nep-cna New Economics Papers
on China
Issue of 2020‒07‒20
fifteen papers chosen by
Zheng Fang
Ohio State University

  1. From Imitation to Innovation: Where Is all that Chinese R&D Going? By Michael König; Zheng Michael Song; Kjetil Storesletten; Fabrizio Zilibotti
  2. Inequality of opportunity in bodyweight among middle-aged and older Chinese: a distributional approach By Nie, P.; Ding, L.; Jones, A.M.
  3. Does industrial water pollution impede agriculture? Evidence from rice farming in China By Sébastien Marchand; Maimouna Barro; Huanxiu Guo
  4. Corporate Ownership and Managerial Turnover in China and Eastern Europe: A Comparative Meta-Analysis By Ichiro Iwasaki; Xinxin Ma; Satoshi Mizobata
  5. The Impact of Chinese Technical Barriers to Trade on its Manufacturing Imports By Mahdi Ghodsi
  6. How does stock market reflect the change in economic demand? A study on the industry-specific volatility spillover networks of China's stock market during the outbreak of COVID-19 By Fu Qiao; Yan Yan
  7. Reserves and Risk : Evidence from China By Fatum, Rasmus; Hattori, Takahiro; Yamamoto, Yohei
  8. Connective Financing - Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries By Richard Bluhm; Axel Dreher; Andreas Fuchs; Bradley C. Parks; Austin M. Strange; Michael J. Tierney
  9. Estimating Capital Formation and Capital Stock by Economic Sector in China : The Implications for Productivity Growth By Herd,Richard
  10. Institutions, Competitiveness and Cognitive Ability By Syngjoo Choi; Byung-Yeon Kim; Jungmin Lee; Sokbae Lee
  11. China’s Import Demand for Agricultural Products: The Impact of the Phase One Trade Agreement By Robert C. Feenstra; Chang Hong
  12. Multilateral and Multidimensional Wellness Measurement in the Absence of Cardinal Measure: Health, Loneliness, Ageing and Gender in 21st Century China. By Gordon John Anderson; Rui Fu
  14. The Prospects of the China-Pakistan Economic Corridor (CPEC): The Importance of Understanding Western China By McCartney, Matthew
  15. Occupational Dualism and Intergenerational Educational Mobility in the Rural Economy : Evidence from China and India By Emran,M. Shahe; Ferreira,Francisco H. G.; Jiang,Yajing; Sun,Yan

  1. By: Michael König; Zheng Michael Song; Kjetil Storesletten; Fabrizio Zilibotti
    Abstract: We construct a model of firm dynamics with heterogeneous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007--2012. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and find the results to be robust. We perform counterfactuals to study the effect of alternative policies. We find large effects of R&D misallocation on long-run growth.
    JEL: L16 O31 O47 O53
    Date: 2020–06
  2. By: Nie, P.; Ding, L.; Jones, A.M.
    Abstract: Using the 2011 and 2015 waves of the China Health and Retirement Longitudinal Study (CHARLS) linked with the 2014 CHARLS Life History Survey, we provide a comprehensive analysis on inequality of opportunity (IOp) in both body mass index (BMI) and waist circumference (WC) among middle-aged and older Chinese. We find that IOp ranges from 65.5% to 74.6% for BMI (from 82.1% to 95.5% for WC). Decomposition results show that spatial circumstances such as urban/rural residence and province of residence are dominant. Health status and nutrition conditions in childhood are the second largest contributor. Distributional decompositions further reveal that inequality in bodyweight is not simply a matter of demographic (age and gender) inequalities; our set of spatial and health and nutrition conditions in childhood become much more relevant towards the right tails of the bodyweight distribution, where the clinical risk is focused.
    Keywords: inequality of opportunity; body mass index; waist circumference; CHARLS; Shapley-Shorrocks decomposition; unconditional quantile regressions
    JEL: D63 I12 I14
    Date: 2020–06
  3. By: Sébastien Marchand (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Maimouna Barro (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Huanxiu Guo (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In the process of industrialization, relocation of manufacturing industries from urban to rural areas may have important implications for the rural environment and agricultural production. As a demonstration, the aim of this paper is to estimate the impact of wastewater from industrial firms on agricultural yields in rice farming of Jiangsu province, China. Using 2011-2015 panel data from both the China Rural Fixed Point Survey and the China Environmental Statistics Database between 2011 and 2015, we find that industrial wastewater significantly reduces rice yields. The econometric strategy implemented allows us to assume that this result reflects a causal and detrimental biological effect of wastewater on the growing process of the rice. These results highlight the need to better understand the conflicts between industry and agriculture at the local level in a context of rapid industrialization.
