nep-cna New Economics Papers
on China
Issue of 2019‒07‒22
seven papers chosen by
Zheng Fang
Ohio State University

  1. Chinese regional inequality and sectoral foreign direct investment By Azarhoushang, Behzad; Wu, Jennifer Pédussel; Zaroki, Shahryar
  2. China’s Overseas Lending By Sebastian Horn; Carmen M. Reinhart; Christoph Trebesch
  3. China's lost generation: Changes in beliefs and their intergenerational transmission By Roland, Gerard; Yang, David Y.
  4. E-commerce as a Potential New Engine for Growth in Asia By Tidiane Kinda
  5. Regularities in stock markets By Abhin Kakkad; Harsh Vasoya; Arnab K. Ray
  6. Cultural Factors and Study Destinations of International Students By Hao Wei; Ran Yuan; Laixun Zhao
  7. Is favoritism a threat to Chinese aid effectiveness? A subnational analysis of Chinese development projects By Dreher, Axel; Fuchs, Andreas; Hodler, Roland; Parks, Bradley; Raschky, Paul A.; Tierney, Michael J.

  1. By: Azarhoushang, Behzad; Wu, Jennifer Pédussel; Zaroki, Shahryar
    Abstract: Following the 1978 economic reforms, China gradually became first amongst developing countries and the second in the world, after the USA, in terms of stock of inward Foreign Direct Investment (FDI). Sustained GDP growth, a high rate of capital return and brisk economic development made China one of the best destinations for foreign capital; however, the benefits of this spectacular growth have not been evenly distributed throughout the various Chinese regions. There are many low-income and poor economic performing provinces in China although poverty is mainly concentrated in the inland regions. Since the beginning of the 2000s, a series of policies have been designed and implemented by the Chinese government to encourage foreign company investment in central and western provinces to help decrease the regional inequality with limited successes. This paper uses Panel Least Squares method to empirically analyze the impact of industrial sector FDI on Chinese regional inequality during 2003-2013. The resulting analysis shows the connection between FDI in industrial sectors and regional inequality in China. In particular, regional inequality affects FDI location choices. The findings show that economic and non-economic indicators such as human capital, infrastructure, per capita income, and government policies affect regional inequality and foreign firms' location choices. Despite government policies to support inland regional economic development, foreign firms still prefer to invest in coastal provinces further illustrating the effects of clusters in this region.
    Keywords: FDI,China,Panel,regional inequality,MNCs
    JEL: F21 F23 F16 C33
    Date: 2019
  2. By: Sebastian Horn; Carmen M. Reinhart; Christoph Trebesch
    Abstract: Compared with China’s dominance in world trade, its expanding role in global finance is poorly documented and understood. Over the past decades, China has exported record amounts of capital to the rest of the world. Many of these financial flows are not reported to the IMF, the BIS or the World Bank. “Hidden debts” to China are especially significant for about three dozen developing countries, and distort the risk assessment in both policy surveillance and the market pricing of sovereign debt. We establish the size, destination, and characteristics of China’s overseas lending. We identify three key distinguishing features. First, almost all of China’s lending and investment abroad is official. As a result, the standard “push” and “pull” drivers of private cross-border flows do not play the same role in this case. Second, the documentation of China’s capital exports is (at best) opaque. China does not report on its official lending and there is no comprehensive standardized data on Chinese overseas debt stocks and flows. Third, the type of flows is tailored by recipient. Advanced and higher middle-income countries tend to receive portfolio debt flows, via sovereign bond purchases of the People’s Bank of China. Lower income developing economies mostly receive direct loans from China’s state-owned banks, often at market rates and backed by collateral such as oil. Our new dataset covers a total of 1,974 Chinese loans and 2,947 Chinese grants to 152 countries from 1949 to 2017. We find that about one half of China’s overseas loans to the developing world are “hidden”.
    JEL: F21 F34 F42 G15 H63 N25 O10
    Date: 2019–07
  3. By: Roland, Gerard; Yang, David Y.
    Abstract: Beliefs about whether effort pays off govern some of the most fundamental choices individuals make. This paper uses China’s Cultural Revolution to understand how these beliefs can be affected, how they impact behavior, and how they are transmitted across generations. During the Cultural Revolution, China’s college admission system based on entrance exams was suspended for a decade until 1976, effectively depriving an entire generation of young people of the opportunity to access higher education (the “lost generation”). Using data from a nationally representative survey, we compare cohorts who graduated from high school just before and after the college entrance exam was resumed. We find that members of the “lost generation” who missed out on college because they were born just a year or two too early believe that effort pays off to a much lesser degree, even 40 years into their adulthood. However, they invested more in their children’s education, and transmitted less of their changed beliefs to the next generation, suggesting attempts to safeguard their children from sharing their misfortunes.
