nep-cna New Economics Papers
on China
Issue of 2019‒01‒14
twelve papers chosen by
Zheng Fang
Ohio State University

  1. A cunning State control – an unprecedented regulatory challenge brought forward by the Chinese social media giant "WeChat" By Li, Grace
  2. Does Trilemma Speak Chinese? By Georgios Magkonis; Simon Rudkin
  3. Consumer perceptions of the commodification and related conservation of traditional indigenous Naxi forest products as credence goods (China) By Rokpelnis, Karlis; Ho, Peter; Cheng, Gong; Zhao, Heng
  4. The Role of Public Pensions in Income Inequality among Elderly Households in China 1988–2013 By Li, Jinjing; Wang, Xinmei; Yuan, Chang; Xu, Jing
  5. Technological change and total factor productivity growth: evidence from China's telecommunications industry By Lin, Xuchen; Lu, Ting-Jie; Chen, Xia
  6. China’s Manufacturing Development and Its Implications for Korea By Lee, Hyuntai; Choi, Jangho; Choi, Hyelin; Kim, Youngsun; Oh, Yunmi; Lee, Joonkoo
  7. Working Longer in China: Implicit Tax or Subsidy? By Xu, Jing; Wang, Xinmei
  8. The mainstream economics interpretation of the local state and central-local relations in Post-Mao China: a critical review By Alexandre De Podest· Gomes
  9. A Study of Startups in Hong Kong By Lee, Paul S. N.
  10. The Economic Consequences of the 2018 US-China Trade Conflict: A CGE Simulation Analysis By Tsutsumi, Masahiko
  11. Gender-Targeted Job Ads in the Recruitment Process: Evidence from China By Peter Kuhn; Kailing Shen; Shuo Zhang
  12. Endowment Structure, Industry dynamics and Vertical Production Structure in China-Theory and Evidence By Jim H. Shen; Leilei Shen; Jun Zhang

  1. By: Li, Grace
    Abstract: China is the largest country by smart phone user and Internet user. By 2017, China has over 1 billion smart phone users and over 70% of its entire population having access to the Internet.1 With severe State censorship and the Great Firewall of China, the worldwide social-media platforms such as Facebook and Tweeter are not accessible in China. This situation has created great opportunities for Chinese companies to generate China's own version of its social media platforms – WeChat, a mobile based, all-purpose social media application has become the answer. Developed by Chinese multinational investment holding conglomerate Tencent, WeChat originally started in 2010 with a Chinese name "Weixin" (literally meaning "micro-message")2. WeChat quickly rose in popularity and the number of active users has reached over one billion in March 2018,3 which means almost every single smart phone user in China would had WeChat installed in their device. Unlike itsWestern counterparts, Facebook Messenger and WhatsApp, WeChat's features were not only limited to Internet messaging. Apart from messaging, voice and video calls, WeChat also offered services such as digital wallet payments, booking doctor appointments, booking taxi and paying electricity bills under the WeChat City Services4, crowd density map used by the government5, reading news, play games, and many more. As WeChat has developed into the China's all-in-one app, dominate proportion of Chinese smartphone users are now less likely dependent on any other apps and solely rely on WeChat for everything...
    Date: 2018
  2. By: Georgios Magkonis (University of Portsmouth); Simon Rudkin (Swansea University)
    Abstract: Based on the limitations imposed by the trilemma, this paper examines the trade-offs faced by the Chinese economy. Taking into account the role of accumulation of foreign reserves we examine how binding the constraints are for the Chinese monetary authorities. Using a Panel VAR with dynamic and static interdependencies as well as cross-sectional heterogeneities, we examine the monetary spillovers from China to a series of Asian economies. In this way, we measure the degree to which the Chinese trilemma constraints are exported to other countries. Consistent with previous research, our empirical evidence suggests that China's trilemma configurations are unique as China manages to achieve exchange rate stability, along with moderate financial liberalization, without losing its monetary autonomy. Furthermore, there are no significant spillovers to regional economies. Overall, trilemma does speak Chinese, but only for a short period.
