nep-cna New Economics Papers
on China
Issue of 2017‒10‒15
eight papers chosen by
Zheng Fang
Ohio State University

  1. The evolution of markets in China and Western Europe on the eve of industrialisation By Daniel Bernhofen; Markus Eberhardt; Jianan Li; Stephen Morgan
  2. China's Footprints on the Global Economy : Remarks delivered at the Second IMF and Federal Reserve Bank of Atlanta Research Workshop on the Chinese Economy By Shaghil Ahmed
  3. Educational Choice, Rural-urban Migration and Economic Development: The Role of Zhaosheng in China By Yin-Chi Wang; Ping Wang; Chong Yip; Pei-Ju Liao
  4. Firm Reorganization, Chinese Imports, and US Manufacturing Employment By Ildikó Magyari
  5. The Exchange Rate System Reform in China: US Pressure, Implicit Gradual Appreciation and Explicit Exchange Rate Bands By Paul S. L. Yip; Yiu-Kuen Tse; Yingjie Dong
  6. Credit Rationing and Firm Exports: Micro Evidence from SMEs in China By Cheng, Dong; Tan, Yong; Yu, Jian
  7. Product Churning, Reallocation, and Chinese Export Growth By Hu, Zhongzhong; Rodrigue, Joel; Tan, Yong; Yu, Chunhai
  8. Appendix to "Capital Accumulation, Private Property and Rising Inequality in China, 1978-2015" By Thomas Piketty; Li Yang; Gabriel Zucman

