nep-cna New Economics Papers
on China
Issue of 2017‒04‒09
eleven papers chosen by
Zheng Fang
Ohio State University

  1. Development of off-farm employment and its determinants in rural China By Hoken, Hisatoshi
  2. Productivity and Exports in Korea: Comparisons with China and Japan By Bae, Chankwon
  3. Korea-China FTA in Its First Year and Effectuation By Lee, Kyu Yub; Lee, Joun Won; Chung, Min-Chirl
  4. The Changing Structure of Economic Cooperation between China and North Korea By Choi, Jangho; Im, So Jeong
  5. North Korea's Trade with China in 2015: Analysis and Forecasts By Choi, Jangho; Choi, Yoojeong
  6. A Proposal to Lower Non-Tariff Barriers between China-Japan-Korea By Choi, Bo Young; Bang, Ho-Kyung; Lee, Boram; Yoo, Saebyul
  7. Genuine output and genuine productivity of China's provinces : a multiregional input-output analysis By Gao, Yuning; Lu, Yufeng; Meng, Bo; Yu, Miao
  8. Structural Changes in China's Import Market for Domestic Demand and Implications By Jung, Jihyun
  9. The Beginning of the China-Led New Financial Order and Korea's Countermeasures By Lim, Ho Yeol; Kim, Hongwon
  10. Loss Aversion and Residential Property Development Decisions in the People’s Republic of China: A Semi-Parametric Estimation By Bao, Helen X. H.; Meng, Charlotte Chunming
  11. Implication of Financial Reforms in China and Vietnam for North Korea By Lim, Ho Yeol; Bang, Ho-Kyung

  1. By: Hoken, Hisatoshi
    Abstract: This study investigates the long-term trends of labor allocation in rural households of China from the late 1980s until the mid-2010s, and examines the determinants of their off-farm employment in 2002 and 2013 using the nationally representative household survey (CHIP). The estimated results indicate that working status of whether a person is employed showed the coefficients on age and education have an inverse-U-shaped relationship with employment probability for both years. The estimated results of the Tobit model of off-farm workdays as a percentage share of total workdays show that female labor was more strongly influenced by household characteristics and political networks than male labor in 2002, but no clear gender gaps were observed in 2013. This appears mainly due to the relative scarcity of off-farm employment in the early 2000s; therefore, women tended to take charge of domestic work such as child care and agricultural production. With the increase of off-farm work and the liberalization of grain marketing, the division of labor between genders has become less apparent.
    Keywords: Agricultural laborers, Rural economy, Labor conditions, Gender, China, Rural inequality, Labor allocation, Off-farm work
    JEL: J22 J71 N35 O15
    Date: 2017–03
  2. By: Bae, Chankwon (Korea Institute for International Economic Policy)
    Abstract: This article aims to assess Korea's competitiveness in manufacturing exports, focusing on the rivalry among the three countries. To this end, we examine the productivities of C-J-K and estimates the effect of relative productivity on exports in Korea. It finds that first, China has drastically caught up with Korea since 2000, while there still exists a relatively large productivity gap between Japan and Korea. This is reminiscent of the sandwich theory, meaning that Korea is literally sandwiched between a fast-growing China and a technologically advanced Japan. Second, technical efficiency, an important determinant of productivity, has improved rapidly and steadily in China during the 2000s, while it has declined in Korea and Japan since the global financial crisis. Third, there seems to be a positive link between productivity and exports in Korea. In particular, a relative increase in productivity to China and Japan is highly related to its export performance. Not only technological progress, but also the enhancement of production efficiency is important for boosting export volumes and global market share.
    Keywords: TFP; Technical Efficiency; Productivity; C-J-K
    Date: 2016–10–25
  3. By: Lee, Kyu Yub (Korea Institute for International Economic Policy); Lee, Joun Won (Korea Institute for International Economic Policy); Chung, Min-Chirl (Korea Institute for International Economic Policy)
    Abstract: On 20 December 2015, the Korea-China Free Trade Agreement (FTA) entered into force. The Korea-China FTA would impact both economies' welfare in the long run, elevating it to a higher level compared to before the FTA was concluded. However, it must be pointed out that in the short run, trade activities between Korea and China might be affected by external/internal economic forces such as the persistent global trade slowdown and weak domestic economic growth, and non-economic forces such as THAAD and non-tariff barriers. Thus, it might be impetuous to examine the economic impact on the Korean and Chinese economies just a year after the Korea-China FTA was concluded. Nevertheless, it would be worth examining the positive changes that have occurred over the last year, and providing constructive suggestions to both countries in order to accelerate the materialization of the benefits of the Korea-China FTA. This article investigates the major changes after the Korea-China FTA in terms of trade of goods and services, digital trade, and investment. Section II covers a brief analysis of the trade of goods between Korea and China. Section III underscores the distinctive features of international digital trade between Korea and China. Section IV provides facts on trade in services and investment. The last section presents policy implications for the Korea-China FTA.