    Keywords: Trilemma, international reserves, Panel VAR
    JEL: F36 F41 O53
    Date: 2019–01–09
  3. By: Rokpelnis, Karlis; Ho, Peter; Cheng, Gong; Zhao, Heng
    Abstract: Commodification of Traditional Knowledge (TK) has been posited as a possible, although contested, alternative for the conservation of indigenous resources. Here we examine the case of the Chinese Naxi minority, with particular reference to the practice of sacred “Dongba” papermaking. The commodification of TK is a complex process with many pitfalls and trade-offs between the environment, economy, and social empowerment. In the process of commodification, consumers have arisen as an important force in environmental politics. To date, little is known about the way domestic tourists, the main consumer base of indigenous products, perceive Dongba paper. In this context, we examined their knowledge of Naxi culture, their willingness to pay for sustainably produced paper, and their perceptions of the product’s authenticity. This socio-economic study is based on a survey (n = 415) in rural Southwest China. We found a significant potential to market Dongba paper as a sustainable indigenous product. Although knowledge about Naxi culture was circumscribed (3% could identify the plant used for papermaking), the majority of respondents (55%) was willing to pay for TK protection. Respondents also preferred third-party labelling. We posit that TK products could be seen as credence goods, necessitating certification to ensure product authenticity and establish consumer trust. Markedly, the survey also found that attitudes as to who should provide third-party assurance are contradictory. The Chinese government was preferred as the strongest assurance of genuineness, but paradoxically, commanded the least trust in its ability to manage and fund the conservation of TK.
    Keywords: indigenous knowledge; forest products; China; Naxi minority; native and aboriginal peoples; certification; commodification; ethnic tourism
    JEL: R14 J01
    Date: 2018–10–20
  4. By: Li, Jinjing; Wang, Xinmei; Yuan, Chang; Xu, Jing
    Abstract: Using data from the Chinese Household Income Project surveys for 1988, 1995, 2002 and 2013, we investigate the role of public pensions in income inequality among households with elderly members across two decades of pension policy reforms. We examine the distribution and role of public pensions at a national level. We analyse the evolution of the contribution of public pensions to national income inequality across a much more extended time period than earlier studies, which have generally focused on regional changes over short periods. Our findings suggest that public pensions have become the most important source of income for households with elderly members on average in China, but the distribution of pension income is highly unequal, with a Gini coefficient of 0.74 in 2013. Public pension income has been the largest source of income inequality for elderly households since 2002 and contributed to more than half of total income inequality in the most recent year of the survey. This finding is robust against variations in the income inequality measures used. Additionally, our analysis suggests unequal distribution of pension benefits is the primary driver of pensioners’ income inequality. Among several hypothetical policy changes, ensuring a minimum pension benefit for all existing pensioners seems to be the most fiscally effective option in reducing income inequality, with a 0.8% reduction in the Gini coefficient for a 1% increase in public pension expenditure.
    Keywords: income inequality, public pension, Gini decomposition
    JEL: H55 C53 C54
    Date: 2018–12
  5. By: Lin, Xuchen; Lu, Ting-Jie; Chen, Xia
    Abstract: The fast-growing telecommunications industry in China has been experiencing dramatic technological change and substantial productivity growth. The actual productivity growth pattern in the sector, however, need to be empirically examined. In this paper, using input and output data at the provincial level, we employ DEA-based Malmquist productivity index to estimate productivity change, technological change, and relative efficiency change in China's telecommunications industry for the period spanning the years from 2011 to 2015. The results show that based on our sample, the productivity improved by 22.9% per annum, which was exclusively due to an average of 25.5% technological progress in the industry production function, while the average efficiency change is slightly negative. Our results also indicate that regions with relatively low levels of telecommunications (and economic) development have a greater chance and ability of enhancing telecommunications productivity growth through technological catch-up. In addition, we find that the industry experienced significantly higher productivity growth and technological progress in the later sample period between 2013 and 2015 than in the early period between 2011 and 2013.
