nep-cna New Economics Papers
on China
Issue of 2018‒12‒03
twelve papers chosen by
Zheng Fang
Ohio State University

  1. Fiscal incentives, competition, and investment in China By Lv, Bingyang; Liu, Yongzheng; Li, Yan; Ding, Siying
  2. Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market By Korkeamäki, Timo; Virk, Nader; Wang, Haizhi; Wang, Peng
  3. Livelihood responses of smallholder farmers in Southwest China to the decline in rubber prices By Jin, S.; Waibel, H.; Min, S.; Huang, J.
  4. Persistent and Transient Inefficiency: Explaining the Low Efficiency of Chinese Big Banks By Zuzana FUNGACOVA; Paul-Olivier KLEIN; Laurent WEILL
  5. Can Chinese Manufacturing Firms Cope with Rising Labor Costs? By Cheng Hong; Albert Park
  6. Why does the short-term contract dominate in China s rural land transfer market? By Zhang, Y.; Liu, W.; Cai, J.
  7. Reconciling Returns to Education in Off-Farm Wage Employment among Women in Rural China By Liu, C.
  8. Does The Granary County Subsidy Policy Lead to Manipulation of Grain Production Data in China? Evidence from a Natural Experiment By Yu, X.; Zhang, X.; You, L.
  9. Evaluating Public Grain Buffer Stocks in China: a Stochastic Simulation Model By Pu, M.; Zheng, F.
  10. The gender gap in math performance, self-concept, and anxiety: rural and urban China in an international context By Lu, M.
  11. Fertility Cost, Intergenerational Labor Division, and Female Employment By Haiyue Yu; Jin Cao; Shulong Kang
  12. China Merchants in Djibouti: from the maritime route to the digital silk route By Thierry Pairault

  1. By: Lv, Bingyang; Liu, Yongzheng; Li, Yan; Ding, Siying
    Abstract: This paper explores how fiscal incentives offered to local governments in China affect investment rates in their jurisdictions. Theoretically, we build a simple fiscal competition model to establish the linkage between local fiscal incentives and expenditure policy and consequently, capital movement. The key prediction of the model, borne out by data from Chinese provinces spanning 2004–2013, is that an increase in the local corporate income tax-sharing ratio, which proxies fiscal incentives offered to local governments, motivates local governments to compete for capital investment through increased public expenditures. Our results contribute to the fiscal federalism literature by showing that local fiscal incentives significantly shape policy choices and local economic performance. In addition, by exploring fiscal incentives offered to local governments, we offer a novel explanation for the unusually high investment rate in China that has been sustained over a prolonged period of time.
    JEL: H72 H77 O16 R53
    Date: 2018–11–20
  2. By: Korkeamäki, Timo; Virk, Nader; Wang, Haizhi; Wang, Peng
    Abstract: We analyze preferences of foreign institutional investors in the Chinese stock market in a sample that covers 2003 to 2014. We find foreign investors changed their investment behavior during the sample period from generic patterns found in much of the world to China-specific patterns. The results suggest that foreign institutions learned to adjust their investment behavior to account for unique features of the Chinese market.
