nep-cna New Economics Papers
on China
Issue of 2016‒12‒04
nine papers chosen by
Zheng Fang
Ohio State University

  1. Will China’s demographic transition exacerbate its income inequality? A CGE modeling with top-down microsimulation: By Wang, Xinxin; Chen, Kevin Z.; Robinson, Sherman; Huang, Zuhui
  2. Learning from China?: Manufacturing, investment, and technology transfer in Nigeria: By Chen, Yunnan; Sun, Irene Yuan; Ukaejiofo, Rex Uzonna; Xiaoyang, Tang; Bräutigam, Deborah
  3. Have Chinese firms become smaller? If so, why?: By Yang, Qiming; Zhang, Xiaobo; Zhu, Wu
  4. From “Made in China” to “Innovated in China”: Necessity, Prospect, and Challenges By Shang-Jin Wei; Zhuan Xie; Xiaobo Zhang
  5. Grain Into Gold? The Impact of Agricultural Income Shocks on Rural Chinese Households By Jessica Leight
  6. China’s Belt and Road Initiative: Can Europe Expect Trade Gains? By Alicia Garcia-Herrero; Jianwei Xu
  7. Undermined climate policies : a study on the impact of regulatory and financial discrimination across heterogeneous firms in China By Tang, Weiqi; Meng, Bo; Wu, Libo; Liu, Yu
  8. Technology Choice for Reducing NOx Emissions: An Empirical Study of Chinese Power Plants By Teng Ma; Kenji Takeuchi
  9. Do College Graduates Serving as Village Officials Help Rural China? By Guojun He; Shaoda Wang