    Keywords: Telecommunications,Productivity,Technological change,Data envelopment analysis,Malmquist index
    Date: 2018
  6. By: Lee, Hyuntai (Korea Institute for International Economic Policy); Choi, Jangho (Korea Institute for International Economic Policy); Choi, Hyelin (Korea Institute for International Economic Policy); Kim, Youngsun (Korea Institute for International Economic Policy); Oh, Yunmi (Korea Institute for International Economic Policy); Lee, Joonkoo (Hanyang University)
    Abstract: Since 2015, the Chinese government has been strongly promoting its "Made in China 2025" initiative, which aims to accelerate the transformation of China from a "big manufacturing country" into a "world manufacturing power" by boosting manufacturing competitiveness through innovation and nurturing high-tech manufacturing industries. China's "Made in China 2025" strategy is both a threat and opportunity for Korea. This study aims to analyze the development status of Chinese manufacturing industries and the policy of "Made in China 2025," and to provide implications and countermeasures.
    Keywords: China; manufacturing development; Korea
    Date: 2018–07–06
  7. By: Xu, Jing; Wang, Xinmei
    Abstract: Using the conventional concept of implicit tax, we investigate pension incentives to retire for private sector employees in China. The social security pension consists of pay-as-you-go defined benefit (DB) and defined contribution (DC) systems. Based on Chinese official parameters and the revised OECD models, our studies conclude that the DB system discourages people from working more, but the DC system offers considerably greater incentives at the expense of financial sustainability. If the annuity factors in the DC scheme were linked to the probability of retirees’ mortality, then both constant incentives to work longer and financial sustainability could be achieved.
    Keywords: implicit tax, incentives, pension wealth, social security pension, working longer
    JEL: C53 C54 H55
    Date: 2018–12
  8. By: Alexandre De Podest· Gomes (Department of Economics, SOAS University of London, UK)
    Abstract: Decentralization and the role of local governments have long been touted as key factors in the Chinese economic miracle. This paper intends to critically assess the chief theories advanced by mainstream economics in its attempt to make sense of these aspects of Chinaís growth story. Firstly the theoretical underpinnings of fiscal federalism, new institutional economics, and market-preserving federalism approaches will be presented, as these theories offer the bedrock for most of the applied insights in which China is framed through the lenses of the central-local relations debate. Secondly, the idea of ëmarket-preserving federalism, Chinese-styleí will be critically appraised, highlighting its shortcomings. Thirdly, the paper proceeds by bringing in the mainstream response to these problems, relying on the notion of political incentives and career concerns faced by local cadres. It will be argued that the continual adherence to some core tenets dear to the new institutional economics literature in all previous explanations prevents this broad camp of knowledge to properly grasp the complex dynamics of Chinaís decentralization drive and the role of local governments in the process. Finally, and in closing, an alternative approach will be offered.
    Keywords: Decentralization; Central-local relations; local state; federalism; political incentives; career concerns
