nep-cna New Economics Papers
on China
Issue of 2019‒11‒25
seven papers chosen by
Zheng Fang
Ohio State University

  1. Magnification of the ‘China Shock’ Through the U.S. Housing Market By Yuan Xu; Hong Ma; Robert C. Feenstra
  2. China and the World Bank - How Contrasting Development Approaches affect the Stability of African States By Kai Gehring; Lennart Kaplan; Melvin H.L. Wong
  3. News or Noise? The Information Content of Social Media in China By Femg, Xunan; Johansson, Anders C.
  4. Local Capital Scarcity and Small Firm Growth: Evidence from Real Estate Booms in China By Harald Hau; Difei Ouyang
  5. Environmental Regulation and Export Product Quality: Evidence from Chinese Firms By Yuping Deng; Yanrui Wu; Helian Xu
  6. What are the Price Effects of Trade? Evidence from the U.S. and Implications for Quantitative Trade Models By Xavier Jaravel; Erick Sager
  7. Made and Created in China: Super Processors and Two-way Heterogeneity By Zhiyuan Chen; Aksel Erbahar; Yuan Zi

  1. By: Yuan Xu; Hong Ma; Robert C. Feenstra
    Abstract: The ‘China shock’ operated in part through the housing market, and that is an important reason why the China shock was as big as it was. If housing prices had not responded at all to the China shock, then the total employment effect of the China shock would have been reduced by more than one-half. Housing prices in the United States did respond to the China shock, however, so the independent employment effect of the China shock is reduced by about 20–30%, with that remainder reflecting exogenous changes in housing prices.
    JEL: F14 R31
    Date: 2019–11
  2. By: Kai Gehring (University of Zurich, CESifo); Lennart Kaplan (German Development Institute); Melvin H.L. Wong (Leibniz University Hannover)
    Abstract: China’s development model challenges the approaches of traditional Western donors like the World Bank. We argue that both aim at stability, but differ in the norms propagated to achieve that. Using fixed effects and IV estimations, we analyze a broad range of subnational stability measures in Africa. Aid by both the WB and China does not increase outright conflict nor any type of citizen protest, on average. Both even reduce outright conflict by governments against civilians. Still, Chinese aid is associated with more government repression and an increased acceptance of authoritarian norms, while the World Bank projects strengthen democratic values.
    Keywords: Development Models, Development Aid, Stability, Conflict, Repression, World Bank, China, Africa, Geolocation
    JEL: D74 F52 H81 O19 P51
    Date: 2019–10
  3. By: Femg, Xunan (Shanghai University of Finance and Economics); Johansson, Anders C. (Stockholm China Economic Research Institute)
    Abstract: We examine the role top executives’ social media activity plays for the stock market. When analyzing a unique data set of board chairs’ posts on Chinese social media platform Sina Weibo, we find that they are positively associated with stock returns. When we take a closer look at content, we show it is work-related content that drives stock returns. Non-work-related content has an immediate but transitory effect, suggesting that such posts grab the attention of investors but only contain noise. We also find that information asymmetry plays a significant role in the relationship between board chairs’ Weibo posts and stock returns. Also, the more followers that board chairs have on their Weibo account, the larger the effect Weibo posts have on stock returns. Furthermore, relative to state-controlled firms, Weibo posts by board chairs in private firms exhibit a significantly larger effect on stock returns. Finally, we find that a laxer regulatory environment translates into board chairs’ work-related Weibo posts having a larger effect on stock returns. Top executive social media activity thus acts as a complementary channel for firm-specific information being disseminated to the stock market.
    Keywords: Social Media; Microblogging; Information dissemination; Stock market; Investors; China
    JEL: G12 G14 N20
    Date: 2019–11–15
  4. By: Harald Hau; Difei Ouyang
    Abstract: In geographically segmented credit markets, local real estate booms can deteriorate the funding conditions for small manufacturing firms and undermine their competitiveness. Using exogenous variation in the administrative land supply across 172 Chinese cities, we show that higher predicted real estate prices cause higher borrowing costs for small manufacturing firms, reduce their bank lending, lower their investment rate and labor productivity, and reduce their output and TFP growth by economically significant magnitudes. These effects are absent in large and listed companies with access to the national capital market. The evidence highlights the benefits of financial market integration.
    Keywords: factor price externalities, real estate booms, firm growth, financial constraints
    JEL: D22 D24 R31
    Date: 2019
  5. By: Yuping Deng (School of Economics and Trade, Hunan University, Changsha, P.R. China); Yanrui Wu (Business School, The University of Western Australia); Helian Xu (School of Economics and Trade, Hunan University, Changsha, P.R. China)
    Abstract: The Chinese government adopted a series of pollution reduction targets in its eleventh five-year (2006-2010) economic development program. Whether this program can achieve its goal of pollution reduction and quality improvement for exports is of vital importance for China’s sustainable development. This paper aims to investigate the effects of these environmental regulation policies on export product quality by using the quasi-difference-in-difference method. Empirical results show that the implementation of these pollution reduction targets significantly reduces export product quality. This negative impact is more profound in western regions, capital-intensive sectors and privately-owned firms. Moreover, the negative effect is only observed among firms exporting to non-OECD countries, whereas the export quality of firms exporting to OECD countries is positively affected by the new policy. Lastly, our extended analysis shows that the negative effects can be mitigated through product switching within the firms.
    Keywords: Environmental regulation; Export product quality; Product switching; China
    JEL: F10 F18 Q56
    Date: 2019
  6. 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.
    Keywords: China ; Inequality ; Markups ; Prices ; Trade
    JEL: F10 F13 F14
    Date: 2019–09–20
  7. By: Zhiyuan Chen (Pennsylvania State University); Aksel Erbahar (Erasmus University Rotterdam); Yuan Zi (University of Oslo)
    Abstract: In this paper, we show that there exists a special breed of firms that are active in both ordinary and processing exports. Contrary to the existing literature that describes processing firms as inferior, these mixed firms are superior to other firms in multiple dimensions, and hence we call them “super processors.†We build on Antr’et al. (2017) and Bernard et al. (2019) to develop a model in which firms are heterogeneous in multiple stages of production. Firms endogenously choose to become suppliers or final good producers, and those that excel in both manufacturing ability and blueprint quality choose to engage in both activities. We test our model’s central prediction by exploiting China’s pilot “paperless†processing trade supervision program that lowered the cost of processing trade but left ordinary trade costs unchanged. We find that facilitating processing exports induces productive domestic downstream firms to establish their own trademarks. Our results highlight that processing trade not only leads goods to be “Made in China,†but also “Created in China.â€
    Keywords: heterogeneous firms, production networks, trade policy, processing trade, China
    JEL: F14 F12 F13
    Date: 2019–11–19

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