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on China |
| By: | Jia, Pengfei; Lim, King Yoong |
| Abstract: | This paper explores the effects of a government tax policy in a growth model with economic transition and toxic housing bubbles applied to China. Such a policy combines taxing entrepreneurs with a one-time redistribution to workers in the same period. Under the tax policy, we find that the welfare improvement for workers is non-monotonic. In particular, there exists an optimal tax at which social welfare is maximized. Moreover, we consider the welfare effects of setting the tax at its optimum. We show that the tax policy can be welfare-enhancing, compare to the case without active policies. The optimal tax may also yield a higher level of welfare than the case even without housing bubbles. Finally, we calibrate the model to China. Our quantitative results show that the optimal tax rate is about 23 percent, and social welfare is significantly improved with such a tax policy. |
| Keywords: | China, Economic Transition, Housing Bubbles, Welfare |
| JEL: | O18 P31 R21 R28 |
| Date: | 2018–05–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86576&r=cna |
| By: | Funke, Michael; Sun, Rongrong; Zhu, Linxu |
| Abstract: | Household borrowing in China has increased considerably in recent years, raising concerns about the household sector’s vulnerability and implications for the stability of the financial system. We construct a number of granular debt-burden indicators at the level of individual Chinese households and calculate the share of households that are financially vulnerable using the three available waves (2011, 2013 and 2015) of China’s Household Finance Survey. Overall loan-to-value (LTV) ratios appear safe and sound at first glance, but closer scrutiny reveals that Chinese households in the lowest income quintile face high vulnerability and struggle to meet their debt commitments. Our stress tests suggest that Chinese households in higher quintiles, despite the huge increase in house-hold indebtedness, are not particularly vulnerable to declining incomes or falling house prices. |
| JEL: | D10 D14 G21 |
| Date: | 2018–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2018_012&r=cna |
| By: | Christian K. Darko (University of Birmingham); Giovanni Occhiali (Fondazione Eni Enrico Mattei and Overseas Development Institute); Enrico Vanino (London School of Economics) |
| Abstract: | This study uses firm level data on 19 Sub-Saharan Africa countries between 2004 and 2016 to provide a rigorous analysis on the impact of Chinese import competition on productivity, skills, and performance of firms., We measure import competition and ports accessibility at the city-industry level to identify the relevance of firms’ location in determining the impact of Chinese imports competition. To address endogeneity concerns, a time-varying instrument for Chinese imports based on the interaction between an exogenous geographic characteristic and a shock in transportation technology is developed. The results show that imports competition has a positive impact on firm performance, mainly in terms of productivity catch-up and skills upgrading. Of particular interest is the finding that the effects of import competition from China are stronger for more remote firms that have lower port accessibility, an indication that Chinese imports in remote areas improves productivity of laggard firms, employment, and intensity of skilled workers. Our findings indicate that African firms are improving their performance as a consequence of the higher Chinese import intensity, mainly through direct competition and the use of higher quality inputs of production sourced from China. |
| Keywords: | Import Competition, Productivity Catch-up, Trade Infrastructure, Skills, Employment, Sub-Saharan Africa, China |
| JEL: | F16 R11 J21 J24 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.14&r=cna |
| By: | Christopher Hansman; Harrison Hong; Wenxi Jiang; Yu-Jane Liu; Juan-Juan Meng |
| Abstract: | Research on leverage and asset-price fluctuations focuses on the direct effect of lax bank lending enabling financially-constrained investors to take excessive risks. Ignored are unconstrained investors speculating on higher prices during credit booms. To identify these two effects, we utilize China's staggered liberalization of stock-margin lending from 2010-2015—which encouraged a bank/brokerage-credit-fueled stock-market bubble. The direct effect is a 25 cent increase in a stock's market capitalization for each dollar of margin debt. Unconstrained investors led to an even larger increase in valuations of an additional 32 cents as they speculated on stocks likely to qualify for lending. |
| JEL: | E51 G01 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24586&r=cna |
| By: | Howell, Anthony (Asian Development Bank Institute) |