    JEL: G11 G15
    Date: 2018–11–19
  3. By: Jin, S.; Waibel, H.; Min, S.; Huang, J.
    Abstract: This paper explores diversification for land and labor by smallholder farmers in Southwest China in response to the rubber price declines. Panel data of some 600 smallholder rubber farmers in Xishuangbanna, Southwest China in 2012 and 2014 is employed. Livelihood diversification is expressed by calculating Shannon for land and labor. We developed Tobit panel models to identify the determinants of diversification, and OLS and Quantile regression models to analyze the correlation between diversification and income. We find that (i) household incomes are more diverse after the decline of rubber prices; (ii) diversification contributes to smoothing household income; (iii) households with higher incomes are more likely to diversify their portfolios of crop and employment; (iv) diversification contributes to decrease of income inequality. We conclude that a more diversification in labor is more effective in mitigating negative effects of shocks from rubber price decline. Land diversification is likely to be a more effective ex-ante shock alleviation strategy. Acknowledgement :
    Keywords: Consumer/Household Economics
    Date: 2018–07
  4. By: Zuzana FUNGACOVA (Bank of Finland); Paul-Olivier KLEIN (University of Aberdeen Business School); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: Considering the evidence that China’s five largest state-owned banks (the Big Five) suffer from low cost efficiency, this paper decomposes overall efficiency of Chinese banks into persistent efficiency and transient efficiency components. Low persistent efficiency reflects structural problems, while low transient efficiency is associated with short-term problems. Using the model of Kumbhakar, Lien and Hardaker (2014) based on the stochastic frontier approach, we measure persistent efficiency and transient efficiency for a large sample of 166 Chinese banks over the period 2008–2015. In line with existing evidence, we find a lower average cost efficiency of the Big Five banks compared to other Chinese banks. It is almost entirely due to low persistent cost efficiency. The Big Five banks transient efficiency is similar to other Chinese banks. Our findings support the view that major structural reforms are needed to enhance the efficiency of China’s Big Five banks.
    Keywords: banks, efficiency, China. Classification-JEL C23, D24, G21.
    Date: 2018
  5. By: Cheng Hong (Dean of the Institute of Quality Development Strategy, Wuhan University; Director of China Employer-Employee Survey (CEES) Management Board and Director of the Macro-Quality Management Collaborative Innovation Center in Hubei Province); Albert Park (Chair Professor, the Division of Social Science, Hong Kong University of Science and Technology; Professor of Economics and Public Policy, Hong Kong University of Science and Technology; Director, Institute for Emerging Market Studies, Hong Kong University of Science and Technology)
    Abstract: Albert Park, the Director of HKUST IEMS, Chair Professor of the Division of Social Science, Professor of Economics and Public Policy, ask how Chinese Manufacturing Firms survive under the rising labor wages. Dramatic increase in real manufacturing wages in China combined with slowing external demand, is putting great pressure on Chinese manufacturing firms. The tight labor market in China led to a high worker turnover rate of 26% in Guangdong from 2015 to 2016, with rates higher for younger workers below age 28 (37%) and migrant workers (30%). Upgrading requires making new capital investments such as in automated equipment or robots, often with government support. To support adjustment to rising labor costs, it is important for China to allow for open market competition and create a level playing field.
    Keywords: wage, manufacturing, china, labor market
    Date: 2018–02
  6. By: Zhang, Y.; Liu, W.; Cai, J.
    Abstract: There is a paradox in rural land transfer in China: it is taken for granted that the preference is for long-term tenancy, which may result in long-term investment and more thorough conservation practices; but in reality, short-term tenancy that is, usually one year or less dominates. By building a theory model and undertaking binary logistic analysis of survey data, we discover two fundamental reasons for the dominance of short-term tenancies that help explain this paradox: (1) owing to unstable land ownership, the high relative income per capita between non-agricultural and agricultural sectors and the close relationship between lessors and lessees, the transaction costs of leasing land are rather high, meaning that long-term leases are a better choice for lessors while short-term leases favor lessees; (2) these same three factors mean that the Chinese land lease market is a buyer's market that is, one in which the lessee has the upper hand so it is the preference of the lessee that determines the nature of the market as a whole. Acknowledgement : This research is supported by Institue of Agricultural Economy and Development, Chiese Academy of Agricultural Sciences through Innovation project. We also thank Professor Zhong Tang for his valueble comments for this paper.
