nep-cna New Economics Papers
on China
Issue of 2018‒03‒19
five papers chosen by
Zheng Fang
Ohio State University

  1. Mapping shadow banking in China: structure and dynamics By Torsten Ehlers; Steven Kong; Feng Zhu
  2. The effect of Hukou registration policy on rural-to-urban migrants’ health By Marta Bengoa; Christopher Rick
  3. The relationship between the Chinese "going out" strategy and international trade By Abeliansky, Ana Lucia; Martínez-Zarzoso, Inmaculada
  4. Is Chinese monetary policy forward-looking? By Zhang, Chengsi; Dang, Chao
  5. Institutions and Innovation: Evidence from Chinese Cities By Chen, Yang; Luan, Fushu; Regis, Paulo José

  1. By: Torsten Ehlers; Steven Kong; Feng Zhu
    Abstract: We develop a stylised shadow banking map for China with the aim of providing a coherent picture of its structure and the associated financial system interlinkages. Five key characteristics emerge. One defining feature of the shadow banking system in China is the dominant role of commercial banks, true to the adage that shadow banking in China is the "shadow of the banks". Moreover, it differs from shadow banking in the United States in that securitisation and market-based instruments play only a limited role. With a series of maps we show that the size and dynamics of shadow banking in China have been changing rapidly. This reveals a marked shift in the relative importance of different shadow banking activities. New and more complex "structured" shadow credit intermediation has emerged and quickly reached a large scale, while the bond market has become highly dependent on funding channelled through wealth management products. As a result, the structure of shadow banking in China is growing more complex.
    Keywords: shadow banking, wealth management products (WMPs), investment receivables, entrusted loans, trust loans
    JEL: G2
    Date: 2018–02
  2. By: Marta Bengoa; Christopher Rick
    Abstract: Access to social services in China is connected to a system of household registration (Hukou system) determined by place of origin with difficult geographical transferability. As a consequence, a vast majority of rural-to-urban migrants do not have access to public health services in urban areas. This paper examines if restrictions on healthcare provisions—that are due to restrictions on migration and Hukou registration—are linked to poorer health for rural-to-urban migrants compared with non-migrant urban residents. We use data from two waves of the Longitudinal Survey on Rural Urban Migration in China that provide data on self-reported health and objectively measured health indicators – blood pressure and grip strength. Results indicate that even after accounting for migrant’s characteristics that have known impacts on health, such as income, education, sex, marital status, and being underweight, the effect of the Hukou restriction policy is large, significantly negative, and acts as a key predictor of why rural-to-urban migrants’ health deteriorates, especially during the early years since migration.
    Date: 2018
  3. By: Abeliansky, Ana Lucia; Martínez-Zarzoso, Inmaculada
    Abstract: This study is the first to estimate a system of simultaneous gravity equations for Chinese exports, imports and foreign direct investment (FDI) using a sample of 167 countries over the period 2003-2012. The main results indicate that trade and outward FDI are complementary. In particular, the authors show that outward Chinese FDI is related to higher exports and imports and that China trades more with countries hosting Chinese FDI. Results are also robust to the use of instrumental variables. Therefore, the popular claim that Chinese investment could be detrimental for developing countries is not supported by the data.
    Keywords: international trade,foreign direct investment,China
    JEL: F14 F21 F59
    Date: 2018
  4. By: Zhang, Chengsi; Dang, Chao
    Abstract: This paper investigates the empirical validity of the claim that China employed a forward-looking monetary policy rule from 2001 to 2016. Survey expectations are used in conjunction with competing money supply and interest rate rules. The paper contributes to the literature by addressing the problems of serial correlation and structural breaks in the underlying policy reaction function. Un-like earlier studies indicating a strong role for expectations in Chinese monetary policy, we find expectations only began to play a significant role after 2008. This finding is robust for expectations series based on surveys of both households and forecasting experts. We also find that the People’s Bank of China promotes economic growth in procyclical fashion, but applies countercyclical policy in managing inflation.
    JEL: E58 E31
    Date: 2018–02–22
  5. By: Chen, Yang (Division of Economics, Xi'an Jiaotong-Liverpool University); Luan, Fushu (Division of Economics, Xi'an Jiaotong-Liverpool University); Regis, Paulo José (Division of Economics, Xi'an Jiaotong-Liverpool University)
    Abstract: We contribute to explore the roles of sub-national leaders and institutional environment in shaping urban innovation in China. We adopt a dynamic production function framework using a panel dataset comprising 280 prefecture cities during 2001-2014. We find that knowledge and education boost local innovative outputs and has positive spillover effects; the externalities of domestic and foreign capital are limited to local investments. Controlling for the basic production inputs, our analysis unveils a clear and significant role of meritocracy with regional dimension in sharpening the competitive advantage of city innovativeness measured by patents applications. Party secretary competition intensity and tenure encourages innovation while city mayor turnover rate has a negative effect. Marketization intensity also positively links with urban innovation. Compared with diversity and specialization, competitive industrial structures bring more creative elements into regional knowledge and idea production.
    Keywords: Innovation, Meritocracy, Institutions, Prefecture-Level City, China
    JEL: H11 R11 O30 P26 C33
    Date: 2018–02–20

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