. Unlike most previous studies on financial market integration, we allow for asymmetry in our investigation. The underlying data is transformed into cumulative partial sums by using a software component that is created by authors in Octave language. By estimating the asymmetric generalized impulse response functions we find that the financial markets of these two biggest economies in the world are linked interactively when the markets are falling. However, no significant impact between the two underlying markets are found when markets are rising. These results support the view that allowing for asymmetry in financial markets is important and it has crucial repercussions for both policy makers and investors.
    Keywords: Financial Market Integration, Asymmetry, Impulses, US, China, Octave
    JEL: C3 G11 G15
    Date: 2016
  11. By: Song, Lina (University of Nottingham); Appleton, Simon (University of Nottingham); Liang, Zhe (University of Nottingham)
    Abstract: The rapid growth of informal employment in China in recent decades has attracted attention, but to understand its implications, the concept of informality must be deconstructed. We reclassify employment status into three categories: salaried workers who have long-term contracts; the self-employed; and causal workers without long term contracts (working in either the formal or the informal sector). The monthly earnings of the self-employed are much (47%) higher than those casual employees. Self-employment is not necessarily a misfortune and the flexibility it provides may be optimal for some kinds of workers. For example, the self-employed are more likely to be disabled and to have young families. Institutionally, it is still difficult for casual workers and most rural-urban migrant workers to embark on business ownership. Although a large group of rural-urban migrants are employees with longer term contracts, their rural registration (hukou) means they lack the social protection of urban residents. The labour force with rural hukou is more likely to fall into the informal sector and, within that sector, is most likely to be engaged in casual labouring jobs. Policies to support small businesses may be warranted given the detrimental impacts of informality on casual workers. Experimental interventions could be tried along the lines of those used in Peru to provide funds to support entrepreneurial activities by this group to lift themselves out of a poverty trap into more sustainable employment. Skill training, encouragement for innovation, tax credits and reducing institutional constraints on starting up small business should be all considered.
    Keywords: informality, vulnerability, self-employment, casual labour, China
    JEL: J24 J46 J48
    Date: 2016–07
  12. By: Lei Gu; Yi-Xin Zhang; Jian-Zhou Wang; Gina Chen; Hugh Battye
    Abstract: This paper discusses the history and present status of different categories of biogas production in China, most of which are classified into rural household production, agriculture-based engineering production, and industry-based engineering production. To evaluate the future biogas production of China, five models including the Hubbert model, the Weibull model, the generalized Weng model, the H–C–Z model, and the Grey model are applied to analyze and forecast the biogas production of each province and the entire country. It is proved that those models which originated from oil research can also be applied to other energy sources. The simulation results reveal that China’s total biogas production is unlikely to keep on a fast-growing trend in the next few years, mainly due to a recent decrease in rural household production, and this greatly differs from the previous goal set by the official department. In addition, China’s biogas production will present a more uneven pattern among regions in the future. This paper will give preliminary explanation for the regional difference of the three biogas sectors and propose some recommendations for instituting corresponding policies and strategies to promote the development of the biogas industry in China.
    Keywords: biogas production; China; temporal-spatial-forecast; policy
    JEL: N0 J50
    Date: 2016–07–05
  13. By: Ding, Sai (Chinese Academy of Social Sciences); Dong, Xiao-Yuan (University of Winnipeg, Manitoba); Maurer-Fazio, Margaret (Bates College)
    Abstract: In this paper we explore the intersectionality of religious and ethnic norms and gender relations across the domestic and public spheres of work in post-reform rural, minority-concentrated China. We focus on the role that children play in their parents' off-farm work decisions for three aggregated ethnic groups (majority Han, Muslim minorities, and non- Muslim minorities). We control for households' composition and economic characteristics and individuals' human capital and as well as local economic conditions. Children generally decrease women's willingness to work away from/outside the home and increase men's willingness to do so. When we focus specifically on the effects of pre-school children, our results suggest it is more socially acceptable for non-Muslim than Muslim women to work away from home. When we turn our attention to school-age children, the gender of the child becomes as important to the analysis as the gender of the parent. With regard to household composition, we find that in Muslim households the presence of extra adult men (of any age between 15 and 70) in the household reduces the likelihood that women engage in off-farm work. The presence in the household of a woman of grandmotherly age (between 46 and 70) supports Muslim minority women's ability to migrate for work. For non-Muslim households, grandfathers and grandmothers alike, facilitate the ability of parents (male and female) to migrate for work.
    Keywords: off-farm work, ethnicity, household composition, children, migration, China
    JEL: J14 J15 J16 J26 D13 O53
    Date: 2016–07

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