| Abstract: | We adopt a structural framework to study the process of indigenous innovation and its impact on firm performance in the People’s Republic of China (PRC). In our analysis we use a rich source of panel data comprising almost 70,000 private Chinese firms operating in the PRC from 2004 to 2007. Relying on a structural innovation framework, we estimate the effects of technological learning during each phase of the structural model: (i) the firm’s decision to innovate, (ii) the innovation effort, (iii) the innovation throughput, and (iv) the firm performance. We show that in the early stages of innovation, Chinese firms fail to incorporate learning spillovers into their innovation effort, even when considering their absorptive capacity. Conversely, we found that in the later stages of innovation, learning spillovers positively increase firms’ innovation output as well as their performance, especially for firms with high absorptive capacity. |
| Keywords: | innovation; firm performance; learning; agglomeration; institutions; People’s Republic of China |
| JEL: | O30 |
| Date: | 2018–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0805&r=cna |
| By: | HuiHui Liu (Academy of Chinese Energy Strategy, China University of Petroleum); ZhongXiang Zhang (Ma Yinchu School of Economics and China Academy of Energy, Environmental and Industrial Economics, Tianjin University); ZhanMing Chen (Department of Energy Economics, School of Economics, Renmin University of China); DeSheng Dou (Academy of Chinese Energy Strategy, China University of Petroleum) |
| Abstract: | The regulated price mechanism in China’s power industry has attracted much criticism because of its incapability to optimize the allocation of resources. To build an “open, orderly, competitive and complete” power market system, the Chinese government launched an unprecedented marketization reform in 2015 to deregulate the electricity price. This paper examines the impact of the electricity price deregulation in the industry level. We first construct two-stage dynamic game models by taking the coal and coal-fired power industries as the players. Using the models, we compare analytically the equilibriums with and without electricity regulation, and examine the changes in electricity price, electricity generation, coal price and coal traded quantity. The theoretical analyses show that there are three intervals of the regulated electricity sales prices which influence the impact of electricity price deregulation. Next, we collect empirical data to estimate the parameters in the game models, and simulate the influence of electricity deregulation on the two industries in terms of market outcome and industrial profitability. Our results suggest that the actual regulated electricity price falls within the medium interval of the theoretical results, which means the price deregulation will result in higher electricity sales price but lower coal price, less coal traded amount and less electricity generation amount. The robustness analysis shows that our results hold with respect to the electricity generation efficiency and price elasticity of electricity demand. |
| Keywords: | China, Electricity Deregulation, Reform, Coal Industry, Power Industry |
| JEL: | Q41 Q43 Q48 L94 L98 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.17&r=cna |
| By: | ZhongXiang Zhang (Ma Yinchu School of Economics and China Academy of Energy, Environmental and Industrial Economics, Tianjin University) |
| Abstract: | The Chinese leadership has determined to assign the market a decisive role in allocating resources. To have the market to play that role, getting the energy prices right is crucial because this sends clear signals to both producers and consumers of energy. While the overall trend of China’s energy pricing reform since 1984 has been moving away from the prices set by the central government in the centrally planned economy and towards a more market-oriented pricing mechanism, the pace and scale of the reform differ across energy types. This article discusses the evolution of price reforms for coal, petroleum products, natural gas, electricity and renewable power in China, and provides some analysis of these energy price reforms, in order to have the market to play a decisive role in allocating resources and help China’s transition to a low-carbon economy. |
| Keywords: | Energy Prices, Tiered Prices, Differentiated Tariffs, Coal, Electricity, Natural Gas, Petroleum Products, Renewable Power, Desulfurization and Denitrification, State-owned Enterprises, China |
| JEL: | H23 H71 O13 O53 P22 Q41 Q43 Q48 Q53 Q58 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.18&r=cna |
| By: | Bai, Yiyi; Dang, Vi Tri; He, Qing; Lu, Liping |
