nep-cna New Economics Papers
on China
Issue of 2020‒03‒09
fourteen papers chosen by
Zheng Fang
Ohio State University

  1. The Determinants of China's International Portfolio Equity Allocations By Agarwal, Isha; Gu, Grace Weishi; Prasad, Eswar
  2. The Effect of Migration Policy on Growth, Structural Change, and Regional Inequality in China By Tongtong Hao; Ruiqi Sun; Trevor Tombe; Xiaodong Zhu
  3. China's growing engagement with the UNDS as an emerging nation: Changing rationales, funding preferences and future trends By Mao, Ruipeng
  4. China: current and potential role in infrastructure investment in Latin America By Chauvet, Pablo; Chen, Taotao; Jaimurzina, Azhar; Xu, Run; Jin, Ying
  5. When Elephants Make Peace : The Impact of the China-U.S. Trade Agreement on Developing Countries By Freund,Caroline; Maliszewska,Maryla; Mattoo,Aaditya; Ruta,Michele
  6. Implications for Provincial Economies of Meeting China's NDC through an Emission Trading Scheme : A Regional CGE Modeling Analysis By Pang,Jun; Timilsina,Govinda R.
  7. Trade liberalization, input intermediaries and firm productivity: evidence from China By Defever, Fabrice; Imbruno, Michele; Kneller, Richard
  8. Methodology and Findings for the Exposure Analysis of the Chinese Wastewater Sector to Flooding and Earthquakes Hazards By Hu,Xi; Pant,Raghav; Zorn,Conrad; Lim,Weeho; Koks,Elco Eduard; Mao,Zhimin
  9. Global Footprints of Monetary Policy By Silvia Miranda-Agrippino; Tsvetelina Nenova; Helene Rey
  10. How Much Would China Gain from Power Sector Reforms ? An Analysis Using TIMES and CGE Models By Timilsina,Govinda R.; Pang,Jun; Yang,Xi
  11. The US-China trade deal and its impact on China's key trading partners By Chowdhry, Sonali; Felbermayr, Gabriel
  12. Real Estate, Interest Rates, and Crowding-out Effects By Tianye Lin; Yangyang Ji; Sen Zhang
  13. Linking Top-Down and Bottom-UP Models for Climate Policy Analysis : The Case of China By Timilsina,Govinda R.; Pang,Jun; Yang,Xi
  14. Sequential Monitoring of Changes in Housing Prices By Lajos Horv\'ath; Zhenya Liu; Shanglin Lu

  1. By: Agarwal, Isha (University of British Columbia); Gu, Grace Weishi (University of California, Santa Cruz); Prasad, Eswar (Cornell University)
    Abstract: We analyze shifts in the structure of China's capital outflows over the past decade. The composition of gross outflows has shifted from accumulation of foreign exchange reserves by the central bank to nonofficial outflows. Unlocking the enormous pool of domestic savings could have a significant impact on global financial markets as China continues to open up its capital account and as domestic investors look abroad for returns and diversification. We analyze in detail the allocation patterns of Chinese institutional investors (IIs), which constitute the main channel for foreign portfolio investment outflows. We find that, relative to benchmarks based on market capitalization, Chinese IIs underweight developed countries and high-tech sectors in their international portfolio allocations but overinvest in high-tech stocks in developed countries. To further examine Chinese IIs' joint decisions on destination country-sector pairs, we construct continuous measures of revealed relative comparative advantage and disadvantage in a sector for a country based on trade patterns. We find that, in their foreign portfolio allocations, Chinese IIs overweight sectors in which China has a comparative disadvantage. Moreover, Chinese IIs concentrate such investments in countries that have higher relative comparative advantage in those sectors. Diversification and information advantages related to foreign imports to China seem to influence patterns of foreign portfolio allocations, while yield-seeking and learning motives do not.
    Keywords: capital account liberalization, international investment position, portfolio flows, institutional investors, revealed comparative (dis)advantage
    JEL: F2 F3 F4
    Date: 2020–02
  2. By: Tongtong Hao; Ruiqi Sun; Trevor Tombe; Xiaodong Zhu
    Abstract: Between 2000 and 2015, China's aggregate income quadrupled, its provincial income inequality fell by a third, and its share of employment in agriculture fell by half. Worker migration is central to this transformation, with almost 300 million workers living and working outside their area or sector of hukou registration by 2015. Combining rich individual-level data on worker migration with a spatial general equilibrium model of China's economy, we estimate the reductions in internal migration costs between 2000 and 2015, and quantify the contributions of these cost reductions to economic growth, structural change, and regional income convergence. We find that over the fifteen-year period China's internal migration costs fell by forty-five percent, with the cost of moving from agricultural rural areas to non-agricultural urban ones falling even more. In addition to contributing substantially to growth, these migration cost changes account for the majority of the reallocation of workers out of agriculture and the drop in regional inequality. We compare the effect of migration policy changes with other important economic factors, including changes in trade costs, capital market distortions, average cost of capital, and productivity. While each contributes meaningfully to growth, migration policy is central to China's structural change and regional income convergence. We also find the recent slow-down in aggregate economic growth between 2010 and 2015 is associated with smaller reduction in inter-provincial migration costs and a larger role of capital accumulation.