    JEL: Z1 I23 O53 P26 P48
    Date: 2019–07–04
  4. By: Tidiane Kinda
    Abstract: The use of e-commerce around the world has accelerated in recent years, with Asia, led by China, spearheading the rise. Using cross-country enterprise survey data, this paper shows that firms engaged in e-commerce have higher productivity and generate a larger share of their revenues from exports than other firms. This is particularly true in Asia, where firms have 30 percent higher productivity and generate about 50 percent more of their revenues from exports. The results presented in this paper are robust to the use of instrumental variables, which highlight possible larger effects of e-commerce on Asian productivity and exports when essential elements are in place for its effective use, such as reliable electricity, telecommunication, and transport infrastructure. Despite the rapid growth of e-commerce in recent years, gaps persist in digital infrastructure and legislation, preventing many Asian countries from fully reaping the potential benefits of e-commerce.
    Date: 2019–07–01
  5. By: Abhin Kakkad; Harsh Vasoya; Arnab K. Ray
    Abstract: From the stock markets of six countries with high GDP, we study the stock indices, S&P 500 (NYSE, USA), SSE Composite (SSE, China), Nikkei (TSE, Japan), DAX (FSE, Germany), FTSE 100 (LSE, Britain) and NIFTY (NSE, India). The daily mean growth of the stock values is exponential. The daily price fluctuations about the mean growth are Gaussian, but with a finite asymptotic convergence. The growth of the monthly average of stock values is statistically self-similar to their daily growth. The monthly fluctuations of the price follow a Wiener process, with a decline of the volatility. The mean growth of the daily volume of trade is exponential. These observations are globally applicable and underline regularities across global stock markets.
    Date: 2019–06
  6. By: Hao Wei (Department of International Economics, Beijing Normal University, China); Ran Yuan (Department of International Economics, Beijing Normal University, China); Laixun Zhao (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: We examine the role of cultural factors in attracting international students, using data of 102 countries from 2000 to 2015. Our results show that the export of cultural products is conducive to the increase of international students, and in particular, international students choose to study in developing countries whose official language and religious beliefs are different from their home countries, while they tend to go to developed countries with a common language. We also examine the features of international students in China and Chinese students in other countries. The policy implication from our study is that "soft power" such as a unique culture, common value and migration networks is important in attracting foreign students.
    Keywords: Cultural Factors, International Students, Cultural Goods Exports, Migration Networks, Chinese Students Abroad
    JEL: F16 I23
    Date: 2019–07
  7. By: Dreher, Axel; Fuchs, Andreas; Hodler, Roland; Parks, Bradley; Raschky, Paul A.; Tierney, Michael J.
    Abstract: Chinese aid comes with few strings attached, allowing recipient country leaders to use it for domestic political purposes. The vulnerability of Chinese aid to political capture has prompted speculation that it may be economically ineffective, or even harmful. We test these claims by estimating the effect of Chinese aid on subnational economic development - as measured by per-capita nighttime light emissions - and whether this effect is different in politically favored jurisdictions than in other parts of the country. Contrary to the conventional wisdom, we do not nd that the local receipt of Chinese aid undermines economic development outcomes at either the district level or provincial level. Nor does political favoritism in the allocation of Chinese aid towards the home regions of recipient country leaders reduce its effectiveness. Our results - from 709 provinces and 5,835 districts within 47 African countries from 2001-2012 - demonstrate that Chinese aid improves local development outcomes, regardless of whether such aid is allocated to politically consequential jurisdictions.
    Keywords: foreign aid,development finance,aid effectiveness,favoritism,economic growth,Africa,China
    JEL: D73 F35 O19 O47 P33 R11
    Date: 2019

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