nep-cna New Economics Papers
on China
Issue of 2017‒07‒02
sixteen papers chosen by
Zheng Fang
Ohio State University

  1. China’s Current Account : External Rebalancing or Capital Flight? By Anna Wong
  2. How Do Regional Interactions in Space Affect China’s Mitigation Targets and Economic Development? By Wang Lu; Hao Yu; Wei Yi-Ming
  3. How to handle state-owned enterprises in EU-China investment talks By Alicia García-Herrero; Jianwei Xu
  4. Interactions between market reform and a carbon price in China’s power sector By Fei Teng; Frank Jotzo; Xin Wang
  5. China's Disinterested Government and the Rule of Law By Joseph Mazur and Ance-Elena Ursu
  6. Political Connections and Antidumping Investigations: Evidence from China By ZHANG Hongyong
  7. Persistence of Cities: Evidence from China By Fan Duan; Bulent Unel
  8. The impact of incentives on prosocial behavior: An experimental investigation with German and Chinese subjects By Yang, Guanzhong
  9. Dragon versus Elephant: A Comparative Study of Chinese and Indian Aid in the Pacific By Denghua Zhang and Hemant Shivakumar
  10. China's Industrial Policy, Strategic Emerging Industries and Space Law By Tristan Kenderdine
  11. What Affects General Trust? A Perspective from Institutional Economics and Empirical Evidence from China By Gao, Lin
  12. Are population and international trade the main factors for environmental damage in China? By Vu, Binh
  13. Curbing Congestion and Vehicular Emissions in China: A Call for Economic Measures By Xin Deng
  14. Building Cooperation for Managing the South China Sea Without Strategic Trust By Sam Bateman
  15. China’s Household Balance Sheet: Accounting Issues, Wealth Accumulation, and Risk Diagnosis By Li, Cheng
  16. Migrants and cities research report on recruitment, employment, and working conditions of domestic workers in China By Minghui, Liu.

  1. By: Anna Wong
    Abstract: This paper examines an anomaly in China’s current account: its large and rapidly growing travel expenditure. Drawing evidence from counterparty data, Chinese international arrival statistics, and gravity equation models extended to travel trade, I find that a significant amount of China’s travel spending in the period 2014-2016 could not be explained by accounting factors or economic fundamentals. The unexplained travel imports are inversely associated with domestic growth and positively associated with renminbi depreciation expectations against the dollar, suggesting that they are less likely to be consumption of goods and services abroad than domestic residents’ acquisition of foreign financial assets. Adjusted for these potential disguised outflows, China’s current account balance could be higher than reported by around 1 percent of GDP in 2015 and 2016, a period when the Chinese economy slowed noticeably as it shifted away from investment-driven growth (i.e.“internal rebalancing”). These results suggest that Chinese households, through the travel channel, have in part replaced the official sector in directing domestic surplus savings abroad in recent years. While the official sector preferred liquid foreign government assets, Chinese households appear to prefer private foreign assets.
    Keywords: Capital flight ; Current account ; Trade mis-invoicing ; Services trade
    JEL: F32 F21 F14 G15
    Date: 2017–06–19
  2. By: Wang Lu (Beijing Institute of Technology); Hao Yu (Beijing Institute of Technology); Wei Yi-Ming (Beijing Institute of Technology)
    Abstract: China is faced with the big challenge of maintaining a remarkable economic growth in an environmental friendly manner; that is why forecasting the turning point is of necessity. Traditional econometric approaches do not consider the spatial dependence that inevitably exists in the economic units, which probably risks misspecification and generating a biased estimation result. This paper firstly constructs Theil index to measure the intra-and inter regional inequality of CO2 emissions, we find that difference in emissions between regions is narrowed but gap within the Western China is sharply expanding. Then the Spatial Durbin model is employed to shape the relationship between mitigation and economic growth using the panel data of 29 provinces ranging from 1995 to 2011. Results show that the peak of per capita carbon dioxide emissions in China would be seen when GDP per capita reaches between $USD 21594 to 24737 (at 2000 constant price), much smaller when compared with the estimations of models which ignore the spatial dependence. This implies that territorial policy and industry transfer, on one hand would favor those underdeveloped regions with investment, technology and labors transfer; on the other hand enables developed regions more potential to mitigation, thus, chances are that China achieves the emissions peak of carbon dioxide earlier than conventional wisdom.