    Keywords: China,Rural environment,Rice farming,Industrial water pollution
    Date: 2020–06–17
  4. By: Ichiro Iwasaki (Institute of Economic Research, Hitotsubashi University); Xinxin Ma (Center for Far Eastern Studies, University of Toyama); Satoshi Mizobata (Institute of Economic Research, Kyoto University)
    Abstract: In this paper, we perform a meta-analysis of 736 estimates extracted from 31 previous studies to compare China and Eastern Europe from the viewpoint of the relationship between corporate ownership and managerial turnover. Our results strongly suggest the presence of asymmetric circumstances between the two. Namely, in Eastern Europe, private outside investors and large shareholders exert a positive influence on the managerial discipline of the companies they invest in, and the government is also actively involved in the corporate governance of state-owned enterprises. In contrast, the Chinese government and the Communist Party of China have such significant control over companies as corporate owners that private shareholders only have limited influence over top management. In this sense, Chinese firms are more likely than their East European counterparts to face greater problems in corporate governance.
    Keywords: corporate ownership; managerial turnover; meta-analysis; publication selection bias; China; Eastern Europe
    JEL: D22 G32 G34 G38 P21 P31
    Date: 2020–07
  5. By: Mahdi Ghodsi
    Abstract: In the past few decades China has put substantial efforts into liberalising its trade and economy that accelerated after its accession to the World Trade Organisation (WTO) in December 2001. In this period China has significantly reduced its tariffs on manufacturing imports. However, the proliferation of nontariff measures (NTMs) imposed by China has made it the country notifying the second largest number of technical barriers to trade (TBTs) to the WTO after the United States. This paper investigates the impact of Chinese TBTs and tariffs on the imports of manufacturing products at the 6-digit level of the Harmonised System (HS) during 2002-2015. Heterogeneity of exporting firms, sample selection bias, multilateral resistances, and endogeneity bias are controlled for according to the recent strands of gravity modelling. Results suggest a positive impact of tariff reduction and the imposition of TBTs by China on its import values and quantities. The impact of Chinese TBTs is also differentiated across exporting countries. Since import prices are not significantly affected by TBTs, the imposed standards and regulations embedded in these trade policy measures allowed the economy to gain access to more products from the more developed economies, leading to trade creation.
    Keywords: World Trade Organisation, trade liberalisation, trade policy, technical barriers to trade
    JEL: F13 F14
    Date: 2018–10
  6. By: Fu Qiao; Yan Yan
    Abstract: Using the carefully selected industry classification standard, we divide 102 industry securities indices in China's stock market into four demand-oriented sector groups and identify demand-oriented industry-specific volatility spillover networks. The "deman-oriented" is a new idea of reconstructing the structure of the networks considering the relationship between industry sectors and the economic demand their outputs meeting. Networks with the new structure help us improve the understanding of the economic demand change, especially when the macroeconomic is dramatically influenced by exogenous shocks like the outbreak of COVID-19. At the beginning of the outbreak of COVID-19, in China's stock market, spillover effects from industry indices of sectors meeting the investment demand to those meeting the consumption demands rose significantly. However, these spillover effects fell after the outbreak containment in China appeared to be effective. Besides, some services sectors including utility, transportation and information services have played increasingly important roles in the networks of industry-specific volatility spillovers as of the COVID-19 out broke. By implication, firstly, being led by Chinese government, the COVID-19 is successfully contained and the work resumption is organized with a high efficiency in China. The risk of the investment demand therefore was controlled and eliminated relatively fast. Secondly, the intensive using of non-pharmaceutical interventions (NPIs) led to supply restriction in services in China. It will still be a potential threat for the Chinese economic recovery in the next stage.
    Date: 2020–07
  7. By: Fatum, Rasmus; Hattori, Takahiro; Yamamoto, Yohei
    Abstract: China holds more international reserves than any other country. We consider if the Chinese accumulation of reserves is associated with unintended consequences in the form of increased private sector risk taking. Using sovereign credit default swap spreads and stock index prices as indicators of risk taking we provide evidence to suggest that as reserve holdings increase, so does the willingness of the private sector to take on more risk. This is an important finding that adds credence to the suggestion that insurance through costly reserves, to be used in the event of a crisis, may lead to private sector actions that in and of themselves make it more likely that this insurance will be used.
