nep-cna New Economics Papers
on China
Issue of 2018‒05‒21
eight papers chosen by
Zheng Fang
Ohio State University

  1. The Role of Transportation Speed in Facilitating High Skilled Teamwork By Xiaofang Dong; Siqi Zheng; Matthew E. Kahn
  2. The Impact of High School Curriculum on Confidence, Academic Success, and Mental and Physical Well-Being of University Students By Han Yu; Naci Mocan
  3. Developing an underlying inflation gauge for China By Amstad, Marlene; Ye, Huan; Ma, Guonan
  4. The Varying Shadow of China's Banking System By Xiaodong Zhu
  5. Determinants and Economic Consequences of Signing Auditor Turnover: A Large-Scale Study from China REPORT By Juan Mao; Baolei Qi
  6. Escaping Import Competition and Downstream Tariffs By Ana Cecília Fieler; Ann Harrison
  7. What Does General Secretary Xi Jinping Dream About? By Saich, Anthony
  8. What can we learn on Chinese aid allocation motivations from new available data? A sectorial analysis of Chinese aid to African countries By Marlène Guillon; Jacky Mathonnat

  1. By: Xiaofang Dong; Siqi Zheng; Matthew E. Kahn
    Abstract: High skilled workers gain from face to face interactions. If the skilled can move at higher speeds, then knowledge diffusion and idea spillovers are likely to reach greater distances. This paper uses the construction of China’s high speed rail (HSR) network as a natural experiment to test this claim. HSR connects major cities, that feature the nation’s best universities, to secondary cities. Since bullet trains reduce cross-city commute times, they reduce the cost of face-to-face interactions between skilled workers who work in different cities. Using a data base listing research paper publication and citations, we document a complementarity effect between knowledge production and the transportation network. Co-authors’ productivity rises and more new co-author pairs emerge when secondary cities are connected by bullet train to China’s major cities.
    JEL: O15 O31 R4
    Date: 2018–04
  2. By: Han Yu; Naci Mocan
    Abstract: This paper investigates the causal effect of high school curriculum on various student outcomes including academic performance at the university, happiness, physical and mental health, self-confidence, confidence in academic ability, and attitudes towards studying and learning. We exploit a curriculum reform in China, the implementation of which started in 2004. The reform covered all provinces and municipal cities, and was rolled out in different years in different provinces. The new curriculum pivoted away from the old lock-step course structure where all students took the same courses and only those subject that were covered in the national university entrance exam were considered important. In contrast, the new curriculum introduced a course credit system, changed textbooks, and provided flexibility in course selection. It also introduced elective courses and made such courses as arts and physical education mandatory, and a graduation requirement. Using survey data on university students and employing a difference-in-difference approach, we find that the students who were exposed to the new curriculum in high school have better academic performance in university. They are happier, and their physical and mental well-being is better. These students are more likely to have positive attitudes towards themselves and they are more involved in student clubs. They have more confidence in their academic ability, they have more positive attitudes towards studying, and they have more general self-confidence. These results indicate that the reform had a significant impact on students’ academic success and well-being by allowing them to focus on subject matters in which they are interested, and by reducing undue stress of a regimented curriculum.
    JEL: H0 I1 I20 I23 I3 J38
    Date: 2018–05
  3. By: Amstad, Marlene; Ye, Huan; Ma, Guonan
    Abstract: Inflation in emerging markets is often driven by large, persistent changes in food and energy prices. Core inflation measures that neglect or under-weight volatile CPI subcomponents such as food and energy risk excluding information helpful in assessing current and future inflation trends. This paper develops an underlying inflation gauge (UIG) for China, extracting the persistent part of the common component in a broad dataset of price and non-price variables. Our proposed UIG for China avoids the excess volatility reduction that plagues traditional Chinese core inflation measures. When forecasting headline CPI, the proposed UIG outperforms traditional core inflation measures over a variety of samples.
    JEL: C13 C33 E31 E37 G15 C43
    Date: 2018–04–27
  4. By: Xiaodong Zhu
    Abstract: The rapid rise of shadow banking activities in China since 2009 has attracted a great deal of attention in both academia and policy circles. Most existing studies and commentary on China’s shadow banking have treated it as a recent phenomenon that appeared after the Global Financial Crisis and China’s response to it. In this paper, I argue that shadow banking is not a new phenomenon; it has always been a part of China’s financial system since the 1980s, and arose from the need to get around various lending restrictions imposed by the central government on banks. I also emphasize that there are two types of shadow banking activities, those initiated by banks and those initiated by local governments or state-owned enterprises. I provide evidence suggesting that the shadow banking activities initiated by banks tend to be efficiency enhancing, but those initiated by local governments and state-owned enterprises are more likely to be associated with misallocation of capital. The policy implication is that the central government should implement policies and regulations that break the link between financial institutions and local governments or state-owned enterprises.
    Keywords: China, Banking System, Shadow Banking, Capital Allocation
    JEL: G21 G23 G28 E44 O16
    Date: 2018–05–17
  5. By: Juan Mao (Department of Accounting, UTSA); Baolei Qi (Xi’an Jiaotong University)
    Abstract: This study investigates why auditors leave one audit firm (and bring their clients) to another and the consequences of such turnover. Using a Chinese sample of 470 auditor-years with turnovers and 7,485 auditor-years without such turnovers from 2001 to 2014, we find that auditors’ professional competency is positively associated with a departure decision in additional to their demographics. Specifically, younger auditors, auditors who are industry specialists, and auditors who audit more clients and have better education background, are more likely to move, suggesting that “rising stars” in the accounting industry are more likely to move from one audit firm to another. However, female auditors, older auditors, and auditors with established status in the current audit firm are less likely to do so. Interestingly, Big 4 signing auditors in China are less likely to move relative to non-Big 4 auditors. We also find that auditors with lower audit quality are less likely to move from one audit firm to another, suggesting that the job market is penalizing auditors for bad quality audits. In terms of consequences, we find that the audit firm is more likely to lose clients whose incumbent auditor moves to another audit firm and it tends to lower audit fees for clients that stay with the audit firm, assign better auditors to them, and treat them more leniently. Our study provides insights that should be of interest to the audit profession, audit firms, and regulators.