    Keywords: Mitigation, Economic growth, Spatial Interaction, Spatial Durbin Model
    JEL: C31 P48 Q54
    Date: 2017–06
  3. By: Alicia García-Herrero; Jianwei Xu
    Abstract: Chinese state-owned enterprises (SOEs) are one of the main obstacles preventing China and the European Union from agreeing a bilateral investment agreement (BIT). Given the benefits that both China and EU could obtain from a BIT, the question of SOEs should be addressed in the most effective way. We examine the main differences between Chinese and European SOEs, in terms of their sectoral coverage and, most importantly, their corporate governance. We argue that preferential market access for Chinese SOEs in China is the key to their undue competitive advantage globally, and is also the reason why global consumers might not necessarily benefit from Chinese SOEs in terms of welfare gain. Preferential market access in China, rather than ownership of SOEs, should be the key factor when evaluating the undue advantage enjoyed by Chinese corporates because private companies with ties to the Chinese government might also benefit from preferential market access. We also offer a checklist of issues for EU-China investment talks in relation to Chinese SOEs. First, creating barriers to prevent Chinese companies acquiring European assets will not solve the problem. Instead, equal market access in China is a much better goal to pursue in order to reduce the seemingly unlimited resources that Chinese SOEs seem to have to compete overseas. Second, bringing Chinese corporate governance closer to global market principles is also essential to ensure European and Chinese corporates operate on an equal footing in their cross-border investment decisions.
    Date: 2017–06
  4. By: Fei Teng (Institute of Energy, Environment and Economy, Tsinghua University, Beijing, China); Frank Jotzo; Xin Wang
    Abstract: The electricity sector accounts for a large share of China’s carbon dioxide emissions and of the economy-wide abatement potential. China’s planned national emissions trading scheme would include electricity generation, as nearly all emissions trading schemes do. The critical difference is that in most existing carbon pricing systems the power sector operates with competitive markets and cost-based pricing, while the Chinese power industry still uses a highly regulated dispatch and pricing system. Together these limitations mean that the effect of a carbon price on China is limited in terms of the impact on operational decisions for existing power stations and in terms of the effects on investment decisions. We explore the channels of interaction between electricity market reform and carbon pricing in China, and provide quantitative estimates of the effects and interactions on electricity sector emissions. A probabilistic discrete choice model is used to simulate the behavior of investors in the power sector. The analysis indicates that market reform can help reduce emissions intensity, but to meet China’s 2030 targets for non-fossil fuel generation a low to moderate carbon price is also necessary; conversely, a carbon price will only be effective with market reform that provides flexibility in dispatch. Using our simplified quantitative analysis, the carbon price required for the same share of non-fossil fuel generation would be about twice as high without market reform. Combining market reform and a carbon price could achieve significant rates of decarbonization and is likely to be the most effective and most feasibly policy package to cut emissions from China’s power sector.
    Keywords: China, emissions trading, energy sector reform, policy interaction
    JEL: Q48 Q52
    Date: 2017–06
  5. By: Joseph Mazur and Ance-Elena Ursu
    Abstract: This article seeks to understand how China has managed to achieve such high rates of growth over the past four decades despite the absence of a veritable rule of law. A large body of research suggests that a strong rule of law is a key prerequisite for sustained economic development, but China's unique political economy which vests limited power in its judiciary seems to defy conventional wisdom on this count. Taking as a starting point Yang Yao's concept of ‘disinterested government’, that is, a government that eschews differentiated interests within a society in favour of a concerted focus on national development, the authors examine the mechanisms by which Chinese leadership has maintained extraordinary growth without the benefit of the rule of law. Specifically, this article argues that the defining features of a disinterested government fulfil many of the same roles as the rule of law from a developmental perspective.
    Keywords: rule of law, legal reform, corruption
  6. By: ZHANG Hongyong
    Abstract: Do political connections affect antidumping (AD) investigations? To address this question, we use antidumping filings data combined with micro data on Chinese manufacturing firms for the period 1998-2007. The political connections of a firm are defined by whether it has state-owned capital or whether it is under the administration of central or provincial government. Estimating a probit model of AD filings at the firm level, we find that strong political connections significantly increase the likelihood of AD petitions and affirmative final dumping decisions. State-owned enterprises, firms affiliated with the central or provincial government, low productivity firms, and large firms tend to file AD investigations in China. The industry-level estimation results also confirm that industries with a greater presence of state-owned enterprises are likely to receive trade protection from the Chinese government, controlling for import penetration, year, and industry fixed effects.
