nep-cna New Economics Papers
on China
Issue of 2019‒08‒19
ten papers chosen by
Zheng Fang
Ohio State University

  1. Does Import Competition Reduce Domestic Innovation? Evidence from the 'China Stock' and Firm-Level Data on Canadian Manufacturing By Myeongwan Kim
  2. Microfinancing and Home-purchase Restrictions: Evidence from the Online “Peer-to-Peer” Lending in China By Chen, Xin; Qin, Yaohua; Xiao, He; Zhang, Yifei
  3. Does College Location Affect the Location Choice of New College Graduates? Evidence from China By Huang, Mian; Xing, Chunbing; Cui, Xiaoyong
  4. Reforms’ Effects on Chinese stock markets world integration - An Empirical analysis with t-DCCGARCH model By Yang Mestre-Zhou
  5. China shock: environmental impacts in Brazil By Victor Simões Dornelas; Ariaster Baumgratz Chimeli
  6. Missing Women, Gender Imbalance and Sex Ratio at Birth: Why the One-Child Policy Matters By Wang, Qingfeng
  7. The Impact of the US-China Trade War on Japanese Multinational Corporations By SUN Chang; TAO Zhigang; YUAN Hongjie; ZHANG Hongyong
  8. What are the Price Effects of Trade? Evidence from the US and Implications for Quantitative Trade Models By Xavier Jaravel; Erick Sager
  9. Exchange rate puzzles: evidence from rigidly fixed nominal exchange rate systems By Charles Engel; Feng Zhu
  10. A Flow Measure of Missing Women by Age and Disease By Stephan Klasen; Sebastian Vollmer

  1. By: Myeongwan Kim
    Abstract: A key economic issue in Canada is the declining Business Enterprise Research and Development in manufacturing since the early 2000s. Accompanying this, the total factor productivity (TFP) growth in manufacturing slowed after 2000. However, there has not been a definitive explanation for these trends. To deepen our understanding of this phenomenon, we focus on the increasing Chinese import share in the total domestic absorption in Canadian manufacturing since the early 2000s, which appears to be driven by positive supply shocks within Chinese manufacturing. Based on a firm-level database covering all incorporated firms in Canadian manufacturing, we find that rising Chinese import competition led to declines in R&D expenditure and TFP growth within firms but reallocated employment towards more productive firms and induced less productive firms to exit. The negative within-effects were pronounced for firms that were initially smaller, less profitable, and less productive. These firms also experienced declines in their profit margins due to rising Chinese import competition while larger and better-performing firms did not. Our estimates imply that rising Chinese import competition can explain about 7 per cent of the total decline of $1.36 billion (2007 CAD) in R&D expenditure in Canadian manufacturing between 2005 and 2010. Although it led to declines in TFP within firms, the positive reallocation effects more than offset the negative within-effect. Had there been no increase in Chinese import competition between 2005 and 2010, TFP in Canadian manufacturing would have declined by 1.26 per cent per year instead of the actual 1.09 per cent per year over this period.
    Keywords: China Shock, Canada, Imports, Productivity, Innovation
    JEL: O32 O51 O53 L60
    Date: 2019–08
  2. By: Chen, Xin; Qin, Yaohua; Xiao, He; Zhang, Yifei
    Abstract: This paper uses a quasi-natural experiment to study how houseowners’ borrowing costs were affected by the housing value fluctuation in China using a novel micro-level data from an online peer-to-peer (P2P) lending platform. The impacts on other equilibrium loan variables such as borrowing duration and numbers of lenders are also examined. By taking the housing purchase restriction policy shock as an exogenous event, we employ a difference-in-differences (DD) identification strategy. It is found that the equilibrium interest rate decreased, the growth rate of the deal completion time reduced and the number of investors went up for borrowers with house properties from the cities implementing the restriction policy. It echoes from a further triple differences (DDD) when considering city-specific effect based on samples with houseowners and non-houseowners. In addition, we estimate the heterogeneous effect for both household and city-level characteristics. Our dynamic analysis indicates that effects on houseowners’ P2P borrowing activities persist for 9 months. The channel of the effect was from the collateral effect rather than the pure wealth effect.