    Keywords: Migration, Structural Change, Regional Income Convergence, China
    JEL: E24 J61 O15 O41 O47 R12 R23
    Date: 2020–02–26
  3. By: Mao, Ruipeng
    Abstract: As China deepens its engagement in global governance and development, its strategic motivation and rising influence within the UN and on international rules and norms are attracting the world's attention. This paper focuses on China's engagement with the UNDS, specifically Chinese funding and allocation decisions. China's UNDS funding has risen rapidly since 2008 and even accelerated in 2013. Between 2013 and 2017, Chinese funding (excluding local resources) grew at an annual average rate of 33.8 per cent. In 2017, its total contribution reached USD 325.869 million. China's shares of core funding and assessed contribution in its total UNDS funding are much higher than traditional donor countries. However, the share of non-core funding has also jumped. While China tends to mostly provide funds for UNDS development projects, in recent years it has also been hiking funding for humanitarian assistance. This paper also examines three cases of China's earmarked funding - to the UNDP and the WFP, which receive the largest share of its UNDS funds, as well as for UNPDF operations, which count as a voluntary contribution. There are several reasons for China's growing engagement with the UNDS, from evolving perception of foreign aid and appreciating the UN's multilateral assets to fostering the reputation of "responsible great nation" and pushing forward the Belt and Road Initiative (BRI) through cooperation with the UNDS. In general, China continues to integrate into the global development system, and can be expected to maintain its support for the UN and continue to contribute to the UNDS.
    Date: 2020
  4. By: Chauvet, Pablo; Chen, Taotao; Jaimurzina, Azhar; Xu, Run; Jin, Ying
    Abstract: China’s investments are one way for expanding infrastructure that many Latin American countries have been seeking through Public-Private Partnerships (PPP). To attract and retain the interest of the private sector, the existence of a proper, strong governance, as well as stable and sound legal frameworks is paramount. Decision-making and implementation processes also need to be improved to ensure that the match between the infrastructure investment needs in Latin America and the Chinese financing capabilities effectively results in a leap towards the improvement of infrastructure in quantity and quality, an imperative for the sustainable development of the region. The current document offers an overview of the needs for infrastructure investments in Latin America and the region’s experience with PPP in infrastructure up to now, as well as the current capabilities and potential of the Chinese public and private sectors to join the infrastructure PPP market in Latin America.
    Date: 2020–02–28
  5. By: Freund,Caroline; Maliszewska,Maryla; Mattoo,Aaditya; Ruta,Michele
    Abstract: Should the China-U.S. trade agreement prompt relief because it averts a damaging trade war or concern because selective preferential access for the United States to China's markets breaks multilateral rules against discrimination? The answer depends on how China implements the agreement. Simulations from a computable general equilibrium model suggest that the United States and China would be better off under this"managed trade"agreement than if the trade war had escalated. However, compared with the policy status quo, the deal will make everyone worse off except the United States and its input-supplying neighbor, Mexico. Real incomes in the rest of world would decline by 0.16 percent and in China by 0.38 percent because of trade diversion. China can reverse those losses if, instead of granting the United States privileged entry, it opens its market for all trading partners. Global income would be 0.6 percent higher than under the managed trade scenario, and China's income would be nearly 0.5 percent higher. By creating a stronger incentive for China to open its markets to all, an exercise in bilateral mercantilism has the potential to become an instrument for multilateral liberalization.
    Date: 2020–03–03
  6. By: Pang,Jun; Timilsina,Govinda R.
    Abstract: This study analyzes the potential impacts of a national emission trading scheme on provincial economies in China of meeting China's emission reduction pledges, the Nationally Determined Contributions announced under the Paris Agreement. The study developed a multiregional, multisectoral, recursive-dynamic computable general equilibrium model and calibrated it with the latest provincial-level social accounting matrices (2012). The study shows that meeting China's Nationally Determined Contributions through an emission trading scheme would reduce almost 30 percent of the emission reduction from the business as usual scenario in 2030. If the baseline is corrected based on information from a bottom-up energy sector model, TIMES, the required reduction of emissions from the baseline in 2030 drops by half, to 15 percent. At the national level, the emission trading scheme would cause a 1.2 to 1.5 percent reduction in gross domestic product from the business as usual scenario in 2030. If the baseline is corrected, the impact on gross domestic product drops by two-thirds. The emission trading scheme would cause some provincial economies to gain and others to lose. The economic impacts are highly sensitive to the allowance allocation rules. Not only the magnitudes, but also the directions of the economic impacts alter when the allocation rules change. The provinces that rely on coal mining or coal-intensive manufacturing industries are found to experience relatively larger economic losses irrespective of the allowance allocation rules.
