nep-cna New Economics Papers
on China
Issue of 2016‒09‒25
twelve papers chosen by
Zheng Fang
Ohio State University

  1. China Pro-Growth Monetary Policy and Its Asymmetric Transmission By Kaiji Chen; Patrick Higgins; Daniel F. Waggoner; Tao Zha
  2. China's New Economic Frontier: Overcoming Obstacles to Continued Growth By Sean Miner
  3. Government Assistance and Total Factor Productivity: Firm-level Evidence from China, 1998-2007 By Richard Harris; Shengyu Li
  4. Chinese And African Migrant Entrepreneur’s Articulation Shaped By African Agency By Kohnert, Dirk
  5. The rise of China: Competing or complementary to DAC aid flows in Africa? By Granath, Louise
  6. The diffusion and dynamics of producer prices, deflationary pressure across Asian countries, and the role of China By Chen, Hongyi; Funke, Michael; Tsang, Andrew
  7. The Impact of Conditional Cash Transfers on the Matriculation of Junior High School Students into Rural China’s High Schools By Fan Li; Yingquan Song; Hongmei Yi; Jianguo Wei; Linxiu Zhang; Yaojiang Shi; James Chu; Natalie Johnson; Prashant Loyalka; Scott Rozelle
  8. Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure By David Autor; David Dorn; Gordon Hanson; Kaveh Majlesi
  9. Ability Tracking and Social Capital in China’s Rural Secondary School System By Fan Li; Prashant Loyalka; Hongmei Yi; Yaojiang Shi; Natalie Johnson; Scott Rozelle
  10. Aid on Demand: African Leaders and the Geography of China's Foreign Assistance By Axel Dreher; Andreas Fuchs; Roland Hodler; Bradley C. Parks; Paul A. Raschky; Michael J. Tierney
  11. Regulating Local Government Financing Vehicles and Public-Private Partnerships in China By Hui Jin; Isabel Rial
  12. The Price of Growth: Consumption Insurance in China 1989-2009 By Yu Zheng; Raul Santaeulalia

  1. By: Kaiji Chen; Patrick Higgins; Daniel F. Waggoner; Tao Zha
    Abstract: China monetary policy, as well as its transmission, is yet to be understood by researchers and policymakers. In the spirit of Taylor (1993, 2000), we develop a tractable framework that approximates practical monetary policy of China. The framework, grounded in relevant institutional elements, allows us to quantify the policy effects on output and prices. We find strong evidence that monetary policy is designed to support real GDP growth mandated by the central government while resisting inflation pressures and that contributions of monetary policy shocks to the GDP fluctuation are asymmetric across different states of the economy. These findings highlight the role of M2 growth as a primary instrument and the bank lending channel to investment as a key transmission mechanism for monetary policy. Our analysis sheds light on institutional constraints on a gradual transition from M2 growth to the nominal policy interest rate as a primary instrument for monetary policy.
    JEL: C13 C3 E02 E5
    Date: 2016–09
  2. By: Sean Miner (Peterson Institute for International Economics)
    Abstract: China's economy is at a pivotal moment, as it faces both imminent and long-term challenges that may significantly hamper the robust growth it has enjoyed in recent decades. Income inequality, increased debt, an aging population, shrinking labor force, and a slow transition from manufacturing to services risk threatening the country's social and economic stability. China's continued economic growth is an essential part of the Chinese Dream, President Xi Jinping's vision for the reemergence of China's prominence on the global stage. China once championed laying low and biding its time while it built its strength, but that time has clearly passed. The road to a "prosperous and strong country," as President Xi has said of the Chinese Dream, will likely be a road filled with hurdles. In this volume of essays PIIE experts explore various areas of concern for China's economic development. The authors use historical or data-driven analysis to explain what is happening, why it is important for China, and then provide recommendations for policymakers in China and elsewhere.
