nep-cna New Economics Papers
on China
Issue of 2017‒12‒18
ten papers chosen by
Zheng Fang
Ohio State University

  1. Urbanisation and household consumption in China By Margit Molnar; Thomas Chalaux; Qiang Ren
  2. Decentralization and Accountability in Authoritarian Regimes: Evidence from Rural China By Pesqué-Cela, Vanesa
  3. Elite Returnees in Beijing and Bangalore: Information Technology and Beyond By Kellee S. Tsai
  4. Asymmetric effects of exchange rate changes on the Malaysia-China commodity trade By Bahmani-Oskooee, Mohsen; Aftab, Muhammad
  5. Urban sprawl and local fiscal burden: analysing the Spanish case By Junxue Jia; Cong Qin; Yongzheng Liu
  6. The relationship between Ecuador and China: a dangerous alliance? By Salvatore Monni; Luca Serafini
  7. Politically Connected Venture Capitalists in China By Feng, Xunan; Johansson, Anders C.
  9. FinTech and Financial Inclusion in China By Kellee S. Tsai
  10. Internet and Income Inequality: A Research Note By Yongzheng Liu

  1. By: Margit Molnar; Thomas Chalaux; Qiang Ren
    Abstract: This paper focusses on the link between urbanisation and consumption behaviour in China. Urbanisation is defined here as rural people moving to cities to work and migrant workers in cities obtaining urban residential status, against the backdrop of government plans to settle 100 million rural dwellers into cities and grant urban residential status to another 100 million migrant workers who already reside in cities. Using household data of the China Family Panel Studies dataset, the paper investigates the impact of those residential status changes on household consumption. The results of the analysis suggest that moving up the residential ladder in this way will likely result in increased consumption by almost 30% for both groups of people and thus contribute to rebalancing of the economy. Higher incomes and longer times in education are important drivers of this process, while a greater number of children in the family discourages consumption. This Working Paper relates to the 2017 OECD Economic Survey of China ( y-china.htm).
    Keywords: consumption, migrant workers, rebalancing, residential status, urbanisation
    JEL: E21 J61 P23 P25
    Date: 2017–11–22
  2. By: Pesqué-Cela, Vanesa (School of Finance and Management, SOAS University of London & Stockholm China Economic Research Institute)
    Abstract: Can political decentralization and the introduction of local elections improve government accountability and public goods provision in a non-democratic regime like China? Political decentralization reforms in China have only been implemented at the village level, and have been implemented unevenly across villages. Villages differ substantially in terms of the quality of their elections and the amount of power given to (or taken away from) their popularly elected village committees. In light of these differences, this paper investigates the relationship between political decentralization processes and government performance in the rural Chinese context, by addressing the question of whether democratically elected village committees are more responsive to villagers’ demands for better infrastructure in their communities, when given the power to govern. To explain differences among villages in terms of whether and how much they invest in new infrastructure, a tobit model of village-financed investment is estimated using cross-sectional survey data collected from over 100 villages. Results from the regression analysis indicate that variation in the degree of political decentralization is positively associated with variation in the level of public goods investment across villages: villages governed by democratically elected village committees tend to invest more in new infrastructures. These results are robust to the endogeneity between governance and public goods provision. Our findings from rural China illustrate the potential and limitations of political decentralization reforms to enhance government accountability in non-democratic regimes. In some communities, they have improved government performance, but in many others they have failed to make elected local governments accountable to citizens because they have failed to devolve authority and resources to them in the first place. The challenge thus is not only to make decentralization work but, more fundamentally, to make decentralization happen.
    Keywords: Decentralization; accountability; public goods provision; China
    JEL: H41 H70
    Date: 2017–12–01
  3. By: Kellee S. Tsai (Division of Social Science, The Hong Kong University of Science and Technology)
    Abstract: Based on industry data, research reports, and field interviews in both cities, this paper compares the networked effects of return migration in three areas: ICT, VC, and philanthropy/social entrepreneurship. We find that Chinese returnees play a substantial role in ICT companies listed abroad and dominate the domestic VC market. Overseas Indians and returnees have represented key links to multinationals’ outsourcing activities, and are as dominant in VC as their counterparts in China. In both Beijing and Bangalore, entrepreneurs draw on school- and work-based networks, whether domestic or international. A greater contrast between the Silicon Valleys are their areas of comparative advantage. ICT firms in Beijing are geared towards serving the domestic ICT market, while Bangalore has been oriented towards global outsourcing. In the field of philanthropy, despite high profile exceptions, returnees are less active than domestic entrepreneurs in both countries. However, returnees are increasingly active in running non-governmental organizations (NGOs) and social enterprises. Analytically, the paper outlines a framework for understanding returnee impact that includes both the individual attributes of returnees and the institutional context of different policy environments.
    Date: 2017–12
  4. By: Bahmani-Oskooee, Mohsen; Aftab, Muhammad
    Abstract: Previous research that considered the response of the trade balance between Malaysia and China to exchange rate changes used a linear model and did not find any significant long-run link. Suspecting that the results suffer from aggregation bias as well as ignoring nonlinear adjustment of the exchange rate, we consider the trade balance of 59 industries that trade between the two countries and use a nonlinear ARDL model to show that almost 1/3rd of the industries are affected by ringgit depreciation against yuan, in an asymmetric manner. The largest industry which accounts for more than 25% of the trade is found to benefit from ringgit depreciation but not hurt from appreciation. In total, 15 industries that account for 40% of the trade enjoy this property.
