nep-cna New Economics Papers
on China
Issue of 2019‒06‒17
seven papers chosen by
Zheng Fang
Ohio State University

  1. China's Investment in ASEAN: Paradigm Shift or Hot Air? By Guanie Lim
  2. Factions, Local Accountability, and Long-Term Development: Theory and Evidence By Hanming Fang; Linke Hou; Mingxing Liu; Lixin Colin Xu; Pengfei Zhang
  3. Metal Prices Made in China? A Network Analysis of Industrial Metal Futures By Pierre L. Siklos; Martin Stefan; Claudia Wellenreuther
  4. Effects of R&D subsidies on regional economic dynamics: Evidence from Chinese provinces By Jonathan Eberle; Philipp Boeing
  5. Valuing Mortality Risk in China: Comparing Stated-Preference Estimates from 2005 and 2016 By Hammitt, James K.; Geng, Fangli; Guo, Xiaoqi; Nielsen, Chris P.
  6. China and the world trade organisation: towards a better fit By Petros C. Mavroidis; André Sapir
  7. China’s extraordinary population expansion and its determinants during the qing period, 1644-1911 By Deng, Kent; Shengmin, Sun

  1. By: Guanie Lim (Nanyang Centre for Public Administration, Nanyang Technological University, Singapore)
    Abstract: This paper focuses on China fs outward foreign direct investment (FDI), arguably one of the most prominent forms of enew f capital entering the Association of South East Asian Nations (ASEAN) in recent times, not least since the Belt and Road Initiative (BRI) was announced by Chinese President Xi Jinping in 2013. Despite initial warmth and hopes for Chinese capital to uplift the economies of the region, recent years have witnessed some high profile pushback against China by some ASEAN members. Key concerns include but are not limited to new, often project-related concerns as well as old, if unspoken, fears that eChina is buying the world f through a spate of edebt trap diplomacy f. This paper aims to shed light on this issue, focusing on China fs outward FDI into ASEAN. Through an analysis of statistical information, it shows that Chinese FDI in ASEAN economies is considerably esmaller f than what popular rhetoric suggests. Firstly, Chinese outward FDI, while increasing in value, is not more significant than the region fs traditional investors, mainly Japan and ASEAN itself. Secondly, the quality of Chinese outward FDI is considerably less sophisticated and sustainable than what is commonly expected. Much of it is directed towards tertiary industries such as real estate activities, which contain a rather speculative element.
    Date: 2019–06
  2. By: Hanming Fang (Department of Economics, University of Pennsylvania); Linke Hou (Shandong University); Mingxing Liu (Peking University); Lixin Colin Xu (World Bank); Pengfei Zhang (Peking University)
    Abstract: We develop a theoretical model of how factional affiliation and local accountability can shape the policy choices of local officials who are concerned about political survivals, and subsequently affect the long-term local development. We provide empirical evidence in support of the theoretical predictions using county-level variations in development performance in Fujian Province in China. When the Communist armies took over Fujian Province from the Nationalist control circa 1949, communist cadres from two different army factions were assigned as county leaders. For decades the Fujian Provincial Standing Committee of the Communist Party was dominated by members from one particular faction, which we refer to as the strong faction. Counties also differed in terms of whether a local guerrilla presence had existed prior to the Communist takeover. We argue that county leaders from the strong faction were less likely to pursue policies friendly to local development because their political survival more heavily relied on their loyalty to the provincial leader than on the grassroots support from local residents. By contrast, the political survival of county leaders from the weak faction largely depended on local grassroots support, which they could best secure if they focused on local development. In addition, a guerrilla presence in a county further improved development performance either by intensifying the local accountability of the county leader, or by better facilitating the provision of local public goods beneficial to development. We find consistent and robust evidence supporting these assumptions. Being affiliated with weak factions and having local accountability are both associated with sizable long-term benefits that are evident in terms of a county’s growth and level of private-sector development, its citizens’ education levels, and their survival rates during the Great Chinese Famine. We also find that being affiliated with the strong faction and adopting pro-local policies are associated with higher likelihood of a local leader’s political survival.
    Keywords: Local Accountability; Factional Politics; Political Survival; Development Performance; Famine
    JEL: O1 O43 H70 D72
    Date: 2019–05–29
  3. By: Pierre L. Siklos; Martin Stefan; Claudia Wellenreuther
    Abstract: Apart from being the world’s greatest consumer and producer of industrial metals, China now also features the most actively traded industrial metal futures contracts worldwide. Using a sample of 29 futures contracts traded on exchanges in the United States, the United Kingdom, India and China, we estimate VAR models and conduct variance decompositions, which are then visualized in the form of networks. The results indicate that China is, despite its role as key actor in both real and financial industrial metal markets, a price taker.
