nep-cna New Economics Papers
on China
Issue of 2018‒08‒20
nine papers chosen by
Zheng Fang
Ohio State University

  1. The impact of Chinese textile imports on employment and value added in the manufacturing sector of the South African economy. By Bonga-Bonga, Lumengo; Biyase, Mduduzi
  2. Trade Linkages and Firm Value: Evidence from the 2018 US-China “Trade War” By Yi Huang; Chen Lin; Sibo Liu; Heiwai Tang
  3. One Belt One Road and the reconfiguration of China-EU relations By Xieshu Wang; Joel Ruet; Xavier Richet
  4. Collateral Damage? Labour Market Effects of Competing with China - at Home and Abroad By Pedro S. Martins; João Pereira dos Santos; Mariana Tavares; Sónia Cabral
  5. Air Pollution and Mental Health: Evidence from China By Shuai Chen; Paulina Oliva; Peng Zhang
  6. Inequality in China – Trends, Drivers and Policy Remedies By Sonali Jain-Chandra; Niny Khor; Rui Mano; Johanna Schauer; Philippe Wingender; Juzhong Zhuang
  7. The Morbidity Cost of Air Pollution: Evidence from Consumer Spending in China By Panle Jia Barwick; Shanjun Li; Deyu Rao; Nahim Bin Zahur
  8. Projection bias in decision-making: Daily air pollution and willingness to pay for better air quality By Jie He; Bing Zhang
  9. Do CEOs Know Best? Evidence from China By Nicholas Bloom; Hong Cheng; Mark Duggan; Hongbin Li; Franklin Qian