| Abstract: | We examine China’s June 2013 liquidity crunch as a negative shock to banks and analyze the wealth effects on exchange-listed firms. Our findings suggest that liquidity shocks to financial institutions negatively impact borrower performance, particularly borrowers reporting outstanding loans at the end of 2012. Stock valuations of firms with long-term bank relationships, however, outperform the market and experience smaller subsequent declines in investment than peers lacking solid banking relationships. This effect is the strongest for firms that enjoy good relations with China’s large state-owned banks or foreign banks, and weakest for firms whose connections are solely with local banks. We document a positive correlation between the stock performances of firms and the stock performances of lender banks and the likelihood of lender banks operating as net lenders in the interbank market. These results suggest that banks transmit liquidity shocks to their borrowing firms and that a long-term bank-firm relationship may mitigate the negative effects of a liquidity shock. |
| JEL: | G30 G14 G21 |
| Date: | 2018–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2018_013&r=cna |
| By: | Alicia García-Herrero; Thibault Marbach; Jianwei Xu |
| Abstract: | China’s increasingly important role in the global economy has transformed the nature of global competition and reshaped international trade. Meanwhile, the European Union has long been the most important power in global trade and continues to run a very large trade surplus. We address whether China is an increasingly relevant competitor for Europe in third markets, and in particular in Latin America. More specifically, we empirically estimate the elasticity of substitution between European exports and Chinese exports to Latin American economies (ie how their exports to Latin America respond to the changes in relative exporting prices). Our results show that the degree of competition between China and the EU in Latin America has increased over time. Before 2007, China and the EU competed less with each other, partly reflecting the fact that China was mainly exporting low-quality products. However, the elasticity of substitution has increased since 2007, reflecting China’s ascent up the value-added chain. We also look at competition between China and the EU in the key EU sectors that export to Latin America. We find that China-EU competition is fiercer in electrical machinery and road vehicles. This finding should be a wake-up call to Europe in its quest to remain competitive at the global level. |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:26150&r=cna |
| By: | Chai, Shijun (Asian Development Bank Institute); Chen, Yang (Asian Development Bank Institute); Huang, Bihong (Asian Development Bank Institute); Ye, Dezhu (Asian Development Bank Institute) |
| Abstract: | Using the 2011 China Household Finance Survey (CHFS) database, we explore the heterogeneous impacts of social networks on informal financial inclusion for urban and rural households in the People’s Republic of China. We find that social networks significantly increase the probability of households’ participation in the informal financial market, augment the size of informal financial transactions, and raise the ratio of informal lending to total household assets. We also identify the mechanisms through which social networks affect households’ participation in the informal financial market. By reducing the information cost, perceived risk, and precautionary saving, social networks play a larger role for urban households than for rural households. Notably, the effects of social networks on informal finance are strengthened by the development of the formal financial market. |
| Keywords: | social networks; informal financial inclusion; perceived risk; precautionary saving; formal financial market |
| JEL: | D10 G20 |
| Date: | 2018–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0802&r=cna |
| By: | Philippe D Karam; Dirk V Muir |
| Abstract: | China and Australia have increasingly strong links, especially through trade. These are driven by demand from China for Australian commodities (coal and iron ore) and services (tourism and education). These links are influenced by China’s transition to a services-driven, consumer-led economy. Using ANZIMF, the Australia-New Zealand Integrated Monetary and Fiscal model, three risks (both upside and downside) to China during this transition process are considered, focusing on their spillovers to Australia. One simple takeaway is central to each risk – while the real GDP response to shocks in Australia typically is small, responses in demand components or sectors are usually much larger– along with three further takeaways, all of which help in the analysis of Australia in relation to any risk emanating from China. |
| Date: | 2018–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:18/119&r=cna |