    Keywords: Land Economics/Use
    Date: 2018–07
  7. By: Liu, C.
    Abstract: Previous studies have found that returns to education in off-farm wage employment in rural China are lower than estimates for other developing economies. This paper seek to understand why and to provide what we believe are more accurate estimates of the returns. The returns to education in rural China may have been systematically underestimated due to mismeasurements in wage rate and/or experiences. Using a nearly nationally representative dataset of female workers in rural China, with detailed information on hours worked and earnings (to calculate daily wage rate), and employment history (to more appropriately measure experiences), might help provide better estimates of returns to education. We find that estimates of returns to education, when employment interruptions are considered, are 3-4% higher than those without being considered. Moreover, we also find that mismeasurement in wage rate by not considering the hours worked cause even more serious underestimate of returns to education (by 25-43%). The paper demonstrates that, although some of the differences between our estimates and previous ones can be attributed to increasing returns since the 2000s, a larger portion of the differences are due to the nature of the data and the methodological approaches used by other authors. Acknowledgement : The authors acknowledge the financial support of the National Natural Science Foundation of China (Grant Numbers 71473240 and 71333012).
    Keywords: Labor and Human Capital
    Date: 2018–07
  8. By: Yu, X.; Zhang, X.; You, L.
    Abstract: Manipulation of food production data could lead to catastrophic social and economic consequences. The accuracy of official agricultural statistics has long been questioned in China. As a natural experiment, this paper studies the linkage between agricultural production data manipulation and the Granary Country Subsidy Policy (GCSP). Chinese government gave subsidies to the counties with annual grain production more than 200 thousand tons to encourage these local governments to give priority on grain production from 2005. In order to obtain the subsidies, the prospective counties with food production slightly below the threshold may have incentives to over-report their grain production. Based on the McCrary (2008) s density test, our empirical results confirm that the GCSP results in over-reporting of grain production in those countries. Furthermore, data manipulations are more likely to happen in major-grain-production, low-income and mid-western counties. The policy implication would be that the fiscal distribution rules of a central government should avoid data manipulation incentives in local governments, particularly should cut the linkage to the data which are self-reported by the local governments. Acknowledgement : Thanks
    Keywords: Agricultural and Food Policy
    Date: 2018–07
  9. By: Pu, M.; Zheng, F.
    Abstract: A stochastic simulation model, with adaptive expectation and multiplicative production shocks, is advocated to investigate the impacts of public grain buffer stocks in China. The effects of alternative public buffer stocks, with three price bands and nine storage capacity levels, are investigated from the perspectives of producer support, market stabilization, food security and social costs. The simulation results show that a narrow price band can improve policy performances and the storage capacity has marginal diminishing effects on above policy performances. For a given width of the price band, the symmetric price band could achieve policy goals at a relatively low cost. In practice, the Chinese government can lower floor price and restrict storage capacity in order to improve Minimum Price Procurement policies of rice and wheat. Acknowledgement : I would like to thank Yu Cheng from Development Research Center of the State Council of China, Xiaohua Yu from Georg-August-University of G ttingen, Chen Zhen for University of Georgia for comments on an earlier draft. This study is funded by the National Natural Science Foundation of China; under Grant [number 71673289]; Doctoral thesis scholarship of China Institute of Rural Studies, Tsinghua University [number 201525].
    Keywords: Agricultural and Food Policy
    Date: 2018–07
  10. By: Lu, M.
    Abstract: Evidence from developed countries shows that there is a significant gender gap in STEM occupations. Girls may begin to underperform in math early as primary school. One possible explanation is the negative stereotype threat towards girls. However, this has been understudied in rural China. In this paper, we describe the math performance gender gap in rural China, compare the gender gap between rural and urban China, and finally compare the Chinese situation with other countries. We further examine possible explanations for the gender gap from comparative perspectives. Using first hand datasets of 3,789 primary students and 12,702 junior high students in China, combing with OECD 2012 PISA survey data, we find that in both rural and urban China, boys outperform girls in math. As students grow older, the gap widens, which is larger than in many other countries. We further find that both the gender gaps in math self-concept and math anxiety and discriminatory family investment towards girls are not sufficient to explain the wide math performance gaps. Our study suggests the inequality of education in rural China still merits concern and calls for further work to explain the observed gender gap in math performance. Acknowledgement : The authors would like to acknowledge the funding of the 111 project (B16031), the International Initiative for Impact Evaluation (3ie) and the Ford Foundation.
