nep-cna New Economics Papers
on China
Issue of 2016‒08‒28
thirteen papers chosen by
Zheng Fang
Ohio State University

  1. Informal Employment in China: Trends, Patterns and Determinants of Entry By Liang, Zhe; Appleton, Simon; Song, Lina
  2. Do WTO Rulings Really Matter? Evidence from the Rare Earth Elements Market By Juliane Proelss; Denis Schweizer; Volker Seiler
  3. State-Owned Enterprise in China: Reform, Performance, and Prospects By Gary Jefferson
  4. Gainers and Losers of Political Instability: Evidence from the Anti-Japanese Demonstration in China By Zijun Luo; Yonghong Zhou
  5. China in the Middle-Income Trap? By Glawe, Linda; Wagner, Helmut
  6. Understanding the Experiences of Relocatees During Forced Relocation in Chinese Urban Restructuring By Li, Xin; van Ham, Maarten; Kleinhans, Reinout
  7. Did FDI Really Cause Chinese Economic Growth? A Meta-Analysis By Philip Gunby; Yinghua Jin; W. Robert Reed
  8. Public Debt and Private Firm Funding. Evidence from Chinese Cities. By Yi Huang; Marco Pagano; Ugo Panizza
  9. The persistence of air pollution in four mega-cities of China By Luis Alberiko Gil-Alaña; Carlos Pestana Barros; Zhongfei Chen
  10. Asia's Rural-urban Disparity in the Context of Growing Inequality By Katsushi S. Imai; Bilal Malaeb
  11. The Impending Long March of the Chinese Economy By Harashima, Taiji
  12. Trade flows and trade specialisation: the case of China By Guglielmo Maria Caporale; Anamaria Sova; Robert Sova
  13. Neoliberalization and the Changing Roles of Stakeholders in State-Led Shantytown Redevelopment in Shenyang City, China By Li, Xin; Kleinhans, Reinout; van Ham, Maarten

  1. By: Liang, Zhe (University of Nottingham); Appleton, Simon (University of Nottingham); Song, Lina (University of Nottingham)
    Abstract: We empirically deconstruct informal employment in China into private business owners and casual workers without job contracts. Survey data from 2007 and 2013 document a rise in informal employment to the point where it exceeds formal employment, potentially an unintended consequence of the 2008 New Labour Contract Law. Compared with formal employees and business owners, casual workers report the lowest monetary and subjective wellbeing although business owners work longer hours with less social protection. Descriptive statistics and multivariate modelling reveal formal employees tend to have more favoured characteristics, often being educated, male, healthy and able bodied. Casual workers are more likely to have the characteristics of vulnerable groups, so the growth of casual employment is particularly concerning. There are indications that running small business is not always a sign of vulnerability and it may provide job flexibility for those with dependents to care for.
    Keywords: informal employment, determinants, human capital, China
    JEL: D03 J46 O15 P23 P36
    Date: 2016–08
  2. By: Juliane Proelss (Concordia University); Denis Schweizer (Concordia University); Volker Seiler (Paderborn University)
    Abstract: Rare earth elements (REEs) have gained increasing attention recently for several key reasons: 1) they are vital to many strategic industries, 2) they are relatively scarce, 3) they frequently exhibit high price fluctuations, 4) China holds a quasi-monopoly on their mining, and 5) China’s REE policy, which was overly restrictive and led to a formal complaint from the U.S., Japan, and the EU at the World Trade Organization (WTO) in 2012. This paper investigates whether the announcement of a WTO dispute resolution case can influence governmental changes in existing policies. We find empirical support for this notion, because REE prices exhibit a structural break around the announcement of the WTO dispute, and show lower variance ratios for all tested REEs afterward. This indicates a tendency toward efficiency, although REE prices still do not follow a random walk. Similarly, we find that the stock price informativeness of companies in the REE industry increases after the announcement, reflecting more firm-specific than marketwide information and less governmental influence. Finally, we show that the model uncertainty for option pricing models decreases, which we measure by the lower pricing differences among them.
    Keywords: Market Efficiency, Rare Earth Elements, Stock Price Informativeness, Structural Break Tests, Variance Ratio Tests, World Trade Organization (WTO)
    JEL: C22 C58 F13 G14 G18 G28 Q02 Q38
    Date: 2016–08
  3. By: Gary Jefferson (Brandeis University)
    Abstract: State-owned enterprise reform in China has travelled a long and uneven road. Arguably, its key driver has been the introduction of competition across China’s transforming economy, both the surge of new forms of domestic ownership and the ever-expanding access to technology and business methods from abroad. By highlighting the public good character of China’s SOEs, this paper underscores the importance of a clear Coasian assignment of property rights and reduced transaction costs. The paper then reviews the three stages of the reform of China’s state sector over the past 30 years, drawing on the literature that describes the intentions, achievements, and shortcomings of China’s reform program. Finally, the paper reviews the 2015 reform guidelines and the recent literature assessing these guidelines, including the intent of the guidelines to clearly distinguish between the public service and commercial mission of individual SOEs, so that the latter SOEs can be more rigorously accountable to corporate fiduciary responsibilities.