    Keywords: Energy and Environment,Energy Demand,Energy and Mining,Oil Refining&Gas Industry,Public Sector Administrative&Civil Service Reform,Public Sector Administrative and Civil Service Reform,De Facto Governments,Democratic Government,Energy Policies&Economics,Employment and Shared Growth
    Date: 2019–06–21
  7. By: Defever, Fabrice; Imbruno, Michele; Kneller, Richard
    Abstract: We investigate theoretically and empirically the role of wholesalers in mediating the productivity effects of trade liberalization. Intermediaries provide indirect access to foreign produced inputs. The productivity effects of input tariff cuts on firms that do not directly import therefore depends on the extent that wholesalers are a feature of input supply within an industry. Using firm level data from China, we document that wholesalers play no such role for direct importers. However, other firms experience productivity gains from reducing input tariffs if trade intermediation of foreign inputs within their sector is high. They suffer efficiency losses otherwise.
    Keywords: firm heterogeneity; trade liberalization; intermediate inputs; productivity; intermediaries; China
    JEL: F12 F13
    Date: 2019–12
  8. By: Hu,Xi; Pant,Raghav; Zorn,Conrad; Lim,Weeho; Koks,Elco Eduard; Mao,Zhimin
    Abstract: This paper describes the methodology and findings for the extreme hazard exposure analysis of the Chinese wastewater sector to flooding and earthquakes hazards. This analysis is undertaken for changing flooding, under climate scenarios, and earthquake exposure of a spatially accurate wastewater treatment plants (WWTP) database for China, covering a total of 1,346 assets with additional attributes quantifying the treatment capacity and users dependent on each plant. For flooding, we apply and downscale a global river routing (CaMa-Flood) model that quantifies the change degree of flood exposures from the present time-period (1980-2005) to the near future time-period (2016-2035) to a far future time period (2036-2055). We find evidence that most climate models project increasing number of WWTP assets face climate-induced flood hazards in both the near and far future, potentially affecting as many as 208 million users by 2050. However, there are spatial and temporal variations from these projections which means that planning for resilient wastewater infrastructure requires more detailed understanding of the vulnerability attributes of WWTPs including their exact location, the number of users they serve as well as their flood protection standards. For earthquakes, we examine the exposure of WWTPs to earthquake hazards through both seismic shaking and induced liquefaction. Overall, we demonstrate the significant risk that earthquakes can have on the WWTP process -- especially on centralized systems. By considering liquefaction susceptibility in combination with shaking, we expose a number of WWTPs that face an increased level of exposure to damages following earthquakes compared to looking at shaking in isolation.
    Keywords: Natural Disasters,Hydrology,Climate Change and Environment,Science of Climate Change,Climate Change and Health
    Date: 2019–06–18
  9. By: Silvia Miranda-Agrippino (Bank of England; CEPR; Centre for Macroeconomics (CFM)); Tsvetelina Nenova (London Business School); Helene Rey (London Business School; CEPR; NBER)
    Abstract: We study the international transmission of the monetary policy of the two world's giants: China and the US. From East to West, the channels of global transmission differ markedly. US monetary policy shocks affect the global economy primarily through their effects on integrated financial markets, global asset prices, and capital ows. EMEs in particular see both a reduction in in ows and a surge in out ows when the market tide turns as a result of a US monetary contraction. Conversely, international trade, commodity prices and global value chains are the main channels through which Chinese monetary policy transmits worldwide. AEs with a strong manufacturing sector are particularly sensitive to these disturbances.
    Keywords: Monetary policy, Global financial cycle, International pillovers, US, China
    JEL: E44 E52 F33 F42
    Date: 2020–01
  10. By: Timilsina,Govinda R.; Pang,Jun; Yang,Xi
    Abstract: Many countries have undertaken market-oriented reforms of the power sector over the past four decades. However, the literature has not investigated whether the reforms have contributed to economic development. This study aims to assess the potential macroeconomic impacts of an element of the power sector reform process that China started in 2015. It uses an energy sector TIMES model and a computable general equilibrium model. The study finds that the price of electricity in China would be around 20 percent lower than the country is likely to experience in 2020, if the country follows the market principle to operate the power system. The reduction in the price of electricity would spill over throughout the economy, resulting in an increase in gross domestic product of more than 1 percent in 2020. It would also increase household income, economic welfare, and international trade.
