nep-cna New Economics Papers
on China
Issue of 2017‒06‒11
ten papers chosen by
Zheng Fang
Ohio State University

  1. Propagation of changes in demand through international trade: Case study China By Andritzky, Jochen; Kassner, Bernhard; Reuter, Wolf Heinrich
  2. Trusting banks in China By Fungáčová, Zuzana; Weill, Laurent
  3. The economic burden of chronic diseases: Estimates and projections for China, Japan, and South Korea By Bloom, David E.; Chen, Simiao; Kuhn, Michael; McGovern, Mark; Oxley, Les T.; Prettner, Klaus
  4. Leverage and Capital Structure Determinants of Chinese Listed Companies By Ferrarini , Benno; Hinojales , Marthe; Scaramozzino , Pasquale
  5. Investigating Imbalances in Manufacturing Trade By Thorbecke, Willem
  6. Transport Infrastructure, City Productivity Growth and Sectoral Reallocation: Evidence from China By Yang, Yang
  7. China’s evolving role in global production networks: implications for Trump's trade war By Prema-chandra Athukorala
  8. China's idiosyncratic economics: An emerging unknown monism driven by pluralism By Dai, Shuanping
  9. Low-quality or high-quality coal: Household energy choice in rural Beijing By Zhang Jingchao; Koji Kotani; Tatsuyoshi Saijo
  10. This paper aims to enhance the understanding of China's monetary policy rule since the mid-1990s, focusing on the role of inflation. It investigates the rule followed by the People's Bank of China (PBoC) by considering both the structural economic transformation of China and its evolving monetary policy framework. Our newly constructed monthly composite discrete monetary policy index (MPI), which combines price, quantity and administrative instruments, shows a change in style towards smoother but more contractionary policy moves from 2002 onwards. The estimation of a dynamic discrete-choice model à la Monokroussos (2011) implies that, from this point onwards, the conduct of monetary policy has been characterised by implicit inflation targeting. While the PBoC's behaviour up to 2001 was reminiscent of that in the inflation-accommodating G3 economies of the United States, euro area and Japan up to 1979, it has been characterized since 2002 by a policy rule similar to the post-1979 anti-inflation (forward-looking) policy of the G3. An accurate estimation of the monetary policy rule from 2002 needs to consider China as an open economy, as a result of its rapid liberalisation of trade and finance after its WTO accession. As such, the influence of US interest rates has become increasingly significant for Chinese monetary policy. By Eric Girardin; Sandrine Lunven; Guonan Ma

  1. By: Andritzky, Jochen; Kassner, Bernhard; Reuter, Wolf Heinrich
    Abstract: China's economy, the second largest in the world, is undergoing a fundamental transition. Its transition from a strong focus on investment and exports towards a larger share of consumption could have important ramifications for China's trading partners. Using China as a case study, this paper deploys a sectoral input-output (IO) analysis to take into account higher-round spillovers from a reduction in import demand or a shift in the composition of the Chinese economy. This approach demonstrates strong indirect effects that exceed by far the initial shock from direct trade links, reflecting China's integration into a closely knit global value chain. The result suggests that the ongoing transition in China will have important effects on the global economy.
    Keywords: Shock propagation,Trade channel,Input-Output,China
    JEL: F14 C67 F47
    Date: 2016
  2. By: Fungáčová, Zuzana; Weill, Laurent
    Abstract: Trust in banks is essential to financial system effectiveness. This study examines the determinants of trust in banks in China. Using the most recent wave of the World Values Survey, which included information on trust in banks from the survey in China in 2012, we perform ordered logit estimations to investigate the potential influence of a large set of individual and provincial indicators on trust in banks. We observe the influence of certain sociodemographic indicators. Membership in the Communist Party and living in a rural area are negatively associated with trust in banks. Age and satisfaction with financial situation contribute to higher trust in banks, while being married and having a higher level of education tend to lower trust in banks. Access to information regardless of the type of media disseminating the information newspapers, television, internet) seem to have no impact on trust in banks. Economic values influence trust in banks. In particular, individuals who favor inequality as an incentive for individual effort or support an expanded government ownership role in the economy tend to trust banks more.