    Keywords: Nonlinear ARDL, Asymmetry, 65 Industries, Malaysia, China
    JEL: F1 F3
    Date: 2017–02–13
  5. By: Junxue Jia (School of Finance, China Financial Policy Research Center, Renmin University of China); Cong Qin (School of Finance, China Financial Policy Research Center, Renmin University of China); Yongzheng Liu (School of Finance, China Financial Policy Research Center, Renmin University of China)
    Abstract: Using a unique dataset for 2,190 Chinese villages, this paper evaluates the poverty-reducing effect of large scale village-based anti-poverty development projects in rural China. We find that these projects significantly increase village net income per capita and thus reduce rural poverty. We also highlight the importance of funding methods, matching requirements, and political institutions for project effectiveness. Specifically, compared to projects funded by unconditional grants, microfinance projects exhibit a stronger poverty-reducing effect; matching requirements enhance the effectiveness of the projects; and a more democratic political environment improves project performance.
    Date: 2017–12
  6. By: Salvatore Monni (Dipartimento di Economia Università degli Studi Roma Tre, Italia); Luca Serafini (Facultad de Economía y Empresa, Universidad de Murcia, Murcia, España)
    Abstract: The aim of this paper is to outline the relationship between Ecuador and China by highlighting the main threats for the development of the Ecuadorian Republic, in particular how it will affect the implementation of the buen vivir, the new economic paradigm experimented in the Latin American State, if it does not change the terms of affair with the Asian giant. The paper is structured as follows: in the introduction, we will present an overview on the historical framework of the relationships of China with Ecuador. Later there will be an analysis supported by data on the commercial situation between the two countries, and its implication over the development of the Latin American state. Finally, some final remarks will present the possible paths that Ecuador can follow to secure its way to development. With this, we will highlight under which conditions Ecuador and China can cooperate while avoiding a state of dependency.
    Keywords: Buen Vivir; China; Dependency; Ecuador; Productive Matrix; Sovereignty;
    JEL: B59 O10 O20 O54
    Date: 2017–12
  7. By: Feng, Xunan (Southwestern University of Finance and Economics); Johansson, Anders C. (Stockholm China Economic Research Institute)
    Abstract: We examine how venture capitalists and the firms they back utilize network-based strategies in China. Analyzing a manually collected data set of venture capitalists with political ties, we find that firms backed by politically connected venture capitalists are more likely to obtain approval for initial public offerings (IPOs), their time from venture capital investment to IPO approval is shorter. They also exhibit higher IPO offering prices and lower underpricing, and consequently deteriorating long-term post-IPO stock performance. By exploiting a unique regulatory change, we show that venture capitalists’ political connections had less IPO applications withdrawn during the 2013 financial inspection period. We also find that firms backed by politically connected venture capitalists have higher levels of earnings management, are more often mentioned in newspaper articles concerning substantial operating performance declines and are more often accused of illegal information disclosures quickly after the IPO. Finally, politically connected venture capitalists can obtain higher investment returns and attract more fund flows after successful IPOs. Our findings are robust to several robustness tests and suggest that political relationships are valuable for this important group of financial intermediaries in transitional China.
    Keywords: Venture capital; Institutions; Network-based strategy; Political connections; IPO; China
    JEL: D02 G24 P48
    Date: 2017–12–01
  8. By: Malmström Rognes, Åsa (Department of Economic History, Uppsala University & The European Institute of Japanese Studies)
    Abstract: This paper analyses the AIIB; its mandate, resources, governance and how it compares to the other multilateral development banks operating in Asia. When China proposed a new multilateral development bank in Asia devoted to infrastructure, there were numerous questions raised. These included whether there was really a need for another development bank, whether the new bank would have sufficiently high environmental and social safeguards and be as transparent as the existing ones. This examines the AIIB in comparison to the existing multilateral development banks in Asia and in particular the ADB with its emphasis on infrastructure. The paper finds that there is certainly a need for more funding but it isn’t clear that it is best met by another multilateral.
    Keywords: Multilateral development banks; infrastructure development; development finance; Asian Infrastructure Investment Bank; Asian Development Bank; China; Japan
    JEL: F35 N25 O19
    Date: 2017–12–01
  9. By: Kellee S. Tsai (Head, Department of Social Science , Hong Kong University of Science and Technology; Chair Professor, Division of Social Science, Hong Kong University of Science and Technology)
    Abstract: Professor Kellee Tsai, Faculty Associate at the Institute, offers insights on the Chinese government’s 2016-2020 plan to encourage digital technologies in order to promote financial inclusion and social stability. This brief examines the explosive growth of China’s fintech in response to demand for web-based services, and the government’s attempts to regulate this space.
    Keywords: Fintech, financial inclusion, china, entrepreneurship
    Date: 2017–11
  10. By: Yongzheng Liu (School of Finance, China Financial Policy Research Center, Renmin University of China)
    Abstract: By using a sample of 51 developed and developing countries, this research note empirically examines the impact of internet diffusion on income inequality. To address the potential endogeneity issue of internet diffusion, I employ lightning density as an instrument for internet diffusion and use an instrumental variable method for the estimations. I find that internet diffusion significantly reduces income inequality. The results are robust across alternative specifications.
    Date: 2017–12

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