    Keywords: Labor and Human Capital
    Date: 2018–07
  11. By: Haiyue Yu; Jin Cao; Shulong Kang
    Abstract: China has set to increase the minimum retirement age, to ease the pressure from pension expenditure and the falling labor supply caused by the aging population. However, policy debates have so far neglected the crucial fact that families in China largely rely on retired grandparents for childcare. Using novel and high-quality survey data, we demonstrate that intra-family downward labor transfer towards childcare significantly increases young females’ labor force participation rate and their labor income, and such effects do not exist for males. Furthermore, we show that the positive effects from grandparental childcare are higher for better-educated, urban females with younger children. This paper thus reveals a large, hidden cost in the new retirement policy — the reduced feasibility of grandparental support, due to postponed retirements, may crowd out productive labor of young females, — and rationalizes a series of social protection policies to accompany the phase-in of the new retirement scheme.
    Keywords: intergenerational labor division, grandparental childcare, female employment, human capital accumulation, minimum retirement age
    JEL: C24 J13 J22
    Date: 2018
  12. By: Thierry Pairault (CECMC-CCJ - Centre d'études sur la Chine moderne et contemporaine - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The determination of Chinese groups to become uncontested leaders in all activities related to maritime transport is proven. Two cases are particularly noteworthy, the best-known and best-documented being probably COSCO and the port of Piraeus. On the other hand, that of China Merchants in Djibouti, still poorly understood, will be the subject of our contribution. We will not deal with security aspects (establishment of a naval base) – largely dealt with elsewhere – but will favour economic and commercial aspects (establishment of China Merchants). The two logics can meet, but they respond to very different strategies: a national strategy to assert China's military power as opposed to a corporate strategy to consolidate its global role. Djibouti's dream of becoming a "commercial hub" and an "East African Singapore", gives a particular dimension to China Merchants' choice because it is not the result of the Chinese government's will, but of a specific request from the Djiboutian government. Our research will be conducted on the basis of existing documents, whether official reports, scientific studies or more journalistic information. It will favour first-hand Chinese documents.
    Abstract: Études en Sciences Sociales), Centre d'études sur la Chine moderne et contemporaine (UMR 8173) Résumé : La détermination des groupes chinois à devenir les leaders incontestables dans toutes les activités liées au transport maritime est avérée. Deux cas retiennent plus particulièrement l'attention, le plus connu en même temps que le mieux documenté est sans doute celui de COSCO et du port du Pirée. En revanche, celui de la China Merchants à Djibouti, encore mal méconnu, sera l'objet de notre contribution. Nous ne traiterons pas des aspects sécuritaires (établissement d'une base navale)-largement traités par ailleurs-mais privilégierons les aspects économiques et commerciaux (implantation de la China Merchants). Les deux logiques peuvent se rejoindre, mais répondent à des stratégies très différentes : une stratégie nationale pour affirmer la puissance militaire de la Chine opposée à une stratégie d'entreprise pour consolider son rôle mondial. Le rêve de Djibouti qui est de devenir un « hub commercial », de s'ériger en un « Singapour de l'Afrique de l'Est » vient donner une dimension particulière au choix de la China Merchants car il résulte, non de la volonté du gouvernement chinois, mais d'une demande spécifique du gouvernement djiboutien. Notre recherche sera conduite sur la base d'une exploitation des documents existants que ce soit des rapports officiels, des études scientifiques voire des informations plus journalistiques. Elle privilégiera les documents chinois de première main.
    Keywords: Djibouti,Africa,China Merchants,Silk Roads,Chine,Afrique,routes de la soie
    Date: 2018–11

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