nep-cna New Economics Papers
on China
Issue of 2016‒10‒30
thirteen papers chosen by
Zheng Fang
Ohio State University

  1. Pareto's Law and City Size in China: Diverging Patterns in Land and People By Chao Li; John Gibson
  2. Policy Uncertainty and Foreign Direct Investment: Evidence from the China-Japan Island Dispute By Cheng Chen; Tatsuro Senga; Chang Sun; Hongyong Zhang
  3. Effects of the People’s Republic of China’s Structural Change on the Exports of East and Southeast Asian Economies By Lee, Hyun-Hoon; Park, Donghyun; Shin, Kwanho
  4. Migration in the People’s Republic of China By Lu, Ming; Xia, Yiran
  5. Apples and Dragon Fruits: The Determinants of Aid and Other Forms of State Financing from China to Africa By Dreher, Axel; Fuchs, Andreas; Parks, Bradley; Strange, Austin M.; Tierney, Michael J.
  6. Higher education expansion, economic reform and labor productivity By Yao, Yao
  7. The Impact of a People’s Republic of China Slowdown on Commodity Prices and Detecting the Asymmetric Responses of Economic Activity in Asian Countries to Commodity Price Shocks By Ghoshray, Atanu; Pundit, Madhavi
  8. Silver Points, Silver Flows, and the Measure of Chinese Financial Integration By David S. Jacks; Se Yan; Liuyan Zhao
  9. Consumption in Asia By Markus Brueckner
  10. China's Electronics Exports, the Renminbi, and Exchange Rates in Supply Chain Countries By THORBECKE, Willem
  11. A mixed methods approach for the integration of urban design and economic evaluation: industrial heritage and urban regeneration in China By Mauro Berta; Marta Bottero; Valentina Ferretti
  12. Industrial Interdependence: China 1995-2010 By Jose-Miguel Albala-Bertrand
  13. Population growth, interest rate, and housing tax in the transitional China By Ling-Yun He; Xing-Chun Wen

  1. By: Chao Li (Auckland Institute of Technology); John Gibson (University of Waikato)
    Abstract: Using Pareto’s Law as a benchmark, the very largest cities in China appear to have scope to absorb more migrants, contrary to the pro-small bias in urban policy. We use population census data from 2000 and 2010 and remote sensing data to study the evolution of the size distribution of Chinese cities in terms of land and people. Migrants without local hukou registration increasingly congregate in a few larger cities, so previous studies that rely on the count of local hukou holders wrongly make the city size distribution seem more even. Temporal comparisons show the city size distribution is diverging in terms of the urban resident population but converging in terms of land area. These divergent patterns suggest that growth in the resident population of large cities is not being assisted by fast enough area expansion, while area expansion of less populous cities is too fast for their slow growth in resident numbers.
    Keywords: agglomeration; city size; hukou; migration; Pareto’s law; China
    JEL: R12 O15
    Date: 2016–10–17
  2. By: Cheng Chen (University of Hong Kong); Tatsuro Senga (Queen Mary University of London); Chang Sun (Princeton University); Hongyong Zhang (RIETI)
    Abstract: Can a temporary negative shock generate long-lasting effects on economic activities? To show causal evidence, we utilize data from Japanese multinational corporations (MNCs) and explore the economic impact of the unexpected escalation of an island dispute between China and Japan in 2012. Our difference-in-differences (DID) estimation substantiates that a sharp, but temporary fall in local sales of Japanese MNCs in China led to persistent downward deviation of foreign direct investment (FDI) from its trend. Moreover, despite the quick recovery of local sales, Japanese MNCs in China have continued to underestimate their local sales, which generates pessimistic and more dispersed forecast errors after the island crisis. We view this as evidence for a belief-driven channel through which a large and unexpected negative shock leads agents to revise their beliefs and start tail risk hedging.
    Keywords: Uncertainty, Forecasts, FDI, Geopolitical conflicts, Business cycles
    JEL: D84 E22 E32 F23
    Date: 2016–10
  3. By: Lee, Hyun-Hoon (Kangwon National University.); Park, Donghyun (Asian Development Bank); Shin, Kwanho (Korea University.)
    Abstract: The Chinese economy is slowing down and, at the same time, it is in the midst of a structural transformation from an export- and investment-led economy to a domestic demand- and consumption-led growth paradigm. While there are widespread concerns in the People’s Republic of China’s (PRC) trading partners about the effect of the PRC’s growth slowdown on their exports, the PRC’s structural change is also likely to have a significant impact—e.g. the PRC will import fewer machines and more cosmetics. The central objective of our paper is to empirically examine the effect of the PRC’s structural transformation on the exports of East and Southeast Asian economies, which have close trade linkages with the PRC. We find that economies which failed to increase the share of consumption goods in their exports to the PRC suffered larger declines in their exports to the PRC. In addition, economies that suffered losses in their shares of the PRC’s parts and components imports suffered losses in their shares of the PRC’s total imports.