    Keywords: Energy Policies&Economics,Energy Demand,Energy and Mining,Energy and Environment,Transport Services,Power&Energy Conversion,Energy Sector Regulation
    Date: 2019–06–21
  11. By: Chowdhry, Sonali; Felbermayr, Gabriel
    Abstract: Das Wirtschafts- und Handelsabkommen (ETA) zwischen den USA und China trat am 14. Februar 2020 in Kraft und eröffnete eine neue Phase in der schon langandauenden handels- und geopolitischen Rivalität zwischen beiden Ländern. Das ETA enthält spezifische Ziele für die Erhöhung der chinesischen Importe von US-Gütern und -Dienstleistungen in Höhe von 200 Mrd. US-Dollar für die Jahre 2020 und 2021. Die Autoren zeigen, dass diese Abnahmeverpflichtungen erhebliche Handelsumlenkungseffekte und Marktanteilsverschiebungen für Chinas wichtigste Handelspartner zur Folge haben können. Im Verarbeitenden Gewerbe dürfte Deutschland von den größten Handelsumlenkungseffekten in einer Reihe von Branchen wie Fahrzeuge (-1,28 Mrd. US-Dollar), Flugzeuge (-1,59 Mrd. US-Dollar) und Industriemaschinen (-0,72 Mrd. US-Dollar) betroffen sein. Ebenso werden Entwicklungsländer die Auswirkungen des ETA spüren, wenn China seine Importe auf US-Lieferanten umleitet. Alleine Brasilien könnte im Jahr 2021 infolge des ETA einen Rückgang der Sojabohnenexporte nach China um 4,95 Mrd. US-Dollar erleiden.
    Keywords: US-China trade relations,trade diversion,multilateralism,Beziehungen USA-China,Handelsumlenkung,Multilateralismus
    Date: 2020
  12. By: Tianye Lin (China Economics and Management Academy, Central University of Finance and Economics); Yangyang Ji (China Economics and Management Academy, Central University of Finance and Economics); Sen Zhang (China Economics and Management Academy, Central University of Finance and Economics)
    Abstract: In this paper, we reveal robust findings of the co-movement of real-estate loans, real-estate booms, and market interest rates by observing Chinese data and using vector auto-regressions. We construct a two-sector credit market partial equilibrium model to explain this phenomenon. The findings show that rising real-estate prices are a cause for this co-movement. We believe that an expansion in demand for real-estate loans has brought about an increase in interest rates in the credit market since 2002, which has crowded-out credit for the non-land sector. We also find that rising real-estate prices can lead to expansion in demand for real-estate loans.
    Date: 2020
  13. By: Timilsina,Govinda R.; Pang,Jun; Yang,Xi
    Abstract: Top-down economic models, such as computable general equilibrium models, are the common tools to assess the economic impacts of climate change policies. However, these models are incapable of representing the detailed technological characteristics of the sources of greenhouse gas emissions. The economic impacts measured by the top-down economic models are likely to be overestimated. This study attempts to quantify the overestimation by measuring the economic impacts linking the top-down model with a bottom-up engineering model for the energy sector. The study uses meeting China's pledges under the Paris Agreement for testing this hypothesis. The study shows that the economic impacts measured by the stand-alone top-down model are almost three times as high as those resulting from the model after linking it with the bottom-up model. However, the findings are sensitive to the assumptions and existing or planned policies on energy technologies considered in the bottom-up model.
    Keywords: Energy and Environment,Energy Demand,Energy and Mining,Energy Policies&Economics,Transport Services,Oil Refining&Gas Industry,Climate Change Mitigation and Green House Gases
    Date: 2019–06–20
  14. By: Lajos Horv\'ath (Department of Mathematics, University of Utah); Zhenya Liu (School of Finance, Renmin University of China; CERGAM, Aix--Marseille University); Shanglin Lu (School of Finance, Renmin University of China)
    Abstract: We propose a sequential monitoring scheme to find structural breaks in real estate markets. The changes in the real estate prices are modeled by a combination of linear and autoregressive terms. The monitoring scheme is based on a detector and a suitably chosen boundary function. If the detector crosses the boundary function, a structural break is detected. We provide the asymptotics for the procedure under the stability null hypothesis and the stopping time under the change point alternative. Monte Carlo simulation is used to show the size and the power of our method under several conditions. We study the real estate markets in Boston, Los Angeles and at the national U.S. level. We find structural breaks in the markets, and we segment the data into stationary segments. It is observed that the autoregressive parameter is increasing but stays below 1.
    Date: 2020–02

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