    JEL: G21 O16 P34
    Date: 2017–06–05
  3. By: Bloom, David E.; Chen, Simiao; Kuhn, Michael; McGovern, Mark; Oxley, Les T.; Prettner, Klaus
    Abstract: We propose a novel framework to analyse the macroeconomic impact of noncommunicable diseases. We incorporate measures of disease prevalence into a human capital augmented production function, which enables us to determine the economic costs of chronic health conditions in terms of foregone gross domestic product (GDP). Unlike previously adopted frameworks, this approach allows us to account for i) variations in human capital for workers in different age groups, ii) mortality and morbidity effects of non-communicable diseases, and iii) the treatment costs of diseases. We apply our methodology to China, Japan, and South Korea, and estimate the economic burden of chronic conditions in five domains (cardiovascular diseases, cancer, respiratory diseases, diabetes, and mental health conditions). Overall, total losses associated with these non-communicable diseases over the period 2010-2030 are $16 trillion for China (measured in real USD with the base year 2010), $5.7 trillion for Japan, and $1.5 trillion for South Korea. Our results also highlight the limits of cost-effectiveness analysis by identifying some intervention strategies to reduce disease prevalence in China that are cost beneficial and therefore a rational use of resources, though they are not cost-effective as judged by conventional thresholds.
    Keywords: Non-communicable Diseases,Human Capital,Health Interventions,Aggregate Output,Ageing,East Asia
    JEL: H51 I15 I18 J24 O11
    Date: 2017
  4. By: Ferrarini , Benno (Asian Development Bank); Hinojales , Marthe (Asian Development Bank); Scaramozzino , Pasquale (SOAS, University of London)
    Abstract: Total debt in the People’s Republic of China has increased significantly in recent years, mostly on account of nonfinancial corporate debt. Earning and the financial performance of corporate firms have weakened, and so has the asset quality of the financial sector. This paper assesses the financial fragility of the Chinese economy by looking at risk factors in the nonfinancial sector. We apply quantile regressions to a rich dataset of Chinese listed companies contained in Standard & Poor’s IQ Capital database. We find higher sensitivity over time of corporate leverage to some of its key determinants, particularly for firms at the upper margin of the distribution. In particular, profitability increasingly acts as a curb on corporate leverage. At a time of falling profitability across the Chinese nonfinancial corporate sector, this eases the brake on leverage and may contribute to its continuing increase.
    Keywords: corporate debt; debt sustainability; panel quantile regression; People’s Republic of China
    JEL: G01 G21 H30 H60
    Date: 2017–01–26
  5. By: Thorbecke, Willem (Research Institute of Economy, Trade and Industry)
    Abstract: Researchers found that manufacturing imports have caused dislocation and triggered protectionist pressures. This paper investigates whether manufacturing exports from China, Germany, and other exporters are disproportionate. Gravity model results indicate that Germany’s exports in 2015 were 24 percent more than predicted and China’s exports 5 percent less than predicted. However, China’s exports to North America were 71 percent more than predicted and China’s exports to East Asia 46 percent less than predicted. East Asia’s intra-regional exports were also 36 percent less than predicted. Dynamic ordinary least squares findings indicate that export price elasticities are higher for China, Korea, Taiwan, the UK and the US and lower for Germany and Japan.
    Keywords: RManufacturing exports; Gravity model; China
    JEL: F32 F14 F22
    Date: 2017–05–30
  6. By: Yang, Yang (Anderson School of Management, University of California, Los Angeles)
    Abstract: This paper examines the impact of highway expansion on aggregate productivity growth and sectoral reallocation between cities in China. To do so, I construct a unique dataset of bilateral transportation costs between Chinese cities, digitized highway network maps, and firm-level census. I first derive and estimate a market access measure for cities in China from 1995 to 2005. I then examine the channels through which the highway infrastructure affected economic outcomes. The results suggest that highways promoted aggregate productivity growth by facilitating the entry of new firms and reallocation among existing firms. I estimate the aggregate economic impact of China's national highway system and find that eliminating all highways in China would decrease aggregate productivity by 3.2%. There is also evidence that the national highway system led to a sectoral reallocation between cities in China.