    Keywords: P2P, housing price, home-purchase restriction, collateral effect
    JEL: D14 G21 G28 R28
    Date: 2019–07–30
  3. By: Huang, Mian (Southwestern University of Economics and Finance); Xing, Chunbing (Beijing Normal University); Cui, Xiaoyong (Peking University)
    Abstract: Based on a representative survey of new college graduates in China, we examine the impact of college location on their location choice upon graduation. We use a discrete choice model and the BLP method to solve the endogeneity problem of housing cost and to estimate the unobservable location features. Furthermore, we allow for different distributions of city preference for graduates studying in different regions to address the self-selection problem of college location. Empirical results show that the graduates are significantly more likely to stay in where they attended college, to return to their hometown, and to avoid cities with high housing costs. Simulation exercise shows that the impact of college location on migration varies considerably across cities, and there is significant heterogeneity for students from universities of different tiers and from rural vs. urban areas. Reduced form evidence suggests that internship in the local labor market plays an important role in raising the probability of staying. College education increased the students' interaction with the local economy and reduced the costs of job search.
    Keywords: higher education, regional development, location choice, human capital
    JEL: J13 J16 J61 J24
    Date: 2019–07
  4. By: Yang Mestre-Zhou (MRE, Université de Montpellier)
    Abstract: In recent years the Chinese government has instituted a series of reforms to restructure and open the Chinese financial system. This paper studies the dynamic correlations and sensitivities between Chinese mainland stock market and five major stock markets with the multivariate t-DCC-GARCH model. We also consider a Normal-DCC model and results show that t-DCC improves slightly the results. The analysis of reforms’ effects on dynamic correlations and sensitivities prove that the Chinese mainland market is more closely tied to Asian stock markets over time, followed by the United States, and with relatively lower correlations with Europe and the United Kingdom. We highlight that the implementation of reforms changes theirs correlations and sensitivities over time. Since the reforms, the correlation between China and international stock markets has been reinforced.
    Keywords: DCC-GARCH, bivariate t distribution, Chinese Stock Market, Dynamic Correlation, Timevarying sensitivity, Chinese reforms
    JEL: C32 C58 G15
    Date: 2019–08
  5. By: Victor Simões Dornelas; Ariaster Baumgratz Chimeli
    Abstract: We study whether the “China shock†, defined as China’s rapid emergence in global markets, caused environmental impacts in Brazilian municipalities, since previous evidence points to effects on real wages and formal sector employment over the period of 2000 to 2010. Building on recent theoretical developments, we implement a shift-share strategy to explore variation in economic specialization between municipalities and find that China’s direct influence on deforestation of the Amazon and Cerrado was on average insignificant, which is supported by the literature. On the other hand, China’s demand for commodities seems to have increased pollution-related mortality of children in mining municipalities, a result obtained by comparing it to mortality caused by other factors. However, we show that this is most likely explained by a municipality’s degree of specialization in mining activities rather than its exposure to trade with China. We conclude that the environmental impacts of the China shock on Brazilian municipalities were small, if not negligible.
    Keywords: international trade; deforestation; infant mortality; Brazil; China
    JEL: F18 Q52 Q56
    Date: 2019–08–06
  6. By: Wang, Qingfeng
    Abstract: In this paper, we show that the one-child policy has played a significant role in the decline of China’s fertility. The one-child policy had reduced China’s fertility rate by an additional 11.5%, based on a year-on-year comparison with the case if China had not implemented the policy. The methodology we introduced in estimating the number of “missing women” improves on the method employed in Anderson and Ray (2010). Our findings suggest that the one-child policy resulted in a total of approximately 11 million missing women in China, and contributed to more than 50% of its outstanding gender imbalance. The adoption of the one-child policy has prevented around 50 million births, and is confirmed to be the major cause of China’s highly skewed sex ratio at birth.