    Date: 2016–08
  3. By: Richard Harris (Durham Business School); Shengyu Li (Durham Business School)
    Abstract: The provision of large-scale assistance to industry is very important in China. The major contribution of this paper is to use Chinese firm-level panel data for 1998-2007 to introduce measures of assistance received by each firm directly into industry-level production functions determining firm output. Our results indicate inverted U-shaped gains from assistance: across the 26 industries considered, firms receiving assistance rates of 1-10%, 10-19%, 20-49% and 50+% experienced on average 4.5%, 9.4%, 9.2% and -3% gains in TFP, respectively. We also provide a simple agency model that justifies such a result
    Keywords: Subsidies; TFP; China; firm-level
    JEL: D24 O14 O43
    Date: 2016–09
  4. By: Kohnert, Dirk
    Abstract: Much has been written on the relationship of China and Africa in the past decade. However, the subject of Chinese migrant entrepreneurs in Africa and their articulation with African counterparts was little explored up to the early 2010s. Apparently, this research gap has been closed, as shown by four publications in recent years: three edited volumes and one monography, focusing on this subject. In view of early prejudices on the passive or even disapproving reception of Chinese migrants by Africans, the state of the art underlines the importance and scope of African agency vis à vis Chinese migrant entrepreneurs in Africa. Book Review Article of: (1) Giese, Karsten, Marfaing, Laurence (eds) (2016) : Entrepreneurs Africains et Chinois. Les impacts sociaux d'une rencontre particulière. Paris : Karthala, 2016. 384 pp. (2) Gadzala, Aleksandra W. (ed) (2015): Africa and China: how Africans and their governments are shaping relations with China. Lanham/Md.: Rowman & Littlefield, xxix + 266 pp. (3) Mohan, Giles, Lampert, Ben et al (eds) (2014): Chinese Migrants and Africa's Development : new imperialists or agents of change? London: Zed books, vi + 185 pp. (4) French, Howard W. (2015): China's Second Continent: how a million migrants are building a new empire in Africa. London: Penguin Random House / New York: Knopf, xi + 304 pp.
    Keywords: African Affairs;migrant entrepreneurs;Chinese Studies;entrepreneurial economics;Sub-Saharan Africa;Ghana;Senegal;Nigeria;Mozambique;Namibia
    JEL: F1 F10 F14 F22 F6 F60 O15 O17 O35 O55 Y3 Z1
    Date: 2016–09–16
  5. By: Granath, Louise (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This study investigates if the relationship between bilateral DAC aid and Chinese aid allocation is better described as competing aid flows, or if Chinese aid has been mainly a complement to DAC aid in Africa between the years 2000 and 2012. The relationship is analysed in a two-level framework, both cross-country and within countries at the sector level, where China is assumed to be responsive to established DAC aid allocation priorities. This study makes use of the most recent update of AidData’s unique dataset on Chinese Official Finance to Africa and the DAC aid data is extracted from the OECD Creditor Reporting System database. The results suggest a positive and statistically significant effect of DAC aid allocation with respect to Chinese aid allocation in the following year at the country level. The result is interpreted as a competition between China and DAC to serve the same recipient countries with aid. A similar, or any, relationship between DAC and Chinese aid allocation at the sector level within recipient countries is however not confirmed.
    Keywords: Foreign aid; China; donor coordination; bilateral DAC; Africa
    JEL: F35 O55
    Date: 2016–09
  6. By: Chen, Hongyi; Funke, Michael; Tsang, Andrew
    Abstract: ​Persistent producer price deflation in China and other Asian economies has become a genuine concern for policymakers. In June 2016, China’s producer prices were down 12.7 percent from their peak in 2011, following a 52-month stretch of consecutive negative producer price readings (March 2012 to June 2016). Given problems with overcapacity and heavy corporate debt burdens, the incessant decline in producer prices has eroded corporate profitability, dampened fixed in-vestment and depressed growth overall. This paper analyzes the determinants of producer price declines across eleven Asian economies, finding that the recent synchronous and protracted pro-ducer price deflation has been driven by weak production growth, low commodity prices, spill-over effects from China, and, to a lesser extent, exchange rate pass-through. With China at the heart of the region’s producer price deflation challenge, we consider the structural adjustments needed in China to cope with the decline and head off deflationary threats.
    Keywords: producer prices, international spillovers, deflation, Asia
    JEL: C23 C32 E31
    Date: 2016–09–12
  7. By: Fan Li; Yingquan Song; Hongmei Yi; Jianguo Wei; Linxiu Zhang; Yaojiang Shi; James Chu; Natalie Johnson; Prashant Loyalka; Scott Rozelle
    Abstract: The goal of this study is to examine whether promising a Conditional Cash Transfer (conditional on matriculation) at the start of junior high increases the rate at which disadvantaged students matriculate in to high school. Based on a randomized controlled trial involving 1,418 disadvantaged (economically poor) students in rural China, we find that the promise of a CCT has no effect on increasing high school matriculation for the average disadvantaged student. We do find, however, that providing the CCT increases high school matriculation among the subset of disadvantaged students who overestimate the direct costs of attending high school.