    Keywords: Korea-China; FTA
    Date: 2017–02–08
  4. By: Choi, Jangho (Korea Institute for International Economic Policy); Im, So Jeong (Korea Institute for International Economic Policy)
    Abstract: China’s shifting economic circumstances have been impacting the structure of its economic cooperation with North Korea. The Chinese economy has been slowing down since 2007 and China’s Northeastern region has been suffering from labor shortage, especially young labor. Decreasing raw material prices due to economic slowing down of China cause the growing share of textiles, decline in mineral share in trade, and increase of processing trade. This also indicates how China may be utilizing North Korea’s cheap labor in the form of outsourcing certain manufacturing procedures, especially those that are labor intensive, for instance in the garment and textile industry. The rising traffic of textile products between borders, especially in the form of processing trade, points to this trend. Intricate webs of division of labor are occurring in the service sector as well. Tourism is one of the newest industries that North Korea has been developing as a means to earn foreign currency, and China’s role in the recent growth of tourism in North Korea is evident. On the one hand, North Korea and China’s deepening economic cooperation may facilitate North Korea’s marketization and opening up. On the other hand, the intensification of economic cooperation between the two countries may also result in North Korea’s over-dependence on the Chinese economy.
    Keywords: North Korea; China; Economic Cooperation
    Date: 2016–06–23
  5. By: Choi, Jangho (Korea Institute for International Economic Policy); Choi, Yoojeong (Korea Institute for International Economic Policy)
    Abstract: The year 2015 marked the first time North Korea's trade with China shrank since 2009. According to China Customs, North Korea's trade with China in 2015 recorded 5.4 billion, a drop by 14.7% from 6.4 billion in 2014. Exports to China recorded 2.5 billion, 12.6% lower than the 2.8 billion in 2015, and imports stood at 2.9 billion, falling 16.4% from 3.5 billion in 2014. The trade deficit recorded 459 million, dropping by 32.0% from 675 million in 2014. Although North Korea's overall imports and imports have witnessed a decline, the trade balance improved. It seems that North Korea's trade has reached a turning point due to the structural changes in the trade environment between North Korea and China. The continued slowdown of China's GDP growth rate and a sharp reduction in imports, signs of a domestic consumption-driven economy, is well expected to continue, and will further lead to a steady decline in North Korea's trade with China. Although imports from China have dropped due to a shortage of foreign currency resulting from export decline, the negative impact this may have on North Korea's economy has yet to show. Market prices have stayed stable since 2013. North Korea's trade with China in 2016 seems that the steady decline in raw materials price in international commodity markets and China's economic slowdown would negatively affect North Korea's trade with China. However, the keys are in North Korea's improved production capabilities and China's discretion of the sanction. We have also yet to see whether China will fully implement the UNSC's sanction against North Korea, as a report says that China has recently resumed economic cooperation with North Korea in infrastructure construction.
    Keywords: North Korea; China
    Date: 2016–07–12
  6. By: Choi, Bo Young (Korea Institute for International Economic Policy); Bang, Ho-Kyung (Korea Institute for International Economic Policy); Lee, Boram (Korea Institute for International Economic Policy); Yoo, Saebyul (Korea Institute for International Economic Policy)
    Abstract: Under the GATT and WTO regimes, the level of tariff rates has gradually declined while non-tariff measures have become more prevalent worldwide. Among many types of non-tariff measures, the number of TBT and SPS measures implemented increased substantially during the global financial crisis, implying that countries around the world are employing more subtle measures to protect their domestic economy. Harmonizing TBT/SPS related regulations between countries is important in eliminating the unnecessary barriers to trade. In this aspect, this study focuses on the current status of non-tariff measures, especially on TBT and SPS measures, in China, Japan, and Korea and proposes to utilize the existing Pan-Yellow Sea Rim Economy and Technology Exchange Meeting to discuss (a) harmonization of standards, (b) mutual recognition of conformity assessment, and (c) enhancement of transparency issues to lower the regulatory barriers relevant to TBT and SPS measures.
    Keywords: Cooperation Policy; Non-tariff Barriers
    Date: 2016–06–21
  7. By: Gao, Yuning; Lu, Yufeng; Meng, Bo; Yu, Miao
    Abstract: This paper recalculates value added, capital formation, capital stock, and related multifactor productivity for China's provinces by expanding on the genuine savings method proposed by the World Bank. Specifically, we construct China's time-series multiregional input?output tables to account for the natural resource depletion and environmental damage that affect genuine output when considering inter-provincial trade. The results show that although the loss of natural capital in China's provinces in terms of value added and investment has declined, the impact on productivity during the past decades is still significant and has even increased during the past decades.