    Keywords: Fertility rate, Missing women, Gender imbalance, the One-child policy
    JEL: J13 J18
    Date: 2018–06–04
  7. By: SUN Chang; TAO Zhigang; YUAN Hongjie; ZHANG Hongyong
    Abstract: Using detailed data on Japanese multinational corporations (MNCs), we examine the impact of the US-China trade war on MNC activities and market values. We first use quarterly data on the foreign affiliates of these MNCs and show that, relative to affiliates in other Asian countries, Chinese affiliates, especially those with high exposure to trade with North America (NA), in general see a decline in sales since the trade war began. This decline is largely driven by a drop in sales to third countries. Second, we use data on listed Japanese firms and find that, relative to other listed firms, firms exposed to China-NA trade see a decline in stock prices after Trump proposed tariffs on $50 billion of Chinese imports on Mar 22, 2018. This decline is larger for firms whose Chinese affiliates rely more on inputs from Japan. We see this as evidence that the negative impact of the trade war propagates through the global value chain.
    Date: 2019–07
  8. By: Xavier Jaravel; Erick Sager
    Abstract: This paper finds that U.S. consumer prices fell substantially due to increased trade with China. With comprehensive price micro-data and two complementary identification strategies, we estimate that a 1pp increase in import penetration from China causes a 1.91% decline in consumer prices. This price response is driven by declining markups for domestically-produced goods, and is one order of magnitude larger than in standard trade models that abstract from strategic price-setting. The estimates imply that trade with China increased U.S. consumer surplus by about $400,000 per displaced job, and that product categories catering to low-income consumers experienced larger price declines.
    JEL: F10 F13 F14
    Date: 2019–08
  9. By: Charles Engel; Feng Zhu
    Abstract: We examine several major exchange rate puzzles: the excess volatility of real exchange rates; their excess reaction to the real interest rate differentials; the uncovered interest rate parity (UIP) puzzle; the excess persistence of real exchange rates; the exchange rate disconnect puzzle; and the consumption correlation puzzle. We examine the behaviour of real exchange rates among pairs of economies that have rigidly fixed nominal exchange rates, eg countries within the euro area, regions in China and Canada, and Hong Kong SAR vis-à-vis the United States, compared with that among non-euro-area OECD economies. Our results suggest that some of these puzzles are less puzzling under a rigidly fixed exchange rate regime. In particular, real exchange rates appear to have no or little excess volatility; excess reaction of the real exchange rate to real interest rates is less common; there is less disconnect between the real exchange rate and the economic fundamentals; and uncovered interest rate parity appears to hold more frequently in these economies. However, real exchange rates are as persistent in these economies as in the floating rate economies and there appears to be little difference in risk-sharing across countries with fixed versus floating nominal exchange rates. These results may have implications for exchange rate modelling.
    Keywords: consumption correlation puzzle, excess volatility, exchange rate disconnect, exchange rate regime, real exchange rate, purchasing power parity, uncovered interest rate parity
    JEL: E43 F31
    Date: 2019–08
  10. By: Stephan Klasen; Sebastian Vollmer
    Abstract: The existing literature on 'missing women' has suggested that the problem is mostly concentrated in India and China, and mostly related to sex-selective abortions and post-birth neglect of female children. In a recent paper in the Review of Economic Studies, Anderson and Ray (AR) develop a new ‘flow’ measure of missing women in developing countries by comparing actual age-sex-specific mortality rates with 'expected' ones. Contrary to the existing literature on missing women, they, and the World Bank which subsequently followed this method, find that gender bias in mortality is much larger than previously found (4-5 million excess female deaths per year), is as severe among adults as it is among children in India, is larger in Sub-Saharan Africa than in China and India, and existed on a large scale in the US around 1900. We first show that the data for Sub-Saharan Africa used by AR are generated by simulations in ways that deliver the findings on Africa (and the US in 1900) essentially by construction. We also show that the findings are entirely dependent on a highly implausible reference standard for sex-specific mortality from rich countries that is inappropriately applied to settings in developing countries; the attempt to control for differences in the disease environment does not correct for this problem and leads to implausible results. When a more appropriate reference standard is used, most of the new findings of AR regarding the regional and age composition of missing women disappear.
    Keywords: Missing women; gender bias; mortality; disease; age; Sub-Saharan Africa; China; India
    JEL: J16 D63 I10
    Date: 2018–08–21

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