  1. By: Wang, Xinxin; Chen, Kevin Z.; Robinson, Sherman; Huang, Zuhui
    Abstract: Demographic transition due to population aging is an emerging trend throughout the developing world, and it is especially acute in China, which has undergone demographic transition more rapidly than have most industrial economies. This paper quantifies the distributional effects in the context of demographic transition using an integrated recursive dynamic computable general equilibrium model with top-down behavioral microsimulation. The results of the poverty and inequality index indicate that population aging has a negative impact on the reduction of poverty while its impact is positive with regard to equality. In addition, elderly rural households are experiencing the most serious poverty, and their inequality problems compared with other household groups and within group inequality worsens with demographic transition. These findings not only advance the previous literature but also deserve particular attention from Chinese policy makers.
    Keywords: demography, poverty, economic development, macroeconomics, mathematical models,
    Date: 2016
  2. By: Chen, Yunnan; Sun, Irene Yuan; Ukaejiofo, Rex Uzonna; Xiaoyang, Tang; Bräutigam, Deborah
    Abstract: The question of how to promote structural transformation is central in fostering sustainable growth and poverty reduction in low-income countries in Africa. Following China’s domestic economic transformation and its growing outward investments in the developing world, we seek to understand how Chinese investment in Africa, particularly in manufacturing, may help to foster industrialization and in turn the structural transformation of African economies. We focus on Chinese investments and partnerships in Nigeria, a salient destination for Chinese manufacturing foreign direct investment in Africa, and examine the potential mechanisms of technology transfer that might catalyze such transformation. We find some small but significant cases of potential technology transfer, particularly through technical partnerships between firms. However, the future potential of such mechanisms will depend on the initiative of Nigerian actors to leverage Chinese investment to their interest.
    Keywords: technology transfer, industrialization, supply chains, manufacturing,
    Date: 2016
  3. By: Yang, Qiming; Zhang, Xiaobo; Zhu, Wu
    Abstract: Normally as an economy develops, firm sizes increase. However, as measured by the employment rate, the firm size in China declined from 2004 to 2008. In this paper, we develop a structural dynamic model with heterogeneous workers to study the relative contributions of three factors to declining firm size: rising real wages, implementation of minimum wages, and the introduction of a new national labor contract law. While rising wages make a sizeable contribution, we find that the new labor law plays a dominant role in solving the puzzle. In comparison, the impact of minimum wages is more muted.
    Keywords: wages, labor law, labour legislation, law,
    Date: 2016
  4. By: Shang-Jin Wei; Zhuan Xie; Xiaobo Zhang
    Abstract: After more than three decades of high growth that was based on an exploration of its low-wage advantage and a relatively favorable demographic pattern in combination with market-oriented reforms and openness to the world economy, China is at a crossroad with a much higher wage and a shrinking work force. Future growth by necessity would have to depend more on its ability to generate productivity increase, and domestic innovation will be an important part of it. In this paper, we assess the likelihood that China can make the necessary transition. Using data on expenditure on research and development, and patent applications, receipts, and citations, we show that the Chinese economy has become increasingly innovative. In terms of drivers of innovation growth, we find that embracing expanded market opportunities in the world economy and responding to rising labor costs are two leading contributing factors. On the other hand, we find evidence of resource misallocation in the innovation area: while state-owned firms receive more subsidies, private firms exhibit more innovation results. Innovation can presumably progress even faster if resource misallocation can be tackled.
    JEL: O1 O3 O4 O53
    Date: 2016–11
  5. By: Jessica Leight (Williams College)
    Abstract: This paper analyzes whether there is evidence of a poverty trap driven by credit constraints and non-linearities in the return to capital in rural China in the 1990s, estimating the effect of positive income shocks experienced by rural households as a result of increases in the price paid for mandatory grain quota sales. Households were required to sell part of their grain output to the state at a below-market price, and increases in the quota price generated income shocks that also varied cross-sectionally in accordance with crop composition. The identification strategy exploits climatically driven variation in crop composition in conjunction with quota price fluctuations to identify quasi-random variation in the size of the positive income shock and estimate its impact on economic outcomes. The results suggest agricultural investment decreases and investment in non-agricultural businesses and migration increase as households gain increased income, consistent with a poverty trap in which households are initially constrained from entering new productive sectors. There is also evidence of large increases in consumption and borrowing.
    Date: 2016–09
  6. By: Alicia Garcia-Herrero (NATIXIS; Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Jianwei Xu (Beijing Normal University)
    Abstract: The Belt and Road initiative, recently embarked on by China, aims to improve cross-border infrastructure in order to reduce transportation costs across a massive geographical area between China and Europe. We estimate how much trade might be created among Belt and Road countries as a consequence of the reduction in transportation costs (both railway and maritime) and find that European Union countries, especially landlocked countries, should benefit considerably. This is also true for Eastern Europe and Central Asia and, to a lesser extent, south-east Asia. In contrast, if China were to seek to establish a free trade area within the Belt and Road region, EU member states would benefit less, while Asia would benefit more. Xi Jinping’s current vision for the Belt and Road, centred on improving transport infrastructure, is very good news for Europe as far as trade creation is concerned.
    Keywords: China, Belt & Road initiative, infrastructure, international economic system
    Date: 2016–11
  7. By: Tang, Weiqi; Meng, Bo; Wu, Libo; Liu, Yu
    Abstract: Firms in China within the same industry but with different ownership and size have very different production functions and can face very different emission regulations and financial conditions. This fact has largely been ignored in most of the existing literature on climate change. Using a newly augmented Chinese input–output table in which information about firm size and ownership are explicitly reported, this paper employs a dynamic computable general equilibrium (CGE) model to analyze the impact of alternative climate policy designs with respect to regulation and financial conditions on heterogeneous firms. The simulation results indicate that with a business-as-usual regulatory structure, the effectiveness and economic efficiency of climate policies is significantly undermined. Expanding regulation to cover additional firms has a first-order effect of improving efficiency. However, over-investment in energy technologies in certain firms may decrease the overall efficiency of investments and dampen long-term economic growth by competing with other fixed-capital investments for financial resources. Therefore, a market-oriented arrangement for sharing emission reduction burden and a mechanism for allocating green investment is crucial for China to achieve a more ambitious emission target in the long run.
    Keywords: Environmental policy, Climatic change, Business enterprises, Econometric model, Emissions, CGE, Firm heterogeneity, SME, ETS, Chinese economy
    JEL: C67 C68 O16 Q56
    Date: 2016–11
  8. By: Teng Ma (Graduate School of Economics, Kobe University); Kenji Takeuchi (Graduate School of Economics, Kobe University)
    Abstract: This study investigates the choices of denitration technology in the Chinese thermal power sector. Using a multinominal logit model of the choices among 1,135 boilers in thermal power plants operating in China in 2013, we analyze how the choices were inuenced by government policies, the stringency of national standards, and subsidies for using speci_c technology. The results are as follows. First, China's 12th Five-year Plan might make it more attractive for plants to choose the cheapest denitration technology among the three options examined in this study. Second, technology choices differed signi_cantly by region before the 12th Five-year Plan period. These differences have disappeared, perhaps due to the economic development across all regions of China. Third, electricity price subsidies offered to plants that use denitration equipment might affect their technology choice. These results suggests that plants might choose the cheapest technology available, in order to lower investment costs.
    Keywords: technology choice, NOx emissions, China, thermal power sector
    JEL: O33 Q53 Q55
    Date: 2016–11
  9. By: Guojun He (Division of Social Science, Hong Kong University of Science and Technology; Division of Environment, Hong Kong University of Science and Technology; Department of Economics, Hong Kong University of Science and Technology); Shaoda Wang (Department of Agricultural and Resource Economics, UC Berkeley)
    Abstract: This study estimates the effect of improved bureaucrat quality on poverty alleviation by exploring a unique human capital reallocation policy in China -- the ¡§College Graduate Village Officials¡¨ (CGVOs) program. We find that introducing CGVOs into the village governance system improves the targeting and implementation of central government¡¦s social assistance programs. CGVOs help eligible poor households understand and apply for relevant subsidies, thus increase the number of pro-poor program beneficiaries. Further analysis suggests that CGVOs improve the quality rather than the quantity of village bureaucrats, and their presence reduces elite capture of pro-poor programs.
    Keywords: College Graduate Village Officials, Pro-Poor Program, Rural Development, Rural Governance
    Date: 2016–11

This nep-cna issue is ©2016 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.