nep-cna New Economics Papers
on China
Issue of 2018‒02‒26
eleven papers chosen by
Zheng Fang
Ohio State University

  1. Credit and Fiscal Multipliers in China By Sophia Chen; Lev Ratnovski; Pi-Han Tsai
  2. Self-employment, financial development and well-being: Evidence from China, Russia and Ukraine By Tho Pham; Oleksandr Talavera; Mao Zhang
  3. Will pollution taxes improve joint ecological and economic efficiency of thermal power industry in China? A DEA based materials balance approach By Ke Wang; Zhifu Mi; Yi-Ming Wei
  4. Agricultural Productivity Shocks, Labor Reallocation, and Rural-Urban Migration in China By Luigi Minale
  5. South-South labour migration and the impact of the informal China-Ghana gold rush 2008–13 By Gabriel Botchwey; Gordon Crawford; Nicholas Loubere; Jixia Lu
  6. The Power of Trading Polarity: Evidence from China Stock Market Crash By Shan Lu; Jichang Zhao; Huiwen Wang
  7. Innovation Responses of Japanese Firms to Chinese Import Competition By YAMASHITA Nobuaki; YAMAUCHI Isamu
  8. Empirical Assessment of Trade Engagements: Africa, China and the Maritime Belt and Road Initiative By Emmanuel , Igbinoba
  9. The Case for the Extra-Territorial Application of Corporate Governance Standards in China By Michael, Bryane; Goo, Say-Hak
  10. Asset Prices under Alternative Exchange Rate Regimes By Nicole Aregger
  11. China's "Great Migration": The Impact of the Reduction in Trade Policy Uncertainty By Facchini, Giovanni; Liu, Maggie Y.; Mayda, Anna Maria; Zhou, Minghai

  1. By: Sophia Chen; Lev Ratnovski; Pi-Han Tsai
    Abstract: We jointly estimate credit and fiscal multipliers in China. We use the tenure of the provincial party secretary, interacted with the type of stimulus used in other provinces, to obtain separate instruments for provincial credit and government expenditure. We estimate a fiscal multiplier of 0.8 and a credit multiplier of 0.2 in 2001-2015. The multipliers have changed over time. The fiscal multiplier has increased from 0.75 in 2001-2008 to 1.4 in 2010-2015. The credit multiplier has declined from 0.17 to zero over the same periods. Our results suggest that reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.
    Keywords: Asia and Pacific;China;Macroprudential Policy;Fiscal stimulus;Credit Growth, Multipliers, Comparative or Joint Analysis of Fiscal and Monetary or Stabilization Policy, General, Size and Spatial Distributions of Regional Economic Activity
    Date: 2017–12–12
  2. By: Tho Pham (School of Management, Swansea University); Oleksandr Talavera (School of Management, Swansea University); Mao Zhang
    Abstract: This paper investigates the impact of financial development on entrepreneurs' well-being. Using longitudinal data from China, Russia and Ukraine, we find that Chinese and Russian entrepreneurs experience a higher level of well-being while the Ukrainian self-employed are prone to dissatisfaction. We also observe that the extent to which financial development can improve entrepreneurs' utility differs across countries. First, the development of formal financial sector does not affect Chinese entrepreneurs’ happiness. Second, greater financial development increases life satisfaction of Ukrainian self-employed but decreases Russian entrepreneurs' job satisfaction. The results suggest that financial development could affect well-being through both monetary and nonmonetary channels.
    Keywords: Entrepreneurship, self-employment, satisfaction, financial development.
    JEL: J24 O16
    Date: 2018–01–25
  3. By: Ke Wang; Zhifu Mi; Yi-Ming Wei
    Abstract: Previous studies of the efficiency of Chinese electricity industry have been limited in providing insights regarding policy implications of inherent trade-offs of economic and environmental outcomes. This study proposes a modified data envelopment analysis method combined with materials balance principle to estimate ecological and cost efficiency in the Chinese electricity industry. The economic cost and ecological impact of energy input reallocation strategies for improving efficiency are identified. The possible impacts of pollution taxes upon the levels of sulfur dioxide (SO2) emissions are assessed. Estimation results show that (i) both energy input costs and SO2 could be reduced through increasing technical efficiency. (ii) It is possible to adjust energy input mix to attain ecological efficient, and correspondingly, SO2 would reduce by 15%. (iii) The Chinese electricity industry would reduce its unit cost by 9% if optimal ecological efficiency is attained and reduce its unit pollution by 13% if optimal cost efficiency is attained, implying that there are positive ecological synergy effects associated with energy cost savings and positive economic synergy effects associated with SO2 pollution reductions. (iv) Estimated shadow costs of SO2 reduction are very high, suggesting that, in the short term, the Chinese electricity industry should pursue cost efficient point instead of ecological efficient point, since alternative abatement activities are less costly and some of the abatement cost could be further offset by energy input cost savings. (v) There would be no significant difference between the impacts of pollution discharge fees and pollution taxes on SO2 emissions levels because of the relatively low pollution tax rate.