    Date: 2016–08
  4. By: Zijun Luo (Department of Economics and International Business, Sam Houston State University); Yonghong Zhou (Department of Economics, Jinan University, P.R. China)
    Abstract: This paper quantifies the Chinese consumers’ boycott of Japanese cars that immediately followed the anti-Japanese demonstration in September 2012.We decompose the total boycott effect into cancel effect and transfer effect. We find that the temporary cancellation of orders by potential buyers accounts for more than 90% of the total decline in Japanese car sales. Such results indicate that Japanese car makers lost these customers only for the short-run. European, Korean, American, and Chinese cars became the dominant substitutes for lost Japanese sales; Chinese brands benefited the least. This paper provides evidence of both negative and positive impacts of political conflicts for different market participants and includes analysis of welfare implications.
    Keywords: China; Japan; Boycott; Automobile; Political Conflict
    JEL: O11 F51 L62
    Date: 2016–08
  5. By: Glawe, Linda; Wagner, Helmut
    Abstract: Over the last decade, a growing body of literature dealing with the phenomenon of the “middle-income trap” (MIT) has emerged. The term MIT usually refers to countries that have experienced rapid growth and thus reached the status of a middle-income country (MIC) in a considerably short amount of time, but have not been able to further catch up to the group of high-income economies. Especially, since the beginning growth slowdown of the Chinese economy in 2011, there has been rising concern that China is or will also be confronted with such a trap. This paper analyzes the Chinese MIT situation taking into account both the (absolute and relative) empirical MIT definitions and MIT triggering factors identified in the literature. We not only survey the recent literature, but also make our own MIT forecasts and analyze under which conditions China could be caught in an MIT.
    Keywords: middle-income trap; China; economic growth; economic development; human capital; export structure; total factor productivity
    JEL: O10 O40 O47 O53
    Date: 2016–08–26
  6. By: Li, Xin (Delft University of Technology); van Ham, Maarten (Delft University of Technology); Kleinhans, Reinout (Delft University of Technology)
    Abstract: Despite the massive forced relocation of residents during urban restructuring in China, there are no systematic studies on how residents undergo the process. Most studies concerning urban restructuring in China directly equate forced relocation with displacement, which has a negative connotation. This negative view overlooks the multifaceted effects of forced relocation on relocatees. This paper aims to develop a critical understanding of the forced relocation of residents during urban restructuring in China. It takes forced relocation to be a process with changing contents over time, and as a specific type of residential mobility that occurs in the context of urban restructuring. This paper presents a conceptual model that includes different stages and contexts to analyse the experiences of relocatees during forced relocation. It divides the process of forced relocation into three stages – the pre-demolition stage, the transitional stage and the post-relocation stage – and investigates the social, economic, physical, psychological and behavioural dimensions of the experiences of relocatees at the macro and micro levels. We argue that forced relocation in urban China is not necessarily equivalent to displacement. Studying the experiences of relocatees from the household and residential mobility perspectives reveals the dynamic, variable and complex nature of forced relocation.
    Keywords: experience of relocatees, forced relocation, urban restructuring, displacement, residential mobility, China
    JEL: O18 R23
    Date: 2016–08
  7. By: Philip Gunby (University of Canterbury); Yinghua Jin; W. Robert Reed (University of Canterbury)
    Abstract: Foreign direct investment (FDI) has been linked to economic growth in a number of countries. Productivity spillovers at the firm level have been identified as a key element in the process by which FDI stimulates economic growth. Moreover, there is evidence of FDI-related productivity spillovers in China. Whether these spillovers have been of sufficient size to affect growth at the aggregate level, however, is an empirical question. We apply meta-analysis to the corresponding empirical literature to find an answer. Our main finding is that the effect of FDI on Chinese economic growth is much smaller than one would expect from a naïve aggregation of existing estimates. Publication bias and a profusion of estimates based on less preferred study and sample characteristics have served to inflate observed estimates. Once these effects are accounted for, the estimated effect of FDI on Chinese economic growth is reduced to statistical insignificance. This suggests that the cause(s) of the Chinese “economic miracle†likely lie elsewhere.
    Keywords: Meta-analysis, FDI, China, economic growth
    JEL: O11 O53 F21
    Date: 2016–07–26
  8. By: Yi Huang (The Graduate Institute, Geneva); Marco Pagano (University of Naples Federico II, CSEF, EIEF, CEPR, and ECGI); Ugo Panizza (The Graduate Institute, Geneva, and CEPR)
    Abstract: In China local public debt issuance between 2006 and 2013 crowded out investment by private manufacturing firms by tightening their funding constraints, while it did not affect state-owned and foreign fi rms. Using novel data for local public debt issuance, we establish this result in three ways. First, local public debt is inversely correlated with the city-level investment ratio of domestic private manufacturing firms. Instrumental variable regressions indicate that this link is causal. Second, local public debt has a larger negative effect on investment by private firms in industries more dependent on external funding. Finally, in cities with high government debt, firm-level investment is more sensitive to internal funding, also when this sensitivity is estimated jointly with the firm's likelihood of being credit-constrained. Altogether, these results suggest that, by curtailing private investment, the massive public debt issuance associated with the post-2008 fiscal stimulus sapped long-term growth prospects in China.