    Keywords: Productivity, Input-output tables, Sustainable development, Genuine savings method, Total factor productivity, China
    JEL: D24 D57 O47 Q01
    Date: 2017–03
  8. By: Jung, Jihyun (Korea Institute for International Economic Policy)
    Abstract: This study aims to seek the countermeasures of Korea by analyzing the structural changes in China's import market for domestic demand and Korea's export to China. In particular, the characteristics of the import market for domestic demand was analyzed by processing phase and industry. China's import structure is shifting focus to general trade (import for domestic demand), general trade import has switched to a structure focused on primary commodities since 2010, while total import is still focused on intermediate goods. And the manufacturing industry plays a crucial role, but has recently been witnessing a rapid decline in share. Korea's export to China is still defined by a structure of export-oriented processing trade. The structure of Korea's general trade export to China is still concentrated on intermediate goods and the top two manufacturing industries. Therefore, exports to China should likewise undergo a structural change in accordance with the evolving needs of China's domestic market, especially Korea should raise its export of intermediate goods (parts and components) and consumer goods to the Chinese domestic market.
    Keywords: Chinas Import For Domestic Demand; Koreas Export To China; Trade Structure Changes
    Date: 2016–10–26
  9. By: Lim, Ho Yeol (Korea Institute for International Economic Policy); Kim, Hongwon (Korea Institute for International Economic Policy)
    Abstract: The emergence of China in the international financial order can be analyzed in three aspects: strengthening its position within the IMF system led by the West, establishing a new financial order through multilateral development banks (MDBs) like the AIIB and NDB, and the internationalization of the renminbi (RMB). For the China-led financial order to take root, China should continue to pursue further reforms and openness regarding free convertibility, capital accounts, and the exchange rate. China, however, is maintaining a cautious approach. In conclusion, the China-led new financial order is still in its infancy. Taking all the three above mentioned aspects together, it will be difficult for China to dramatically change the current international financial order in the short term, when taking into consideration the Chinese financial goals and internal capability, the speed of progress in AIIB's projects, and the West's containment policy toward China. Korea, however, will have to secure its own national interest by establishing mid- to long-term strategies and specific countermeasures against the new financial order. Above all, Korea needs to actively and accurately adopt a bandwagon policy, since China will carefully deal with domestic problems like insufficient financial capacity and the existing order centered on advanced countries. In the mid- to long-term it needs to concentrate on establishing a Korea-led development financial institution which will focus on development in North Korea.
    Keywords: China; AIIB; Silk Road Fund; RMB Internationalization; Finance
    Date: 2017–02–01
  10. By: Bao, Helen X. H. (Asian Development Bank Institute); Meng, Charlotte Chunming (Asian Development Bank Institute)
    Abstract: Loss aversion is a core concept in prospect theory that refers to people’s asymmetric attitudes with respect to gains and losses. More specifically, losses loom larger than gains. With the capability of loss aversion to explain economic phenomena, some of which are puzzling under expected utility theory, this concept has received significant attention. We develop a behavioral model of loss aversion to explain the development decisions by residential property developers in the People’s Republic of China. Under the leasehold property right system, real estate development has two stages—first to lease land from the government, and then to develop the property according to the lease terms. This presents a unique opportunity to test the presence and effect of loss aversion in real estate development decisions. More specifically, we determine when the land premium paid by a developer is substantially higher than the market value, whether and how this “paper loss” will affect the pricing of the housing products and development time of the project in future development. We use a sample of land and house transaction records from Beijing to test the hypothesis. This is the first study to use a semi-parametric model in estimating developers’ loss aversion. Results show that developers are most prone to loss aversion bias around the reference point or when facing large losses. The results also suggest that loss aversion contributes to the cyclical trading pattern in housing markets.
    Keywords: loss aversion; real estate; residential property; housing; housing prices; housing market; semi-parametric estimation
    JEL: C14 D81 R31
    Date: 2017–01–18
  11. By: Lim, Ho Yeol (Korea Institute for International Economic Policy); Bang, Ho-Kyung (Korea Institute for International Economic Policy)
    Abstract: North Korea's financial system is based upon a mono-banking system, centered on the Central Bank of the DPRK. The Central Bank of the DPRK serves diverse functions - aside from financial activities, it also acts simultaneously as a central bank and a commercial bank. From the experiences of China and Vietnam's financial reform, we draw several implications for North Korea. With the enactment of the Central Bank Law and Commercial Banking Law, North Korea has already laid the institutional foundations for financial reform. What matters is to draft and carry out specific plans for implementation, create an environment conducive to its enforcement, and to continuously put the plan to practice. It is imperative to ensure the explicit prohibition of financial asset provisions via the central bank, to guarantee the smooth transition to commercial banks taking on the primary role in savings and deposits, to acquire substantive tools for currency and foreign exchange market operation, and to stimulate both the capital and foreign currency markets.
    Keywords: North Korea; Financial Reforms
    Date: 2016–05–17

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