    Keywords: Transport infrastructure, trade, highway, productivity, China
    JEL: F10 H54 O18 O40 R10
    Date: 2017–05–26
  7. By: Prema-chandra Athukorala
    Abstract: This paper examines China’s evolving role in global production networks and its implications for assessing the potential impact of the ‘trade war’ declared by President Trump. The analysis, which is based on a systematic disaggregation of trade based on global production sharing into components and final assembly, suggests that the Sino-US trade gap is a structural phenomenon driven by the pivotal role played by China within East Asia centered production networks. The global competitiveness of US MNEs depends on their ability to use China as the production base for supplying the rest of the world, and China is now an important supplier of components used in US manufacturing. Given this intricate interdependence between the two countries, attempt to impose punitive tariffs on China is bound to face formidable opposition from business interests in the United States. Even if the protectionist threat becomes a reality, the impact may not be as damaging as commonly thought because global production sharing has considerably weakens the link between relative prices and trade flows.
    Keywords: China, global production networks, Sino-US trade dispute, punitive tariffs, MNEs
    JEL: F13 F14 F59
    Date: 2017
  8. By: Dai, Shuanping
    Abstract: China's economics education started at the beginning of the 20th century, when China was learning from the Western civilization, and accordingly economics curriculum system was introduced as well. As the communist government was established in 1949, economics education in China was interrupted, started to follow a conventional Marxism, and almost acted as ideological education approach and as a tool to economic plan. The fundamental economic reform from 1980s brought modern economics back to China, and from 1990s, economists who were educated in Europe and the USA introduced Western Economics, of which majority are neoliberalism, to China's Universities, and the popular economics textbooks and curriculum prevailed in China as well. This made the existing socialism economics education struggling in the research evaluation and classroom, although the Communist Party still is giving strong support to Marxism. The 2005 debate between Marxist and Neoliberalism actually reflected two monism tried to lead whole China's economics education. A hidden issue behind the learning from the West is that China's economists are keeping pursuing an approach based on China's reality, which in particular has been reinforced by the recent impressive economic success. Generally, China's economists have a common sense of that China did not follow a single economic theory to lead its reform and development, and believe that China's success can contribute to economics, although none tells what is a China's idiosyncratic economics. Hence, an unknown monism might be emerging in China, but pluralism may act as a channel for understanding Chinese economy, and accordingly be the essential parts of China's idiosyncrasy economics, which will be a new monism.
    Keywords: China's Idiosyncratic Economics,Pluralism in Economics Education,Monism,Marxian Political Economy
    Date: 2017
  9. By: Zhang Jingchao (School of Economics and Management, Kochi University of Technology); Koji Kotani (School of Economics and Management, Kochi University of Technology); Tatsuyoshi Saijo (School of Economics and Management, Kochi University of Technology)
    Abstract: Household low-quality coal consumption is a main contributor to air pollution in China. In response, governmental subsidies on high-quality coal and promotion of new-type coal stoves have been implemented. However, to date, little is known about the effectiveness of these policies and determinants of consumption behavior between low-quality and high-quality coals. To fulfill this paucity, we conducted face-to-face surveys with 602 households in rural Beijing and collected the information of coal consumption, socioeconomic, cognitive and psychological factors. With the data, we empirically characterize the determinants of coal consumption and its switching behavior between high-quality and low-quality coals by bivariate probit and Tobit regressions, yielding the following principal results: (1) prosocial people are more likely to consume high-quality coal, and critical thinking disposition positively affects the probability to choose high-quality coal; (2) local environmental concern plays an important role in consumption behavior, but global environmental concern does not; (3) government policies appear to be efficient in that subsidies on high-quality coal reduce the likelihood of choosing low-quality coal and the promotion of new-type coal stoves facilitates the transition from low-quality to high-quality coal. Overall, the results suggest that cognitive, psychological factors and promotion policies can be considered significant in coal consumption behavior. Public education on critical thinking, local environment and prosociality as well as new-type coal stoves should be further promoted to accelerate the transition from low-quality to high-quality coal.
    Keywords: coal, air pollution, China
    Date: 2017–05
  10. By: Eric Girardin; Sandrine Lunven; Guonan Ma
    Keywords: monetary policy in China, People's Bank of China, Taylor rule, inflation targeting, discrete-choice model, open-economy model
    JEL: E52 E58 O11 O52
    Date: 2017–06

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