  1. By: Bonga-Bonga, Lumengo; Biyase, Mduduzi
    Abstract: With the increased trade linkage between China and African economies, this paper endeavours to assess the dynamic impacts of Chinese textile imports on the employment and value added in the manufacturing sector of the South African economy. The paper makes use of the structural vector autoregressive (SVAR) methodology with sign restrictions. Moreover, based on this methodology, the paper conducts a counterfactual analysis to uncover what would have happened to employment and value added trends in the manufacturing sector in South African textile in the absence of trade with china. The results of the empirical analysis show that total employment responds negatively to shocks to import from China. Moreover, total value added in the manufacturing sector reacts negatively to positive shocks to textile imports from China.
    Keywords: Textile industry, China, South Africa, SVAR, sign restrictions
    JEL: C54 F14 F16
    Date: 2018
  2. By: Yi Huang (IHEID, Graduate Institute of International and Development Studies, Geneva); Chen Lin (University of Hong Kong); Sibo Liu (University of Hong Kong); Heiwai Tang (Johns Hopkins University)
    Abstract: On March 22, 2018, Trump proposed to impose tariffs on up to $50 billion of Chinese imports leading to a significant concern over the “Trade War” between the US and China. We evaluate the market responses to this event for firms in both countries, depending on their direct and indirect exposures to US-China trade. US firms that are more dependent on exports to and imports from China have lower stock and bond returns but higher default risks in the short time window around the announcement date. We also find that firms’ indirect exposure to US-China trade through domestic input-output linkages affects their responses to the announcement. These findings suggest that the structure of US-China trade is much more complex than the simplistic view of global trade that engendered Trump’s “Trade War” against China.
    Keywords: Stock returns, event study, trade policy, offshoring, input-output linkages, global value chains
    JEL: F10 G12 G14 O24
  3. By: Xieshu Wang (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique); Joel Ruet (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique); Xavier Richet (ICEE - ICEE - Intégration et Coopération dans l'Espace Européen - Etudes Européennes - EA 2291 - Université Sorbonne Nouvelle - Paris 3)
    Abstract: The context of EU-China relations has dramatically changed over the past five years. China's interest in Europe has expanded geographically and substantially. At the broader diplomatic and strategic level, the OBOR initiative has come to symbolize China's growing significance in international affairs, reshaping regional dynamics. The European Commission and the Chinese government have agreed to enhance synergies in connectivity platforms. However, new investment trends and trade relations with China are highly differentiated across Europe and across sectors. The lack of a clearly defined OBOR plan in most European countries is weakening their bargaining power. In the meantime, China is following its flexible foreign policy approach when dealing with the EU. So far, the OBOR projects in Europe are mainly focusing on transport and infrastructure in Central, Eastern and Southern Europe. We are witnessing the reconfiguration of international institutions and the emergence of a more multi-polar global order.
    Keywords: governance,One Belt One Road,connectivity,infrastructure,investment
    Date: 2017–03
  4. By: Pedro S. Martins; João Pereira dos Santos; Mariana Tavares; Sónia Cabral
    Abstract: The increased range and quality of China's exports is a major ongoing development in the international economy with potentially far-reaching effects. In this paper, we examine the impact of the China's integration in international trade in the Portuguese labour market. On top of the direct effects of increased imports from China studied in previous research, we focus on the indirect labour market effects stemming from increased export competition in third markets. Our findings, based on matched employer-employee data in the 1991-2008 period, indicate that workers' earnings and employment are significantly negatively affected by China's competition, but only through the indirect 'market-stealing' channel. In contrast to evidence for other countries, the direct effects of Chinese import competition are mostly non-significant. The results are robust to a number of checks, and the negative impacts of indirect competition are found to be stronger for women, older and less educated workers, and workers in domestic firms.
    JEL: F14 F16 J31
    Date: 2018
  5. By: Shuai Chen; Paulina Oliva; Peng Zhang
    Abstract: A large body of literature estimates the effect of air pollution on health. However, most of these studies have focused on physical health, while the effect on mental health is limited. Using the China Family Panel Studies (CFPS) covering 12,615 urban residents during 2014 – 2015, we find significantly positive effect of air pollution – instrumented by thermal inversions – on mental illness. Specifically, a one-standard-deviation (18.04 μg/m3) increase in average PM2.5 concentrations in the past month increases the probability of having a score that is associated with severe mental illness by 6.67 percentage points, or 0.33 standard deviations. Based on average health expenditures associated with mental illness and rates of treatment among those with symptoms, we calculate that these effects induce a total annual cost of USD 22.88 billion in health expenditures only. This cost is on a similar scale to pollution costs stemming from mortality, labor productivity, and dementia.
    JEL: I15 I18 O53 Q51 Q53
    Date: 2018–06
  6. By: Sonali Jain-Chandra; Niny Khor; Rui Mano; Johanna Schauer; Philippe Wingender; Juzhong Zhuang
    Abstract: China has experienced rapid economic growth over the past two decades and is on the brink of eradicating poverty. However, income inequality increased sharply from the early 1980s and rendered China among the most unequal countries in the world. This trend has started to reverse as China has experienced a modest decline in inequality since 2008. This paper identifies various drivers behind these trends – including structural changes such as urbanization and aging and, more recently, policy initiatives to combat it. It finds that policies will need to play an important role in curbing inequality in the future, as projected structural trends will put further strain on equity considerations. In particular, fiscal policy reforms have the potential to enhance inclusiveness and equity, both on the tax and expenditure side.
    Keywords: Asia and Pacific;China;Fiscal policy;Income inequality;structural change, Personal Income and Wealth Distribution, General
    Date: 2018–06–05
  7. By: Panle Jia Barwick; Shanjun Li; Deyu Rao; Nahim Bin Zahur
    Abstract: Developing and fast-growing economies have some of the worse air pollution in the world, but there is a lack of systematic evidence on the health especially morbidity impact of air pollution in these countries. Based on the universe of credit and debit card transactions in China from 2013 to 2015, this paper provides to our knowledge the first analysis of the morbidity cost of PM2.5 for the entire population of a developing country. To address potential endogeneity in pollution exposure, we construct an instrumental variable by modeling the spatial spillovers of PM2.5 due to long-range transport. We propose a flexible distributed-lag model that incorporates the IV approach to capture the dynamic response to past pollution exposure. Our analysis shows that PM2.5 has a significant impact on healthcare spending in both the short and medium terms that survives an array of robustness checks. The annual reduction in national healthcare spending from complying with the World Health Organization’s annual standard of 10 mg/m3 would amount to $42 billion, or nearly 7% of China’s total healthcare spending in 2015. In contrast to the common perception that the morbidity impact is modest relative to the mortality impact, our estimated morbidity cost of air pollution is about two-thirds of the mortality cost from the recent literature.
    JEL: I15 Q51 Q53
    Date: 2018–06
  8. By: Jie He (Département d'économique, École de gestion, Université de Sherbrooke); Bing Zhang (Nanjing University)
    Abstract: Previous psychological and economic studies have observed systematic biases in people’s predictions of their future utilities. In this paper, using repeated contingent valuation (CV) surveys conducted with a very high frequency (every two weeks, in total 29 waves) in Nanjing, China during July 2014 to June 2015, we tested whether people’s expected future utility for better air quality is overly influenced by the air quality at the moment of valuation. As air quality, in general, is subject to high day-to-day variability, its negative impact on people’s utility (health, happiness etc.), according to rational logic, should be essentially stationary in the long-run and dependent on the yearly average air quality. Following this logic, based on the classical random utility model, we should not expect the daily air quality to be a determining factor in a rational person’s valuation decision. Our results show, however, that people’s willingness to pay (WTP) is significantly and positively affected by the level of PM2.5 concentration, one of the key air pollution indicators that has been well understood for several years and is widely available on different media platforms for almost all large cities in China. We explored a range of rational explanations but found that our results were more consistent with the effects of psychological mechanisms, in particular, projection bias.
    Keywords: Psychological effects, projection bias, contingent valuation, air quality, China
    Date: 2018–08
  9. By: Nicholas Bloom; Hong Cheng; Mark Duggan; Hongbin Li; Franklin Qian
    Abstract: We analyze a new management survey for around 1,000 firms and 10,000 employees across two large provinces in China. The unique aspect of this survey is it collected management data from the CEO, a random sample of senior managers and workers. We document four main results. First, management scores, much like productivity, have a wide spread with a long left-tail of poorly managed firms. This distribution of management scores is similar for CEOs, senior managers and workers management, and appears broadly reasonably compared to US scores for similar questions. Moreover, for all groups these scores correlate with firm performance, suggesting all employees within the firm are (at least partly) aware of the their firms’ managerial abilities. Second, the scores across the groups are significantly cross-correlated, but far from completely. This suggests that while different levels of the firm have similar views on the firms’ management capabilities, they do not fully agree. Third, we find that the CEO’s management scores are the most predictive of firm performance, followed by the senior managers and then the workers. Hence, CEOs do appear to know best about their firms management strengths and weaknesses. Fourth, within-firm management score dispersion is negatively correlated with investment and R&D intensity, suggesting long-run planning is linked with greater consistency in management across levels in firms.
    JEL: J0
    Date: 2018–06

This nep-cna issue is ©2018 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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