    Keywords: International reserves, risk taking, China
    JEL: F31 G15
    Date: 2020–05
  8. By: Richard Bluhm; Axel Dreher; Andreas Fuchs; Bradley C. Parks; Austin M. Strange; Michael J. Tierney
    Abstract: This paper studies the causal effect of transport infrastructure on the spatial concentration of economic activity. Leveraging a new global dataset of geo-located Chinese government-financed projects over the period from 2000 to 2014 together with measures of spatial inequality based on remotely-sensed data, we analyse the effects of transport projects on the spatial distribution of economic activity within and between regions in a large number of developing countries. We find that Chinese-financed transportation projects reduce spatial concentration within but not between regions. In line with land use theory, we document a range of results which are consistent with a relocation of activity from city centers to their immediate periphery. Transport projects decentralize activity particularly strongly in regions that are more urbanized, located closer to the coast, and less developed. .
    Keywords: transport costs, infrastructure, development finance, foreign aid, spatial concentration China
    JEL: F15 F35 R11 R12 P33 O18 O19
    Date: 2020
  9. By: Herd,Richard
    Abstract: This paper aims to fill a gap in the literature on capital formation in China by estimating the capital stock in four economic sectors: business, infrastructure, government, and housing. Such a breakdown is necessary for the purpose of analysis of economic development in China, as the normal models of economic development are based on a competitive economy, which is clearly not the case for the country's infrastructure and government sectors. Moreover, the contribution of housing to gross domestic product in China is very poorly measured. Although the results of this analysis can only be approximate, as the required detailed information for a better estimate is not published, they nonetheless suggest that there has not been overinvestment in the Chinese business sector -- its capital-output ratio has risen only slightly over the past 40 years. Yet, there have been surges in the stocks of housing and infrastructure in the past decade. These sectors account nearly all the recent increase in the capital-output ratio in China.
    Date: 2020–07–13
  10. By: Syngjoo Choi; Byung-Yeon Kim; Jungmin Lee; Sokbae Lee
    Abstract: We investigate whether growing up in a socialist country affects the development of competitiveness by comparing three Korean groups in South Korea, born and raised in three countries with distinct institutional environments: South Korea, North Korea, and China. We examine the effect of home country experiences on competitiveness using laboratory experiments. Results show that North Korean refugees are significantly less competitive than South Koreans or Korean-Chinese immigrants. Ultimately, we find that the lower cognitive ability of North Koreans is a crucial determinant for the deficiency of competitiveness, while we fail to find evidence for direct effects of socialist institutions. Analysis through the lens of a choice model with probability weighting uncovers the effects of cognitive ability not only on expected performance but also on subject belief about winning and aversion for competition.
    Keywords: Piece Rate; Tournament; North Korea; Institution; Laboratory Experiment;
    JEL: C92 P20
    Date: 2020–06
  11. By: Robert C. Feenstra; Chang Hong
    Abstract: In December 2019, the United States and China reached a Phase One trade agreement, under which China committed to purchase more imports from the United States: $12.5 billion more agricultural imports in 2020 and $19.5 billion more in 2021, as compared to 2017. We show that the most efficient way for China to increase its imports from the United States is to mimic the effect of an import subsidy. If China’s agricultural imports did not otherwise grow from their 2017 values, then the subsidies would need to be 42% and 59% to meet the 2020 and 2021 targets, respectively. These effective subsidies mean that China would divert agricultural imports away from other countries. We find that this trade diversion is especially strong for Australia and Canada, followed by Brazil, Indonesia, Malaysia, Thailand, and Vietnam.
    JEL: F14 F53 Q17
    Date: 2020–06
  12. By: Gordon John Anderson; Rui Fu
    Abstract: Comparing the wellbeing of groups using self reported measures of wellbeing can be challenging. The scale dependency of many summary statistics applied to arbitrary Cantril scales attached to ordinal categorical data can engender a lack of coherency in results based upon alternative, equally valid scales. Furthermore, the conditions under which results will be robust across alternative scales seldom prevail in practice. Here scale independent methods for the multilateral and multidimensional wellness measurement and comparison of groups are proposed and implemented in a study of the health-loneliness-aging-gender nexus in 21st century China. The results indicate that poor health and loneliness appears to increase with age, though not monotonically. Improved health status is always associated with better un-loneliness outcomes and improved un-loneliness status is always associated with better health outcomes. While a large portion of the population are not affected by loneliness, of those who are, ill health is generally more likely to be reported. With regard to the health - loneliness joint distribution, generally, males enjoy better joint outcomes than their female counterparts in almost every comparison and urban dwellers enjoy better outcomes than their rural counterparts.