    JEL: D72 H70 H77 O43 P26 P30 P48
    Date: 2018–11
  9. By: Lee, Paul S. N.
    Abstract: This study examines the factors contributing to the success of startups in attaining a unicorn status by comparing three successful companies, namely, WeLab, SenseTime, and GoGoVan. We investigate the development of these startups and the various stages of their growth, with a focus on the success factors for getting continuing funding from various sources. We found that a competitive business model of a startup is a first factor to nurture a unicorn. The second factor is the executive power of the founder(s). Almost without exception, there are ups and downs of running a startup, which highlights the importance of leadership. The founders do not need only vision and passion, but soft skills in managing the business and attracting financial support as well. We also found that all three startups have a "China" element. The attractiveness to Chinese market and capital seems to be a must for Hong Kong unicorn to come into shape. Interestingly, profit is not that important a factor for a startup to become a unicorn. Very often, investors buy on the potential of the startup rather than immediate profit. The four factors, namely, competitiveness, executive power of founder(s), attractiveness to Chinese market and capital, and future potential have proved to be important for a startup to succeed in Hong Kong. At the end of the paper, we discuss three different models of running a successful startup. It ranges from facilitating financial loans, using innovative AI technology to solve specific problems, to providing a one-stop e-commerce platform. We anticipate that more startups will succeed in Hong Kong since the unicorns have thrown light on the path which latecomers can follow.
    Date: 2018
  10. By: Tsutsumi, Masahiko
    Abstract: This paper aims at evaluating the economic consequences of the 2018 US-China trade conflict. The potential impact of the proposed tariff increases is calculated using a global CGE model. Capital deepening and technological spillover induced by trade are also taken into account to explore the long-run influence. We can derive the following implications.First, the additionally imposed tariffs on goods alone declines the GDP in the US and China by 0.1% and 0.2%, respectively. The equivalent variation in the US and China is reduced by 9.8 billion and 35.2 billion USD, respectively. Although other countries gain from trade diversion, losses exceed gains globally.Second, considering the effect from capital deepening and technological spillover induced by trade makes the situation worse. The GDP in the US and China declines by 1.6% and 2.5%, respectively. The equivalent variation in the US and China is reduced by 199.5 billion USD and 187.1 billion USD, respectively. Again, the trade diversion is not large enough to recover losses in these countries.Third, the imposed tariffs distort relative prices, resulting in changes to the global production structure. Both the US and China lose their comparative advantage in transport, electronic, and machinery equipment production, while other countries expand their production in these sectors.Finally, China’s retaliatory tariff increases worsens the US economy to some extent, but it comes at a cost to the Chinese economy. In the long run, retaliation is not an appropriate policy response
    Keywords: the US, China, Tariff, Trade Policy, Retaliation, CGE model
    JEL: F13 F17 F51
    Date: 2018–12
  11. By: Peter Kuhn; Kailing Shen; Shuo Zhang
    Abstract: We document how explicit employer requests for applicants of a particular gender enter the recruitment process on a Chinese job board. We find that 95 percent of callbacks to gendered jobs are of the requested gender; worker self-selection (“compliance” with employers’ requests) and employer callback decisions from applicant pools (“enforcement”) both contribute to this association, with compliance playing the larger role. Explicit gender requests account for over half of the gender segregation and gender wage gap observed on the board. Ad-level regressions with job title and firm fixed effects suggest that employers’ explicit gender requests have causal effects on the gender mix of applications received, especially when the employer’s likely gender preference is hard to infer from other contents of the ad. Application-level regressions with job title and worker fixed effects show that both men and women experience a callback penalty when applying to a gender-mismatched job; this penalty is significantly greater for women (44 percent) than men (26 percent).
    JEL: J16 J63 J71
    Date: 2018–12
  12. By: Jim H. Shen; Leilei Shen; Jun Zhang (Department of Economics, SOAS University of London, UK)
    Abstract: This paper proposes a theoretical model and shows that the comparative advantage of China’s factor endowment allows firms specializing in the midstream stage to gain at least as much as firms that specialize in the two ends of the supply chain (capital-intensive stage and labour-intensive stage) in terms of labour productivity and profitability, if and only if they have at least as much viability and use intermediate level of capital intensity. The empirical results are consistent with the theory’s predictions. Our findings on China’s industry supply chain production patterns provide a new angle on the division of gains in the vertical production network driven by the endowment structure. This could have far-reaching implications for the industrial development of other middle-income countries.
    Keywords: Comparative Advantage, Factor Endowment Structure, labour-intensive, capital-intensive, industry chains, viability, labour productivity
    JEL: F12 F23 L14
    Date: 2018–12

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