    Keywords: Data envelopment analysis (DEA); Emission reduction; Energy efficiency; Environmental economics; Material balance; Sulfur dioxide (SO2)
    JEL: Q54 Q40
    Date: 2018–02–21
  4. By: Luigi Minale (Universidad Carlos III de Madrid)
    Abstract: This paper analyses the way households in rural China use rural-urban migration and off-farm work as a response to negative productivity shocks in agriculture. I employ various waves of a longitudinal survey to construct a panel of individual migration and labour supply histories, and match them to detailed weather information, which I use to instrument agricultural productivity. For identification, I exploit the year-by-county variation in growing season rainfalls to explain within-individual changes in labor allocation. Data on days of work supplied to each sector allow to study the responses to weather shocks along both the participation and the intensive margin. Results suggest that farming activity decreases by 4.5% while migration increases by about 5% in response to a 1-standard deviation negative rainfall shock. Increment in rural-urban migration derives from both longer spells in the city as well as raise in the likelihood to participate in the urban sector. I find interesting heterogeneous responses across generations driven by age-specific migration costs and changes in the relative productivity of sectors. Finally, land tenure insecurity seems to partially prevent households from freely reallocating labor away from farming in bad times.
    Keywords: Agricultural productivity, Labor supply, Rural-urban migration, China
    JEL: J22 R23 J61
    Date: 2018–02
  5. By: Gabriel Botchwey; Gordon Crawford; Nicholas Loubere; Jixia Lu
    Abstract: This paper examines irregular South-South migration from China to Ghana, and the role it has played in transforming livelihoods and broader developmental landscapes. It looks at the entry from the mid-2000s of approximately 50,000 Chinese migrants into the small-scale gold mining sector. They were mainly from Shanglin County, an area of alluvial gold mining. In Ghana, they formed mutually beneficial relationships with local miners, both legal and illegal, introducing machinery that substantially intensified gold production. However, the legal status of Chinese miners was particularly problematic as, by law, small-scale mining is restricted to Ghanaian citizens. In mid-2013 President Mahama established a military task force, which resulted in the deportation of many Chinese miners. This paper examines the experiences of undocumented Chinese migrants and Ghanaian miners. Findings are that this short-lived phenomenon has had long-lasting effects and significant consequences for Ghanaian and Chinese actors, as well as transforming economic, political, and physical landscapes in Ghana.
    Date: 2018
  6. By: Shan Lu; Jichang Zhao; Huiwen Wang
    Abstract: The imbalance of buying and selling functions profoundly in the formation of market trends, however, a fine-granularity investigation of the imbalance is still missing. This paper investigates a unique transaction dataset that enables us to inspect the imbalance of buying and selling on the man-times level at high frequency, what we call 'trading polarity', for a large cross-section of stocks from Shenzhen Stock Exchange. The trading polarity measures the market sentiment toward stocks from a view of very essence of trading desire. When using the polarity to examine market crash, we find that trading polarity successfully reflects the changing of market-level behavior in terms of its flipping times, depth, and length. We further investigate the relationship between polarity and return. At market-level, trading polarity is negatively correlated with returns, while at stock-level, this correlation changes according to market conditions, which becomes a good signal of market psychology transition. Also, the significant correlation disclosed by the market polarity and market emotion implies that our presented polarity, which essentially calculated in the context of high-frequency trading data, can real-timely reflect the sentiment of the market. The trading polarity indeed provides a new way to understand and foresee the market behavior.
    Date: 2018–02
  7. By: YAMASHITA Nobuaki; YAMAUCHI Isamu
    Abstract: This paper examines innovation response of a panel of Japanese firms to the intensified import competition from China for the period 1994-2009. We build a comprehensive firm-level dataset linking innovation activities including patenting and research and development (R&D) merged to cross-industry measures of Chinese import competition. Carefully accounting for a simultaneity bias between innovation and importing and the possible heterogeneous effects across firms, it is found that firms filed for more patents in response to increased import competition from China. However, this effect is only evident for a group of globally engaged firms. At the same time, Chinese import competition has adversely affected the quality of innovation as measured by citations. Overall, firms with a more domestic market focus are the ones who have felt most of the Chinese import competition, which is also reflected in their declined R&D efforts.