    Date: 2016
  9. By: Luis Alberiko Gil-Alaña; Carlos Pestana Barros; Zhongfei Chen
    Abstract: This paper analyses long range fractional dependence of China pollution in four major cities, namely Beijing, Shangai, Guangzhou and Shenzhen from September 28 of 2013 to December 12 of 2015. Unit roots hypotheses are tested by using fractional integration methods using both uncorrelated and autocorrelated errors. The results reveal that the pollution is persistent, meaning that it will continue until strong anti-pollution measures are adopted. Policy implication is derived.
    Keywords: Chinese cities, pollution, unit roots, AR
    JEL: C22 O11
    Date: 2016–02
  10. By: Katsushi S. Imai (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan and School of Social Sciences, University of Manchester, UK); Bilal Malaeb (Oxford Department of International Development, University of Oxford, UK)
    Abstract: This study offers empirical evidence on the rural-urban gap in the context of growing inequality in Asia. First, China and India explain the trends of regional inequality given their large population, signifying their importance as major contributors. Overall, China’s income inequality is characterised by rural-urban disparity, but the inequality within-rural and/or within urban areas has worsened, although it experienced very high economic growth. India is mainly characterised by high inequality within urban areas despite a sharp reduction in urban poverty. Rural-urban income gap has narrowed in recent years. We also find that the rural and urban income gap has narrowed in many countries, such as, India, Vietnam and Thailand. Second, our econometric results on the agricultural and non-agricultural income gap suggest that higher non-agricultural growth rate tends to widen the urban-rural gap over time, while agricultural growth is unrelated to the rural-urban gap. Third, the rural-urban human resources gaps in terms of educational attainment have increased in both India and China. Fourth, remittances are likely to reduce poverty in many countries. Policies which would promote agricultural growth and rural education are deemed important not only for reducing rural poverty, but also for narrowing the rural-urban gap of human resources.
    Keywords: Remittances, Migration, Growth, Poverty, Inequality, Asia
    JEL: F22 O10 O15 O53 I30
    Date: 2016–08
  11. By: Harashima, Taiji
    Abstract: The Chinese economy is currently faced with the difficult problems of slowing economic growth and huge overcapacity. China is struggling to adapt to a “new normal.” Here, I examine the mechanism of why China is faced with these problems and some potential future paths of the Chinese economy. China does not have a socialist, socialist market, or market-oriented economy. Rather, it has a “state-driven economy” and that has deviated far from the saddle path to the steady state. The model of a state-driven economy constructed in this paper indicates that it is highly likely that China will proceed along a long-running transition path with low or no growth, but it is also very likely that China will excessively build up its military.
    Keywords: The Chinese economy; Transition; Economic growth; Overcapacity; Pareto inefficiency
    JEL: O40 O53 P20
    Date: 2016–08–26
  12. By: Guglielmo Maria Caporale; Anamaria Sova; Robert Sova
    Abstract: Using annual data for the period 1992-2012, this paper examines trade flows between China and its main trade partners in Asia, North America and Europe, and whether increasing trade has led to industrial structural adjustment and changes in China’s trade patterns. The analysis is based on both economic indicators and the estimation of a gravity model, and applies recently developed panel data methods that explicitly take into account unobserved heterogeneity, specifically the fixed effect vector decomposition (FEVD) technique. The findings confirm the significant change in China’s trading structure associated with the fast growth of foreign trade. In particular, there has been a shift from resource- and labour-intensive to capital- and technology-intensive exports.
    Keywords: gravity model; panel data analysis; trade specialisation; comparative advantage
    JEL: C23 F14 F15
    Date: 2015–02
  13. By: Li, Xin (Delft University of Technology); Kleinhans, Reinout (Delft University of Technology); van Ham, Maarten (Delft University of Technology)
    Abstract: Neoliberal politics in China have changed the roles of, and the interrelationships between, the state, the market and society in urban restructuring. Since 2008, the central state has initiated the Shantytown Redevelopment Projects (SRPs) to improve the living conditions of low-income residents. Between 2008 and 2012, about 12.6 million households were involved in these national SRPs, and forced to move as their dwellings were demolished. This paper investigates how different stakeholders perceive and interact with each other in the state-led SRPs in Shenyang City in Northeast China. Through in-depth interviews with a range of stakeholders and analysis of policy documentation on SRPs, we find that there is a complex interplay between centralization, decentralization, marginalization of market forces, and the empowerment of residents in SRPs. The central government has replaced local governments in the initiation of redevelopment projects in disadvantaged neighbourhoods. District-level governments have replaced developers and municipal governments in land expropriation. Developers have become marginalized in SRPs and residents have become more empowered in the land expropriation taking place in urban redevelopment.
    Keywords: Shantytown redevelopment, neoliberalization, governance, demolition, China
    JEL: O18 R23
    Date: 2016–08

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