nep-cna New Economics Papers
on China
Issue of 2016‒11‒27
eight papers chosen by
Zheng Fang
Ohio State University

  1. Resolving China’s Corporate Debt Problem By Wojciech Maliszewski; Serkan Arslanalp; John Caparusso; José Garrido; Si Guo; Joong Shik Kang; W. Raphael Lam; Daniel Law; Wei Liao; Nadia Rendak; Philippe Wingender; Jiangyan Yu; Longmei Zhang
  2. Intergenerational transmission of education in China: Pattern, mechanism, and policies By Jingyi Huang; Yumei Guo; Yang Song
  3. The Price of Growth: Consumption Insurance in China 1989-2009 By Santaeulàlia-Llopis, Raül ; Zheng, Yu
  4. When China Sneezes Does ASEAN Catch a Cold? By Sohrab Rafiq
  5. Has China Replaced Colonial Trade ? By Laurent Didier; Pamina Koenig
  6. Gender Differences in Willingness to Compete: The Role of Culture and Institutions By Booth, Alison L.; Fan, Elliott; Meng, Xin; Zhang, Dandan
  7. Spillovers from the Maturing of China’s Economy By Allan Dizioli; Benjamin L Hunt; Wojciech Maliszewski
  8. What is Different about Urbanization in Rich and Poor Countries? Cities in Brazil, China, India and the United States By Juan Pablo Chauvin; Edward Glaeser; Kristina Tobio