    Date: 2017–12
  8. By: Emmanuel , Igbinoba (Diversity Watch Limited England)
    Abstract: Recent development economic literatures theorize that South-South trade and foreign investment may have a larger impact on economic growth in developing economies than North-South trade and investment, since investors from the South are more familiar with local developing markets and business practices, which increases their productivity spillovers (Aykut and Goldstein 2007). Amighini and Sanfilippo (2014) provided evidence that South-South trade and investments stimulate product diversification in light manufacturing industries such as agroprocessing, plastic, textile and leather production. The Belt and Road Initiative (BRI) launched in 2013, aims to create economic opportunities as well as improve and establish new trading routes between China and connected regions. This paper attempts to evaluate the degree of trade relations between China and selected African countries along the Maritime Silk Route (MSR) and further appraise the trade potentials and gains inherent for African economies through the initiative. To achieve our objective, we apply quantitative techniques in trade evaluation to enable us explore and estimate the degree and intensity of trade engagements amongst selected Sino-African silk route countries, identify the trade opportunities and potentials, which are critical for increased trade engagements between both parties along the route and to explore some of the channels through which the maritime route can impact on investment, trade and economic growth in Africa. Findings from the analysis indicate that while the degree of trade integration is unbalanced and favourable to China relative to Africa, the trade pattern and structure are observed to be more complementary than competitive, and this provides Africa with ample opportunity to engage in product upgrading and diversification, critical for structural transformation.
    Keywords: Maritime Silk Route; Belt and Road; Africa; Trade Complementarity; Trade Competitiveness
    JEL: F15 F17 F18 O24
    Date: 2017–12–19
  9. By: Michael, Bryane; Goo, Say-Hak
    Abstract: What rule might an international financial centre like Hong Kong play in incentivizing corporate governance reform in China? Or any foreign jurisdiction? In this article, we describe theoretical application of extra-territoriality to corporate governance related law in Hong Kong. We describe why and how such extra-territoriality (following the US’s lead) could encourage Mainland firms to adopt better corporate governance practices (and even implement them). Changes to the Companies Ordinance and the Hong Kong Stock Exchange’s Listing Rules can, in theory, provide for such extra-territorial reach. The results of such an experiment would help us understand the role an international financial centre can play in creating value across borders, as well as make Hong Kong’s rules and markets more relevant in/to the Mainland.
    Keywords: extra-territoriality,Hong Kong Listing Rules,Chinese corporate governance
    Date: 2017
  10. By: Nicole Aregger
    Abstract: Motivated by the potential contribution of China's unilateral peg to asset price in flation in the US before the financial crisis of 2007-2009, this paper studies the effect of alternative exchange rate regimes ( flexible versus fixed) on the response of asset prices to economic shocks. I use a two-country general equilibrium model with sticky prices and extend earlier work on this topic by making use of a newer method for analyzing portfolio choice in DSGE models. My findings suggest that asset price responses to shocks differ across regimes. In particular, under a fixed regime, which is operated by the foreign country, responses to shocks in the home country are stronger than under a flexible regime. For home asset prices, however, the amplification of shock responses tends to be small. Applied to the US and China, this implies that, under China's prevailing unilateral peg, the Fed's expansionary monetary policy before the crisis resulted in a slightly but not substantially stronger US asset price infl ation relative to the one that would have been observed under a floating USD/CNY exchange rate.
    Date: 2018–02
  11. By: Facchini, Giovanni (University of Nottingham); Liu, Maggie Y. (Smith College); Mayda, Anna Maria (Georgetown University); Zhou, Minghai (University of Nottingham)
    Abstract: We analyze the effect of China's integration into the world economy on workers in the country and show that one important channel of impact has been internal migration. Specifically, we study the changes in internal migration rates triggered by the reduction in trade policy uncertainty faced by Chinese exporters in the U.S. This reduction is characterized by plausibly exogenous variation across sectors, which we use to construct a local measure of treatment, at the level of a Chinese prefecture, following Bartik (1991). This allows us to estimate a difference-in-difference empirical specification based on variation across Chinese prefectures before and after 2001. We find that prefectures facing the average decline in trade policy uncertainty experience an 18 percent increase in their internal in-migration rate – this result is driven by migrants who are "non-hukou", skilled, and in their prime working age. Finally, in those prefectures, working hours of "native" unskilled workers significantly increase – while the employment rates of neither native workers nor internal migrants change.
    Keywords: hukou, immigration, internal migration, trade policy uncertainty
    JEL: F22 J61 O15
    Date: 2018–01

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