    Date: 2017–06
  7. By: Fan Duan; Bulent Unel
    Abstract: Using data from Qing Dynasty, this paper investigates long-run implications of the early development for the present development in China. We use city-level population density in 1820 as a measure of the early economic prosperity, and investigate how it is associated with today’s development indicators such as the average night-light density, GDP per capita, average years of schooling, and trade openness. We find that more prosperous cities of the Qing Dynasty are now brighter, richer, more educated, and more open.
  8. By: Yang, Guanzhong
    Abstract: Economists believe in (monetary) incentives. However, in the specialized area of prosocial behaviours, (monetary) incentives could backfire because extrinsic motivation might crowd out intrinsic motivation. Moreover, national differences in the perception of incentives should also be considered, taking the cultural background of individuals into account. In this project, we ran a real effort experiment in Germany and in China. In addition to an extrinsic monetary incentive (personal payment) to the subjects, we made a donation to UNICEF, and the amount of the donation depended on the effort of the subjects, which served as an intrinsic motivation. The results indicate that with respect to activities with a prosocial element, Germans tended to exert a high level of effort, regardless of the alternation of the art and the level of their payoff; in contrast, the Chinese did react to extrinsic monetary incentives and exerted more effort with a linear payment or if the level of payment was high. Females exerted significantly more effort than males, and this was true for both the German and Chinese subjects. The last finding is that the Chinese were more motivated by a fixed non-monetary payment than a fixed monetary payment, if the level of payment was relatively low.
    Keywords: monetary incentives,prosocial behaviour,intrinsic and extrinsic motivation
    JEL: C91 D64 L31
    Date: 2017
  9. By: Denghua Zhang and Hemant Shivakumar
    Abstract: The growing scale of development assistance programs of China and India has attracted increased global attention. Research on their aid to the Pacific Island Countries, however, is largely missing. Whether their aid programs in the Pacific region are similar or significantly different—in terms of aim and scope—deserves investigation. Also, current literature on Chinese and Indian trilateral cooperation—a relatively new aid modality—is almost non-existent. Based on archival analysis and the authors' interviews in China, India and across the region over 2014–2016, this article provides a comparative analysis of Chinese and Indian aid to the Pacific island countries. It argues that Chinese and Indian aid in the Pacific are heterogeneous in a number of ways. In addition, China has been actively piloting trilateral cooperation in the Pacific, while no such projects have taken place from India who has only begun looking more closely at the region.
    Keywords: foreign aid, trilateral aid cooperation, China, India, Pacific Islands Countries
    Date: 2017–04–17
  10. By: Tristan Kenderdine
    Abstract: China's transition economy experiment continues to rely heavily on state-driven industrial policy to structure the economy. In 2016, five-year plans on strategic emerging industries were formed by State Council ministries and transmitted to lower levels of government bureaucracy. Building on existing industrial geographic complementarities and technology clusters, developments were expected to dovetail with broader 13th Five-Year Plan and Made in China 2025 industrial policy trajectories. This article explores the policy program of industrial upgrading and innovation in national strategic emerging industries, regional innovation and industrial cluster plans, space and ocean industrial strategies and places China's policy trajectories for industrial development, technology innovation and upgrading in context of institutional economic analysis.
    Keywords: industrial policy, institutional economics, industrial clusters, China politics, space policy, ocean policy
    Date: 2017–05–12
  11. By: Gao, Lin
    Abstract: Given the importance of trust, exploring what may affect trust then becomes attractive. The main purpose of this paper is to explain general trust quantitatively. This paper from, but not limited to, a perspective of original institutional economics elaborates what may affect general trust and proposes three reasonable hypotheses first, and then uses CGSS 2013 dataset to execute ordered logit regression of general trust on some selected variables. It is found that taken advantage has a strongly significant negative impact on general trust; fairness, moral satisfaction, opinion similarity, leisure time for rest and leisure time for learning have strongly significant positive impacts on general trust; public security problem, however, has a negative but not significant impact on general trust. These core explanatory variables improve predictive capability by 4 percent. This paper also compares general trust and trust in strangers, and regress trust in strangers on the same independent variables of general trust. There are two main differences: the first is that the negative impact of public security problem gets significant for trust in strangers; the second is that the significant impact of leisure time for resting gets negative for trust in strangers.