  1. By: Daniel Bernhofen; Markus Eberhardt; Jianan Li; Stephen Morgan
    Abstract: We use monthly prefectural data for Southern China (1740-1820) to implement a dynamic version of Shiue and Keller’s (2007) seminal analysis of spatial market integration. Our cointegration analysis is carried out for rolling windows of 20 years, rather than their static cross-section, and uncovers a secular decline in market integration across all bilateral distance categories of Southern China. When comparing Chinese prefectures less than 150 km apart with Belgian markets (1765-94) and English counties (1770-1820) in the same distance category, we observe similar degrees of market integration for 1740s China and mid-18th century Belgium and England. While the two European countries maintain stable levels of integration over time, we find substantial decline in China relative to the West, in particular when the analysis is limited to the economically most advanced Lower Yangtze region or the prefectures along the Yangtze River.
    Keywords: market integration, 18th century, China and Western Europe, cointegration
    Date: 2017
  2. By: Shaghil Ahmed
    Abstract: This note explores some key aspects of China’s economic rise and the spillovers to the rest of the world that this rise has created. It then examines, using the Federal Reserve Board’s large-scale global model (SIGMA), the potential consequences for the global economy were China’s economy to slow sharply. Although the probability of such an event is low, a sharp slowdown of Chinese economic growth could have significant consequences for the global economy.
    Date: 2017–09–28
  3. By: Yin-Chi Wang (Chinese University of Hong Kong); Ping Wang (Washington University in St. Louis); Chong Yip (Chinese University of Hong Kong); Pei-Ju Liao (Institute of Economics, Academia Sinica)
    Abstract: Observing China's rapid skill-enhanced development and urbanization process accompanied by continual reforms of the household registration system, we explore the underlying drivers, highlighting the channel of rural to urban migration. In addition to conventional work-based migration, we incorporate education-based migration by constructing a dynamic spatial equilibrium model of migration decisions with educational choice. We then calibrate our model to fit the data from China over the 1980--2007 period. We find that the effects of education-based migration on total per capita output cannot be ignored. There also exist rich interactions between the two migration channels. Furthermore, our results suggest that the increase in the college admission selectivity for rural students seriously depresses China's development. Policy experiments on migration and labour-market regulations are also conducted to assess their quantitative significance.
    Date: 2017
  4. By: Ildikó Magyari
    Abstract: What is the impact of Chinese imports on employment of US manufacturing firms? Previous papers have found a negative effect of Chinese imports on employment in US manufacturing establishments, industries, and regions. However, I show theoretically and empirically that the impact of offshoring on firms, which can be thought of as collections of establishments – differs from the impact on individual establishments - because offshoring reduces costs at the firm level. These cost reductions can result in firms expanding their total manufacturing employment in industries in which the US has a comparative advantage relative to China, even as specific establishments within the firm shrink. Using novel data on firms from the US Census Bureau, I show that the data support this view: US firms expanded manufacturing employment as reorganization toward less exposed industries in response to increased Chinese imports in US output and input markets allowed them to reduce the cost of production. More exposed firms expanded employment by 2 percent more per year as they hired more (i) production workers in manufacturing, whom they paid higher wages, and (ii) in services complementary to high-skilled and high-tech manufacturing, such as R&D, design, engineering, and headquarters services. In other words, although Chinese imports may have reduced employment within some establishments, these losses were more than offset by gains in employment within the same firms. Contrary to conventional wisdom, firms exposed to greater Chinese imports created more manufacturing and nonmanufacturing jobs than non-exposed firms.
    Date: 2017–01
  5. By: Paul S. L. Yip (Department of Economics, Nanyang Technological University, Singapore); Yiu-Kuen Tse (School of Economics, Singapore Management University, Singapore); Yingjie Dong (Business School, University of International Business and Economics, Beijing)
    Abstract: This paper provides a review and empirical investigation of the exchange rate system reform in China over the period between July 2005 and January 2017. We describe the People's Bank of China's (PBoC's) initial achievements and subsequent mistakes in the reform. We note that the central bank's initial honoring of its implicit indication of gradual appreciation played a significant role in its success in the reform initially. However, because of the US pressure for faster renminbi (RMB) appreciation, the PBoC's subsequent violation of the implicit indication of gradual appreci- ation triggered substantial speculative in ows and hence excessive RMB appreciation and volatility between March 2006 and July 2008. We find that during the first ten years of the reform, the PBoC was actually monitoring the RMB-USD exchange rate instead of the nominal elective exchange rate (NEER). This policy failure was one of the reasons for the substantial drop in China's foreign reserves amid the strengthening of the USD between 2014 and early 2017. The PBoC's mini deval- uation on 11 August 2015 was another mistake that had thereafter triggered sharp depreciation and high volatility of the RMB. On the other hand, the several incidences of widening of the RMB-USD exchange rate band over the sampling period was found to have only relatively mild e ect on the volatility of the RMB.
    Keywords: fixed exchange rate system, GARCH model, nominal e ective exchange rate, renminbi
    JEL: F15 F31 F33
    Date: 2017–08
  6. By: Cheng, Dong; Tan, Yong; Yu, Jian
    Abstract: In this study we examine the effect of credit rationing on export performance for small and medium sized firms in China. We use a detailed firm-level data provided by the Small and Medium-sized Enterprises Dynamic Survey (SMEDS) to conduct this analysis. SMEDS provides firm-specific measures of credit rationing based directly on firm-level responses to the survey rather than indirectly from firm-level financial statements. We find that, at the extensive margin, weak and strong credit rationing reduce SMEs' export probability by 22% and 36%, respectively. At the intensive margin, they decrease SMEs' export values by more than 32% and over 66%, respectively. Different from existing literature, we construct valid firm-level instruments, firm-level housing investments and receivables, for credit rationing rather than using province-level instruments. In addition, credit rationing exhibits heterogeneous impacts on firms with different liquidity ratios, product portfolios, external collateral and capital utilization rates.
    Keywords: SMEs, Strong Credit Rationing, Weak Credit Rationing, Export Performance
    JEL: F10 G20
    Date: 2017–10–12
  7. By: Hu, Zhongzhong; Rodrigue, Joel; Tan, Yong; Yu, Chunhai
    Abstract: This paper quantifies the separate contribution of idiosyncratic productivity and demand growth on aggregate Chinese exports. We develop firm, product, market and year specific measures of productivity and demand. We use these measures to document a number of novel findings that distinguish the growth of Chinese exports. First, we document that changes in demand explain nearly 78–89% of aggregate export growth, while only 11–22%of export growth is determined by productivity growth. Second, our results highlight two mechanisms which contribute significantly to aggregate export growth: the rapid reallocation of market shares towards products with growing demand, and high rates of product exit among low demand products. Investigating the mechanisms underlying these results we find that new exporters suffer demand shocks which are 66% smaller than those observed for incumbent producers in the same product market. By comparison, we find that there is only an 8% difference on average between the productivity of new and incumbent exporters.Repeating our exercise with revenue productivity reveals much smaller differences. This is largely attributed to differential movements in prices and marginal costs.
    Keywords: Exports, China, Productivity, Demand
    JEL: D24 F12 L11 L25
    Date: 2017–10–07
  8. By: Thomas Piketty (Paris School of Economics); Li Yang (World Bank); Gabriel Zucman (University of California at Berkeley)
    Abstract: This appendix supplements our paper and describes the full set of data files and computer codes ( that were used to construct the series.
    Date: 2017–04

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