    Keywords: auditor turnover, audit partners, individual auditors, audit fees, audit quality, audit switch
    JEL: M42 O15 E24
    Date: 2017–01–09
  6. By: Ana Cecília Fieler; Ann Harrison
    Abstract: We propose and provide evidence for a new source of gains from trade: Firms invest in product differentiation to escape import competition. In the data and in the model, these investments are associated with increases in measured productivity, introduction of new goods, and shifts to skill-intensive sectors. Investment in differentiation downstream leads upstream firms to also invest in differentiation. For China, these "downstream tariff" reductions lead to big increases in measured productivity for upstream suppliers. The effect on measured productivity is larger for upstream than for downstream firms, and we explain this difference theoretically through heterogeneous changes in markups.
    JEL: F12 F13 F14
    Date: 2018–04
  7. By: Saich, Anthony (Harvard University)
    Abstract: This analysis argues that the period of easy reforms in China has ended, and the time of difficult reforms that touch core political interests has begun. The resulting challenges facing the Chinese Communist Party (CCP) general secretary Xi Jinping when he is confirmed for another five-year-term span political, economic, and international spheres. This leadership must both maintain a domestic focus to strengthen economic growth and avoid the “middle-income trap,†while also engaging in a host of regional and global actions to cement China’s position on the world stage. Internally, Xi has consolidated significant political power, and this has created significant tension among vested interests and competing centers of influence. Externally, for the first time in several centuries, the largest economy in the world is not Western and will be under a leadership that does not share the same consensual values and political structures as those in the West. Xi has outlined several priorities, including: increased CCP control over state and society; the promotion of traditional Chinese culture; the importance of Marxism as a guiding principle; historical revisionism and censorship; the promotion of nationalism; and the pursuit of an aggressive national anti-corruption campaign. Given these goals and sets of challenges, the outcome in China is uncertain and there exist a range of possible scenarios. The most attractive for the West would be an increase in social diversity and an accommodation with society to form a new social compact. However, it is difficult to see what would cause the current elite willingly to reject the existing beneficial system. A more unpredictable outcome would be chaotic pluralization in which democracy is not entrenched and elites and their families continue to benefit from their political connections to privatize public wealth. An alternative over the short to medium term would be the continuation of the fluctuation of soft and harder authoritarianism that would make bold initiatives unlikely. Rarely does a transition occur during a period of economic growth and is more likely to occur with the system under stress. As a result, the emergence of an illiberal democracy would be quite plausible under this final scenario.
    Date: 2017–08
  8. By: Marlène Guillon (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Jacky Mathonnat (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique, FERDI - Fondation pour les Etudes et Recherches sur le Développement International)
    Abstract: Since the creation of the Forum on China-Africa Cooperation (FOCAC) in 2000, Chinese official development assistance (ODA) to Africa has increased drastically. Only few analyses on the determinants of Chinese ODA allocation to African countries are available. Moreover, existing literature mainly focused on total aid flows while Chinese motivations for aid allocation might differ depending on the ODA sector considered. Our objective is to study the factors associated with Chinese aid allocation to African countries by sector between 2000 and 2014. We consider 3 ODA broad sectors as defined by the Organisation for Economic Cooperation and Development (OECD): the social infrastructure and services sector, the economic infrastructure and services sector and the production sector. Chinese ODA is measured using the AidData's Global Chinese Official Finance Dataset, 2000-2014, Version 1.0, released in fall 2017. Over the 2000-2014 period, China allocated 971, 218 and 138 ODA projects to African countries in the social infrastructure and services sector, the economic infrastructure and services sector and the production sector respectively. Between 2000 and 2014, the economic infrastructure and services sector was the first sector in terms of ODA amount with a total of US$18.9 billion ahead from the social infrastructure and services sector with US$7 billion or the production sector with US$3.1 billion. Results of our analysis suggest that the motivations of Chinese aid allocation to African countries differ by sector. Chinese ODA in the social infrastructure and services sector appears responsive to the economic needs of recipient countries but is also driven by foreign policy considerations. Chinese economic interest, in particular for natural resources acquisition, is associated with China’s ODA allocation in the economic infrastructure and services sector. Finally, while institutions in recipient countries are not related to Chinese ODA in the social infrastructure and services sector, we find that China allocates more ODA in the economic infrastructure and services sector and the production sector to African countries with weaker institutions. One of the strong conclusions of this study is to show that considering only China's overall aid to Africa can be misleading as to its underlying determinants, and therefore to point out the need to disaggregate the analysis by ODA sectors.
    Keywords: Official development assistance,China,Africa,sectorial analysis
    Date: 2018–04–24

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