    Keywords: Commodity Markets, China, Industrial Metals, Price Leadership, Networks
    Date: 2019–06
  4. By: Jonathan Eberle (Department of Economic Geography and Location Research, Philipps University Marburg); Philipp Boeing (ZEW - Leibniz Centre for European Economic Research, Mannheim and Peking University, China Center for Economic Research (CCER), Beijing)
    Abstract: We investigate the impact of research and development (R&D) subsidies on R&D inputs of large- and medium-sized firms and on additional innovation and economic activities in Chinese provinces. A panel vector autoregressive (VAR) model and corresponding impulse response function (IRF) analysis allow us to differentiate between direct and indirect effects, which add up to total effects. We find that an increase of R&D subsidies significantly decreases private R&D investments, although there is a significant positive effect on the R&D personnel employed in firms. We interpret these findings as a partial crowding-out effect because public funds substitute some private funds while total R&D inputs still increase. Complementarily, we find a positive secondary effect on the provincial patent activity, our measure of technological progress. Interestingly, we also find potentially unintended effects of R&D subsidies on increases in the investment rate in physical capital and residential buildings. Although R&D subsidies fail to incentivize private R&D expenditures, firms increase total R&D inputs, and provincial economies benefit from secondary effects on technological progress and capital deepening.
    Keywords: China, R&D subsidies, regional economic growth, panel VAR, impulse response functions
    JEL: C33 R11 R58 O38 O47
    Date: 2019–06
  5. By: Hammitt, James K.; Geng, Fangli; Guo, Xiaoqi; Nielsen, Chris P.
    Abstract: We estimate the marginal rate of substitution of income for reduction in current annual mortality risk (the “value per statistical life” or VSL) using stated-preference surveys administered to independent samples of the general population of Chengdu China in 2005 and 2016. We evaluate the quality of estimates by the theoretical criterion that WTP for risk reduction should be strictly positive and nearly proportional to the magnitude of the risk reduction (evaluated by comparing answers between respondents). We test the effect of excluding respondents whose answers violate these validity criteria. For subsamples of respondents that satisfy the criteria, point estimates of the sensitivity of WTP to risk reduction are consistent with theory and yield estimates of VSL that are two to three times larger than estimated using the full samples. Between 2005 and 2016, estimated VSL increased sharply, from about 22,000 USD in 2005 to 550,000 USD in 2016. Income also increased substantially over this period. Attributing the change in VSL solely to the change in income implies an income elasticity of about 2.5.
    Keywords: value per statistical life; stated preference; willingness to pay
    JEL: D61 H43 I18 Q51
    Date: 2019–06–14
  6. By: Petros C. Mavroidis; André Sapir
    Abstract: China’s accession to the World Trade Organisation in 2001 was hailed as the natural conclusion of a long march that started with the reforms of Deng Xiaoping in the 1970s. However, China’s participation in the WTO has been anything but smooth. Its self-proclaimed socialist market economy system has alienated its trading partners. Two diametrically opposite approaches have been proposed to deal with the emerging problems. One is to demand that China changes its economic regime. The other is to stay idle and accept that the WTO must accommodate different economic regimes, no matter how idiosyncratic. In this paper, we argue that there is a more promising third way. In our view, the problems posed by China arise from the fact that, while in the past the GATT/WTO had to address the accession of socialist countries or of big trading nations, it never had to deal with a big, socialist country like China. In order to retain its principles while accommodating China, the WTO needs to translate some of its implicit legal understanding into explicit treaty language. We advance specific proposals to this effect.
    Date: 2019–06
  7. By: Deng, Kent; Shengmin, Sun
    Abstract: It has long been puzzled why and how China’s population was able to multiply four-fold from circa 1750 to 1850. Descriptions/explanations as well as reservations/suspicions vary widely and the debate can be energetic and uncompromising at the same time. This research aims to settle some aspects of the debate both qualitatively by looking at the interplay between China’s resource endowments (e.g. farmland), technology (new crops), institutions (landownership, aided migration, disaster relief and so forth) and exogenous shocks (wars and natural disasters) on the one hand, and quantitatively by deploying empirical test on correlations between populations growth and factors that influenced that growth. Our key findings indicate that China’s demographic upsurge during the Qing Period (1644-1911) was achieved with a synergy of positive factors and mainly by the non-market sector.
    Keywords: Exogenous shocks; Living standards; New technology; Population growth; Resource endowments; Tax burden; Urban food prices
    JEL: N0 E6
    Date: 2019–01–01

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