    Keywords: Wellbeing Measurement, Ordering Distributions, Ordinal Data.
    JEL: C14 I14 I30 I31
    Date: 2020–06–22
  13. By: Li, Zhan
    Abstract: We first follow the standard approaches (OECD, 2001) to measure capital and labor services in China during the time period of 1980-2016 using the China Industrial Productivity database, and then investigate the influences of replacing factors services with their stocks, which is often adopted in current studies, on total factor productivity (TFP) growth. We also investigate the resource reallocations and their impacts on TFP growth, and further trace their industry origins. The results show that by taking quality changes into account, the annual growth rates of capital service and labor service are 12.30% and 3.56%, respectively. The economy-wide capital quality declines by 3.68% while labor quality increases by 34.10%. Consequently, the aggregate TFP growth of China is underestimated by 6.58% when only replacing capital service with capital stock, while it is overestimated by 50% when only replacing labor service with labor stock and is overestimated by 43.42% when replacing both capital and labor services with their stocks. There are barriers to factor mobility that cause resources misallocation in China, which could be corrected by following market mechanisms. The net reallocation of capital and labor contributes 60.53% to the aggregate TFP growth. Industries with high (or low) factor input growth and high (or low) factor service price contribute to the improvement of factor allocation while those with high (or low) factor input growth and low (or high) factor service price are responsible for the negative reallocation of factor inputs.
    Keywords: Inputs services, Inputs quality, Aggregate production possibility frontier, China Industrial Productivity database, Resource reallocation
    JEL: C82 O11 O47 O53
    Date: 2020–03
  14. By: McCartney, Matthew
    Abstract: The China-Pakistan Economic Corridor (CPEC) announced in 2015 is a $60billion package of Chinese-led investment in roads, railways, energy and industry in Pakistan. It is part of China’s new Eurasia-wide Belt and Road Initiative (BRI). The likely impact of CPEC is controversial. Some scholars argue that CPEC will generate prosperity, regional equality and rapid economic growth in Pakistan. Others argue that CPEC will lead to debt and to the economic and political subordination of Pakistan to China. The existing discussion of CPEC has a near exclusive inward-looking focus on Pakistan. Some scholars, mainly from outside of Pakistan, have looked in more detail at China, but principally from an International Relations perspective. Missing from all of this discussion is how economic change in China, particularly in Western China, will influence the likely economic outcome of the CPEC. This paper makes an effort to start fill this gap. The paper demonstrates the likely competitive nature of the emerging economy of Xinjiang with that of Pakistan. Careful attention needs to be paid to the evolution of thinking and policy practice in Beijing.
    Keywords: China, Pakistan, Economic Growth, Investment, Infrastructure
    Date: 2020–04
  15. By: Emran,M. Shahe; Ferreira,Francisco H. G.; Jiang,Yajing; Sun,Yan
    Abstract: This paper extends the Becker-Tomes model of intergenerational educational mobility to a rural economy characterized by farm-nonfarm occupational dualism and provides a comparative analysis of rural China and rural India. The model builds a micro-foundation for the widely used linear-in-levels estimating equation. Returns to education for parents and productivity of financial investment in children's education determine relative mobility, as measured by the slope, while the intercept depends, among other factors, on the degree of persistence in nonfarm occupations. Unlike many existing studies based on coresident samples, our estimates of intergenerational mobiity do not suffer from truncation bias. The sons in rural India faced lower educational mobility compared with the sons in rural China in the 1970s to 1990s. To understand the role of genetic inheritance, Altonji et al. (2005) sensitivity analysis is combined with the evidence on intergenerational correlation in cognitive ability in economics and behavioral genetics literature. The observed persistence can be due solely to genetic correlations in China, but not in India. Fathers'nonfarm occupation and education were complementary in determining a sons'schooling in India, but separable in China. There is evidence of emerging complementarity for the younger cohorts in rural China. Structural change in favor of the nonfarm sector contributed to educational inequality in rural India. Evidence from supplementary data on economic mechanisms suggests that the model provides plausible explanations for the contrasting roles of occupational dualism in intergenerational educational mobility in rural India and rural China.
    Keywords: Educational Sciences,Labor Markets,Economics of Education,Education Finance,Food Security
    Date: 2020–07–13

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