    Keywords: People’s Republic of China; East Asia; export; global value chain; structural change
    JEL: F14 F41
    Date: 2016–07–21
  4. By: Lu, Ming (Asian Development Bank Institute); Xia, Yiran (Asian Development Bank Institute)
    Abstract: This report summarizes the characteristics of migration in the People’s Republic of China (PRC) after its reforms and opening up. Rapid urbanization in the PRC has resulted from recent decades of intense rural–urban migration. The scale of migration increased rapidly and long-term migration is the main characteristic. The population characteristics of migration are determined not only by a personal decision, but also a joint decision within households to send members with comparative advantages in manufacturing and services, usually male and young, to work in cities. Coastal regions where manufacturing and services are better developed, especially big cities, are the major destinations. The aspiration for higher-income and better job opportunities is the major force that drives migration, while public services and urban amenities also partly account for population flows. However, in the PRC, there are still major institutional barriers—especially the hukou system and related segmentation in the urban labor market, social security, and public services access—that hinder rural–urban and interregional migration. Facing the challenges of fast urbanization and growing urban diseases, local governments still rely on the current system to control the population flow into large cities. Controlling population growth by discriminative policies will lead to more social problems. Policy makers should reconsider the way to achieve efficient and harmonious urbanization by shifting to more pro-market policies and reducing the migration costs embedded in institutional constraints.
    Keywords: migration; rural-urban migration; PRC; urbanization; hukou system; People’s Republic of China; rapid urbanization
    JEL: J61 P25 R23
    Date: 2016–10–17
  5. By: Dreher, Axel; Fuchs, Andreas; Parks, Bradley; Strange, Austin M.; Tierney, Michael J.
    Abstract: Chinese “aid” is a lightning rod for criticism. Policymakers, journalists, and public intellectuals claim that Beijing is using its largesse to cement alliances with political leaders, secure access to natural resources, and create exclusive commercial opportunities for Chinese firms—all at the expense of citizens living in developing countries. We argue that much of the controversy about Chinese “aid” stems from a failure to distinguish between China’s Official Development Assistance (ODA) and more commercially-oriented sources and types of state financing. Using a new database on China’s official financing commitments to Africa from 2000-2013, we find the allocation of Chinese ODA to be driven primarily by foreign policy considerations, while economic interests better explain the distribution of less concessional flows. These results highlight the need for better measures of an increasingly diverse set of non-Western financial activities.
    Keywords: Development Finance; Foreign Aid; Non-DAC Donors; China; Tracking Underreported Financial Flows
    Date: 2016–10–20
  6. By: Yao, Yao
    Abstract: This paper studies the impact of higher education expansion, along with economic reform of the state sector, in the late 1990’s in China on its labor productivity. I argue that in an economy such as China, where allocation distortions widely exist, an educational policy affects average labor productivity not only through its effect on human capital stock, but also through its effect on human capital allocation across sectors. Thus, its impact could be very limited if misallocation becomes more severe following the policy. I construct a two-sector general equilibrium model with private enterprises and state-owned enterprises, with policy distortions favoring the latter. Households, heterogeneous in ability, make educational choices and occupational choices in a threeperiod overlapping-generations setting. Counterintuitively, quantitative analysis shows an overall negative effect of higher education expansion on average labor productivity (by 5 percent). Though it did increase China’s skilled human capital stock significantly (by nearly 50 percent), the policy had the effect of reallocating relatively more human capital toward the less-productive state sector. This also directed physical capital allocation toward the state sector and further dampened average labor productivity. It was the economic reform that greatly improved the allocation efficiency and complemented educational policy in enhancing labor productivity (by nearly 50 percent).
    Keywords: Higher education, China, Economic reform, Educational policy,
    Date: 2016
  7. By: Ghoshray, Atanu (Newcastle University Business School, Newcastle-upon-Tyne); Pundit, Madhavi (Asian Development Bank)
    Abstract: The recent slowdown of the People’s Republic of China (PRC) has led to question to what extent the PRC demand of commodities can have an impact on commodity prices. We take into account the fact that commodity prices are characterized by structural breaks, and to this end we make use of novel econometric procedures incorporating the Flexible Fourier Form when testing for causal relations between the PRC slowdown and commodity prices. We find varying degrees of response of the PRC slowdown on different commodity prices. Further, this study determines whether the economic growth in selected developing and emerging Asian countries that are heavily dependent on commodities respond in an asymmetric manner to positive commodity price shocks as opposed to negative price shocks. Adopting a structural dynamic regression and censoring positive and negative shocks, we find limited evidence of any asymmetric response of economic activity to positive and negative commodity price shocks.
    Keywords: commodity prices; economic growth; Flexible Fourier Form; impulse response analysis; PRC slowdown
    JEL: C22 C32 F43 O47 Q31
    Date: 2016–07–27
  8. By: David S. Jacks; Se Yan; Liuyan Zhao
    Abstract: To what degree were Chinese financial markets integrated with the rest of the world prior to the 1949 Revolution and to what extent was the Chinese foreign exchange market efficient during this period? We estimate silver points for the Shanghai market from 1905 to 1933 to answer these questions. Our inferred measures are small in value, favorably match measured costs of the silver trade derived from contemporary accounts, and fare well in the comparison to estimates of trans-Atlantic gold points. This leads to the conclusion that the degree of Chinese financial market integration was substantial. However, during and immediately after World War I, our estimates of the silver points increased appreciably, foreshadowing the collapse of China’s linkages to world financial markets beginning in the 1930s.