  1. By: Wojciech Maliszewski; Serkan Arslanalp; John Caparusso; José Garrido; Si Guo; Joong Shik Kang; W. Raphael Lam; Daniel Law; Wei Liao; Nadia Rendak; Philippe Wingender; Jiangyan Yu; Longmei Zhang
    Abstract: Corporate credit growth in China has been excessive in recent years. This credit boom is related to the large increase in investment after the Global Financial Crisis. Investment efficiency has fallen and the financial performance of corporates has deteriorated steadily, affecting asset quality in financial institutions. The corporate debt problem should be addressed urgently with a comprehensive strategy. Key elements should include identifying companies in financial difficulties, proactively recognizing losses in the financial system, burden sharing, corporate restructuring and governance reform, hardening budget constraints, and facilitating market entry. A proactive strategy would trade off short-term economic pain for larger longer-term gain.
    Keywords: Corporate debt;China;Credit expansion;Credit booms;Debt strategy;Corporate Debt Overhang; Credit; Restructuring; Hardening Budget Constraints
    Date: 2016–10–14
  2. By: Jingyi Huang (University of Michigan, U.S.A.); Yumei Guo (Central University of Finance and Economics, China); Yang Song (Renmin University of China)
    Abstract: This paper has three objectives. First, we present the mobility pattern for intergenerational education persistence. Second, we estimate the effect of parental education on children education by using instruments generated by the Chinese Cultural Revolution, and further explore the mechanisms of this causal relationship. Third, this study aims to investigate the impact of two education reforms on intergenerational transmission of education, including the Compulsory Education Law and college expansion reform. Although mobility seems increasing for the newer generation, the lowest mobility is found in rural areas for the lowest-educated group. Fathers' education has a significant impact on children education through the nurture effect, which is almost entirely driven by father's income. Finally, we find that popularizing compulsory education did not have a expected effect on increasing mobility. Moreover, the college expansion policy indeed reduces the intergenerational education mobility in urban areas, but this effect is not found in rural areas.
    Keywords: intergenerational education mobility, nurture effect, education reforms, China.
    JEL: H5 I2 O1
    Date: 2016–10
  3. By: Santaeulàlia-Llopis, Raül ; Zheng, Yu
    Abstract: The welfare gains of economic 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 China, an economy that has witnessed enormous and sustained 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 economic growth across time and across space.
    Keywords: Income Risk, Consumption Insurance, Growth, Welfare, China
    JEL: O4 D1
    Date: 2016
  4. By: Sohrab Rafiq
    Abstract: This paper looks at the effects of a China slowdown on Emerging Market Economies (Indonesia, Malaysia, and Thailand) and Frontier Developing Economies (Cambodia, Lao P.D.R., and Vietnam) in ASEAN. The main finding is that the impact of China growth shocks on ASEAN has risen since the global financial crisis. A one percent decline in China’s growth implies a 0.3 percent reduction in growth for ASEAN EMEs and 0.2 for FDEs. An important component of inflation is also shared between ASEAN and China. These magnitudes are double what they were two decades ago due to stronger trade and financial linkages. Finally, a slowdown in China, while having real effects, also has a financial impact via slower credit growth and lower equity prices. This is in line with the existence of both portfolio balance and signaling channels, in which ASEAN market participants absorb news on China economic activity as an indicator over domestic growth prospects.
    Date: 2016–11–10
  5. By: Laurent Didier (CEMOI - Centre d'Économie et de Management de l'Océan Indien - Université de la Réunion - IAE - Institut d'Administration des Entreprises - Université de la Réunion); Pamina Koenig (Université de Rouen, PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique)
    Abstract: China is often suspected of taking over the extraordinary trade relationships that former colonies had within colonial empires. We detail the three reasons why China's trade flows with former colonies could exhibit unexpected levels after independence. Besides potential preferential bilateral relationships built after independence, the two expected determinants of trade flows are China's export capacity and the natural redirection caused by the increase in country pairs trade costs due to independence. We investigate and quantify the three reasons explaining the level of former colonies' trade flows with China. Using sequentially naive graphical representations and structural gravity equations, we show that methodological issues can be largely responsible for displaying and estimating abnormaly high trade levels between former colonies and China. We show that increased trade between these pairs of countries is the result of coinciding unilateral factors on each side which raise trade with all partners, instead of being driven by more intense bilateral preferences. We then measure the reorientation of trade flows from former colonies' metropoles towards China and show that independence has produced the expected redistribution: trade flows would be 15$\%$ lower with China, had former colonies not become independent.
    Keywords: colonial trade, gravity equation, China, multilateral resistance,bilateral effects
    Date: 2016–11
  6. By: Booth, Alison L. (Australian National University); Fan, Elliott (National Taiwan University); Meng, Xin (Australian National University); Zhang, Dandan (Peking University)
    Abstract: In the laboratory experiment reported in this paper we explore how evolving institutions and social norms, which we label 'culture', change individuals' preferences and behaviour in mainland China. From 1949 China experienced dramatic changes in its socio-economic institutions. These began with communist central planning and the establishment of new social norms, including the promotion of gender equality in place of the Confucian view of female 'inferiority'. Market-oriented reforms, begun in 1978, helped China achieve unprecedented economic growth and at the same time Marxist ideology was gradually replaced by the acceptance of individualistic free-market ideology. During this period, many old traditions crept back and as a consequence social norms gradually changed again. In our experiment we investigate gender differences in competitive choices across different birth cohorts of individuals who, during their crucial developmental-age, were exposed to one of the two regimes outlined above. In particular we investigate gender differences in competitive choices for different birth cohorts in Beijing using their counterparts in Taipei (subject to the same original Confucian traditions) to control for the general time trend. Our findings confirm: (i) that females in Beijing are significantly more likely to compete than females from Taipei; (ii) that Beijing females from the 1958 birth cohort are more competitive than their male counterparts as well as more competitive than later Beijing birth cohorts; and (iii) that for Taipei there are no statistically significant differences across cohort or gender in willingness to compete. In summary, our findings confirm that exposure to different institutions and social norms during the crucial developmental age changes individuals' behaviour. Our findings also provide further evidence that gender differences in economic preferences are not innately determined.
    Keywords: gender, competitive choices, culture, behavioural economics
    JEL: C9 C91 C92 J16 P3 P5 D03
    Date: 2016–11
  7. By: Allan Dizioli; Benjamin L Hunt; Wojciech Maliszewski
    Abstract: China’s transition to a new growth model continues and the impact has been felt across the globe. Several trends contribute to the ‘maturing’ of China’s economy: i) structural slowing on the convergence path; ii) on-shoring deepening; and iii) demand rebalancing from investment towards consumption. In the short term, financial stress may lead to a cyclical slowdown. This paper discusses and quantifies spillovers to the global economy from these different developments. The analysis is undertaken using the APDMOD and G20MOD, both modules of the IMF’s Flexible System of Global Models. For plausible values of these developments, the overall impact on the global economy is not large. However, the impact on China’s closest trading partners and commodity exporters can be notable.
    Date: 2016–11–08
  8. By: Juan Pablo Chauvin (Harvard University); Edward Glaeser (Harvard University and NBERAuthor-Name: Yueran Ma; Harvard University); Kristina Tobio (Harvard University)
    Abstract: Are the well-known facts about urbanization in the United States also true for the developing world? We compare American metropolitan areas with analogous geographic units in Brazil, China and India. Both Gibrat’s Law and Zipf’s Law seem to hold as well in Brazil as in the U.S., but China and India look quite different. In Brazil and China, the implications of the spatial equilibrium hypothesis, the central organizing idea of urban economics, are not rejected. The India data, however, repeatedly rejects tests inspired by the spatial equilibrium assumption. One hypothesis is that spatial equilibrium only emerges with economic development, as markets replace social relationships and as human capital spreads more widely. In all four countries there is strong evidence of agglomeration economies and human capital externalities. The correlation between density and earnings is stronger in both China and India than in the U.S., strongest in China. In India the gap between urban and rural wages is huge, but the correlation between city size and earnings is more modest. The cross-sectional relationship between area-level skills and both earnings and area-level growth are also stronger in the developing world than in the U.S. The forces that drive urban success seem similar in the rich and poor world, even if limited migration and difficult housing markets make it harder for a spatial equilibrium to develop.
    Keywords: Urbanization; developing countries; spatial equilibrium; agglomeration economies; human capital externalities
    JEL: O15 O18 R12 R23
    Date: 2016

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