    Keywords: Conditional Cash Transfer, Voucher, Rural Education, Dropout, High School, Randomized Controlled Trial, China
    Date: 2015
  8. By: David Autor; David Dorn; Gordon Hanson; Kaveh Majlesi
    Abstract: Has rising trade integration between the U.S. and China contributed to the polarization of U.S. politics? Analyzing outcomes from the 2002 and 2010 congressional elections, we detect an ideological realignment that is centered in trade-exposed local labor markets and that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising trade with China and classifying legislator ideologies by their congressional voting record, we find strong evidence that congressional districts exposed to larger increases in import competition disproportionately removed moderate representatives from office in the 2000s. Trade-exposed districts initially in Republican hands become substantially more likely to elect a conservative Republican, while trade-exposed districts initially in Democratic hands become more likely to elect either a liberal Democrat or a conservative Republican. Polarization is also evident when breaking down districts by race: trade-exposed locations with a majority white population are disproportionately likely to replace moderate legislators with conservative Republicans, whereas locations with a majority non-white population tend to replace moderates with liberal Democrats. We further contrast the electoral impacts of trade exposure with shocks associated with generalized changes in labor demand and with the post-2006 U.S. housing market collapse.
    JEL: D72 F14 H11
    Date: 2016–09
  9. By: Fan Li; Prashant Loyalka; Hongmei Yi; Yaojiang Shi; Natalie Johnson; Scott Rozelle
    Abstract: The goal of this paper is describe and analyze the relationship between ability tracking and student social capital, in the context of poor students in developing countries. Drawing on the results from a longitudinal study among 1,436 poor students across 132 schools in rural China, we find a significant lack of interpersonal trust and confidence in public institutions among poor rural young adults. We also find that there is a strong correlation between ability tracking during junior high school and levels of social capital. The disparities might serve to further widen the gap between the relatively privileged students who are staying in school and the less privileged students who are dropping out of school. This result suggests that making high school accessible to more students would improve social capital in the general population.
    Keywords: Ability Tracking, Social Capital, Interpersonal Trust, Confidence in Public Institutions, Rural Secondary Schooling
    Date: 2016
  10. By: Axel Dreher (Heidelberg University); Andreas Fuchs (Heidelberg University); Roland Hodler (University of St. Gallen); Bradley C. Parks (College of William and Mary); Paul A. Raschky (Monash University); Michael J. Tierney (College of William and Mary)
    Abstract: This article investigates whether China's foreign aid is particularly prone to capture by political leaders of aid-receiving countries. We examine whether more Chinese aid is allocated to the birth regions of political leaders and regions populated by the ethnic groups to which leaders belong, controlling for indicators of need and various fixed effects. We have collected data on 117 African leaders' birthplaces and ethnic groups and have geocoded 1,650 Chinese development finance projects across 3,097 physical locations that were committed to Africa over the 2000{2012 period. Our econometric results show that when leaders hold power their birth regions receive substantially more funding from China than other subnational regions. We also find -less robust- evidence that African leaders direct more Chinese aid to areas populated by individuals who share their ethnicity. However, when we replicate the analysis for the World Bank, our regressions show no evidence of favoritism. We also evaluate the impact of Chinese aid on regional development, exploiting time variation in the amount of Chinese aid that results from China's production of steel and geographical variation in the probability that a subnational region will receive such aid. We find that Chinese aid improves local development outcomes, as measured by per-capita nighttime light emissions at the first and second subnational administrative level. We therefore conclude that China's foreign aid program has both distributional and developmental consequences for Africa.
    Keywords: Foreign aid, Favoritism, Aid allocation, Aid effectiveness, Africa, China, Official Development Assistance, Georeferenced data, Spatial analysis
    JEL: D73 F35 P33 R11
    Date: 2016–09–13
  11. By: Hui Jin; Isabel Rial
    Abstract: In this paper, we argue that there is much room for China to strengthen its regulatory framework for public-private partnerships (PPPs). We show that infrastructure projects carried out through local government financing vehicles (LGFVs) were largely unregulated PPPs, and significant fiscal risks have already manifested themselves. While PPPs can potentially provide efficiency gains, they can also be used by governments to circumvent budgetary borrowing constraints. Therefore, effective PPP regulation is key to delivering PPPs’ benefits while containing their potential fiscal risks. The authorities have taken concrete steps in order to establish a sound regulatory framework and foster a new generation of PPPs. However, to make the framework effective, we highlight a few issues to be resolved. Based on international best practice, we propose a four-pillar regulatory framework for China, which could be implemented gradually in three stages.
    Date: 2016–09–16
  12. By: Yu Zheng (City University of Hong Kong); Raul Santaeulalia (Washington University St. Louis)
    Abstract: Growth entails taking risks. This implies that the welfare gains of growth hinge on the ability of households to insure consumption against the risks associated with growth. We exploit a novel and unique opportunity to study this question using as laboratory an economy, China, that has witnessed enormous and sustained economic growth and for which we build a long panel of household-level consumption and income. We find that consumption insurance deteriorates along the growth process with a transmission of permanent income shocks to consumption that triples from 1989 to 2009. The loss of consumption insurance has implications for the welfare assessment of growth across time and space.
    Date: 2016

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