    Keywords: general trust, trust in strangers, original institutional economics, fairness, morality, opinion, public security, leisure time
    JEL: B52 C1
    Date: 2017–06–27
  12. By: Vu, Binh
    Abstract: This paper investigates whether population and international trade, along with energy consumption, are the main factors for environmental damage in China during the period 1971-2011. The stationary analysis is examined by the Zivot–Andrews unit root test and the ARDL bounds testing approach is used for a long run relationship between the series in the presence of structural breaks. The causality between CO2 emissions, energy consumption, economic growth, population and international trade is examined by the VECM Granger causality technique. Our results show that the selected variables are cointegrated; it means that the long run relationship exists in the presence of structural breaks. The empirical findings indicate that in long run, energy consumption and population increase CO2 emissions, while in short run, energy consumption and international trade decrease CO2 emissions. The VECM causality analysis shows that CO2 emissions Granger cause energy consumption, while energy consumption and population Granger cause trade. The VECM analysis also indicates the feedback hypothesis between trade and CO2 emissions. Policy recommendations are made following the obtained results.
    Keywords: CO2 emissions; population; international trade; energy consumption.
    JEL: C22 O44 Q43 Q53 Q56
    Date: 2017–02–17
  13. By: Xin Deng
    Abstract: With the exponential growth of the national vehicle fleet in the last three decades, most cities in China are facing mounting pressure to tackle congestion and air pollution problems caused by motor vehicles. Beijing, the capital city, is a good case to study how municipal governments address those issues. To alleviate road congestion and pollution, the government has invested heavily in road infrastructure, advanced traffic management technology and also introduced stringent standards on vehicular emissions. However, city planners have been over-relying on command and control measures including travel demand management, which have proven to be costly and inefficient in controlling motor vehicle ownership and usage—the fundamental causes of congestion and emissions. Economic measures including road pricing and vehicle registration auction schemes are superior and should be adopted in travel demand management in the future.
    Keywords: congestion, air pollution, motor vehicles, China, travel demand management
    Date: 2017–02–24
  14. By: Sam Bateman
    Abstract: The ruling from the arbitral tribunal dealing with the case between China and the Philippines in the South China Sea provides opportunities for fresh approaches to building cooperation for managing the sea and activities within it. This cooperation is both a necessity and an obligation of the countries bordering the sea. However, obstacles remain, particularly the lack of trust between the various stakeholders in the sea and the way in which important areas for cooperation, such as fisheries management, environmental protection and marine scientific research, have been politicised to the extent that even cooperation in these areas cannot proceed without greater strategic trust. The objective of this paper is to put forward a set of policy implications from the ruling that might overcome these obstacles and allow the necessary cooperation to proceed despite the lack of strategic trust.
    Keywords: South China Sea, arbitration ruling, maritime cooperation, trust, ASEAN
    Date: 2017–04–18
  15. By: Li, Cheng
    Abstract: In this paper, we compile China’s household balance sheet and apply this perspective to the analysis of household financial conditions. Specifically, we first address some technical issues on the balance sheet accounts, and detail the estimations of two important asset items, “dwellings” and “automobiles.” Next, through reading the sheets, we provide an international comparative analysis, and show: (1) China’s households are still on their early stage of wealth accumulation, and this trend is associated with a changing structure in favour of financial assets. (2) Although being subject to relatively low insolvency and liquidity risks, the sector has experienced, generally contrary to major developed countries, a climbing leverage cycle since the global financial crisis. These findings imply that China’s policymakers should, on the one hand, make further efforts to help households accumulate wealth with an improved structure in terms of liquidity and risk diversification, and on the other hand need to pay high attention to the increasing household financial stress and the potential risk contagion.
    Keywords: Balance sheet; Household sector; Wealth accumulation; Debt risks; Financial deepening
    JEL: E01 E21 O57
    Date: 2017–06–26
  16. By: Minghui, Liu.
    Keywords: descriptor 1, descriptor 2, descriptor 3, descriptor 4
    Date: 2017

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