    JEL: E42 F15 N25
    Date: 2016–10
  9. By: Markus Brueckner
    Abstract: This paper examines consumption patterns in Asia. The majority of Asian countries, in particular, those located in East Asia, such as China, are characterized by high GDP shares of consumption. While over the past two decades there has been a remarkable growth in consumption, and to a lesser extent of consumption per capita, the GDP share of consumption has declined by a considerable amount in Asia. The paper presents projections of the GDP consumption share. The projections are based on time series models and an econometric model that relates the GDP share of consumption to PPP GDP per capita growth. Instrumental variables estimates show that the GDP share of consumption is significantly negatively related to growth: a decrease in PPP GDP per capita growth of 1 percentage point per annum increases the GDP share of consumption by around 2 percentage points. Slower growth in Asia would thus significantly contribute to a higher GDP share of consumption in that region.
    Date: 2016–10
  10. By: THORBECKE, Willem
    Abstract: China's trade surplus remains huge. Researchers have reported that China's exports decimate manufacturing job abroad and stoke protectionist pressures. China's surplus is concentrated in the electronics sector. Much of the value-added of China's exports of smartphones, tablet computers, and consumer electronics goods comes from processors, sensors, and other parts and components (p&c) produced in Taiwan, South Korea, Japan, and the Association of Southeast Asian Nations (ASEAN). This paper finds that exchange rates in countries supplying p&c are crucial for understanding China's electronics exports. A concerted appreciation of East Asian currencies is needed to rebalance the region's exports. However, because of underdeveloped financial markets, the U.S. dollar remains the most important currency in the currency baskets of many East Asian economies. Countries resist appreciation against the dollar to maintain competitiveness vis-Ã -vis neighboring economies. This paper considers ways to overcome this coordination failure and develop stronger consumption-oriented economies in the region.
    Date: 2016–09
  11. By: Mauro Berta; Marta Bottero; Valentina Ferretti
    Abstract: This paper presents the early results of a study aimed at experimenting an innovative approach to the design and the evaluation of complex urban transformation processes, based on the combined use of different design strategies and tools. The purpose of the paper is to illustrate, by means of a case study, a multi-level decision aiding process, able to support strategic urban design, with specific reference to regeneration processes for abandoned industrial sites in urban areas. The case study presented in the paper concerns different alternative proposals for the requalification of the former Shougang/Er-Tong mechanical factory in Beijing, China. The choice of a Chinese case study as a field test for an experimentation about mixed methods research approaches in the domain of urban transformation is related to the peculiar emerging conditions of that context, in which huge economic potentials are speeding up the transformation but a substantial lack of cultural and methodological instruments to manage a so fast modification exists. During the design process, three methods in particular have been combined according to a multi-phase design: (i) Stakeholders Analysis, (ii) Multicriteria Analysis, and (iii) Discounted Cash Flow Analysis. Each one of them has been applied in parallel to the evolution of the different design scenarios. The results of the performed study show that mixed methods approaches are a promising line of research in the field of environmental evaluation and urban design. Insights and guidelines for the replication of the proposed methodological approach in other territorial contexts are also proposed.
    Keywords: multicriteria analysis; urban design; decision support; masterplanning; economic evaluation
    JEL: J50
    Date: 2016–09–28
  12. By: Jose-Miguel Albala-Bertrand (Queen Mary University of London)
    Abstract: This paper is a continuation of our study of structural change in China and deals with the changes of domestic industrial/sectoral backward and forward linkages (i.e. the pull and push of the economy) as well as the changes in their domestic and imported components (i.e. via import substitution/penetration) over the 1995-2010 period. We present the results in terms of rates of change for the period as a whole as well as for their yearly evolution over such a period. The main conclusions are that the secondary sector has become the main pull engine of the economy by far, with the tertiary sector also increasing its pull, and that there are three distinctive periods for the evolution of import substitution/penetration, which seem to correspond to both international crises and domestic reform.
    Keywords: China, Industrial structural change, Input-output decomposition, Trajectories over 1995-2010
    JEL: L16 O4 B4 E2
    Date: 2015–10
  13. By: Ling-Yun He; Xing-Chun Wen
    Abstract: This paper combines and develops the models in Lastrapes (2002) and Mankiw & Weil (1989), which enables us to analyze the effects of interest rate and population growth shocks on housing price in one integrated framework. Based on this model, we carry out policy simulations to examine whether the housing (stock or flow) tax reduces the housing price fluctuations caused by interest rate or population growth shocks. Simulation results imply that the choice of housing tax tools depends on the kind of shock that housing market faces. In the situation where the housing price volatility is caused by the population growth shock, the flow tax can reduce the volatility of housing price while the stock tax makes no difference to it. If the shock is resulting from the interest rate, the policy maker should not impose any kind of the housing taxes. Furthermore, the effect of one kind of the housing tax can be strengthened by that of the other type of housing tax.
    Date: 2016–10

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