nep-cna New Economics Papers
on China
Issue of 2020‒10‒05
nine papers chosen by
Zheng Fang
Ohio State University

  1. Growing Like China: Firm Performance and Global Production Line Position By Davin Chor; Kalina B. Manova
  2. Opening up the black box: Interacting subspheres through enterprise entry and exit in China By Maria Csanádi; Ferenc Gyuris; Wanjun Wang
  3. Multiple Social Credit Systems in China By Liu, Chuncheng
  4. Imports from China:Threat or Opportunity Analysis of Indian Manufacturing Sector. By Sunitha Raju; V.Raveendra Saradhi
  5. Population Ageing and the Impact of Later Retirement on the Pension System in China: An Applied Dynamic General Equilibrium Analysis By Xuejin Zuo; Xiujian Peng; Xin Yang; Philip Adams; Meifeng Wang
  6. Market Integration through Smuggling: China’s Sanction on Norwegian Salmon By Garcia, Roberto J.; Nguyen, Thi Ngan Giang
  7. Competitive Effects of IPOS: Evidence from Chinese Listing Suspensions By Frank Packer; Mark M. Spiegel
  8. Uneven Economic Overheating in a Transforming Party-State During the Global Crisis: The Case of China By Maria Csanádi; Ferenc Gyuris
  9. Macroeconomic Aspects of the Coronavirus Epidemic: Eurozone, EU, US and Chinese Perspectives By Paul J.J. Welfens

  1. By: Davin Chor; Kalina B. Manova
    Abstract: Global value chains have fundamentally transformed international trade and development in recent decades. We use matched firm-level customs and manufacturing survey data, together with Input-Output tables for China, to examine how Chinese firms position themselves in global production lines and how this evolves with productivity and performance over the firm lifecycle. We document a sharp rise in the upstreamness of imports, stable positioning of exports, and rapid expansion in production stages conducted in China over the 1992-2014 period, both in the aggregate and within firms over time. Firms span more stages as they grow more productive, bigger and more experienced. This is accompanied by a rise in input purchases, value added in production, and fixed cost levels and shares. It is also associated with higher pro fits though not with changing profit margins. We rationalize these patterns with a stylized model of the firm lifecycle with complementarity between the scale of production and the scope of stages performed.
    Keywords: global value chains, production line position, upstreamness, firm heterogeneity, firm lifecycle, China
    JEL: F10 F14 F23 L23 L24 L25
    Date: 2020
  2. By: Maria Csanádi (Institute of Economics, Centre for Economic and Regional Studies, 1097 Budapest, Tóth Kálmán u. 4, Hungary); Ferenc Gyuris (Department of Regional Science, Eötvös Loránd University (ELTE), 1117 Budapest, Hungary, Pázmány Péter stny. 1/C.,); Wanjun Wang (Nanjing University of Finance and Economics, Nanjing, China.)
    Abstract: In this paper, we scrutinize in the transforming party-state system of China the subtle dynamics of enterprise adaptation to state interventions, which react to hardening external and internal constraints. We use a comparative systemic framework that interprets adaptation in the context of system dynamics and transformation (Csanádi, 2006). We analyze a firm-level database of the Chinese industry from 1998 to 2013 with more than 3.8 million entities. Enterprise sensitivity and adaptation is measured by entries and exits. Taking a systemic approach, we distinguish enterprises that belong to either the party-state network or to the market as two economic sub-spheres defined by our analytical framework. Using the dynamics of entries and exits of industrial enterprises in each of these two spheres, we measure their expansion and contraction as well as that of the speed of both. Different speed allows for the quantification of the dynamics of economic transformation. Our results reveal that increasing frequency of entries and exits, both within and between the two spheres, are interconnected with state interventions reacting to booming and cooling periods of system-specific overinvestment and hardening and softening external constraints (Csanádi, 2015; Csanádi and Gyuris, forthcoming). Similarly, we reveal a strong connection between enterprise entries and exits and the occasional changes in the acceleration and slowdown of transformation dynamics through alternating periods of retreat and expansion of the network. We confirm the retreat of the network between 1998 and 2009 in terms of number of enterprises, employment, and sales revenues. However, we find that state interventions reacting to the 2008-2009 global crisis as well as Xi Jinping’s anticorruption campaign in 2012-2013 halted the retreat of the network in terms of various statistical indicators. Interventions also changed the moderate annual decline of state-owned capital share among enterprises belonging to the network (a clear trend until 2008), for they led to a “hidden expansion” of the state ownership through a relatively fast increase of its capital share from the early 2010s. Thus, transformation is not continuous, as halts and slowdowns during this process occur in major periods of state intervention. Neither is the advancement of transformation uniform. Regarding the number, employment, and sales revenue of enterprises, the retreat of the network and the expansion of the market sphere have substantially been more advanced than in case of the allocation of resources, which is selective and biased towards state-owned and large enterprises (Csanádi, 1997; Csanádi and Liu, 2012). These along with the resulting politically rational economic behavior of enterprises are essential characteristics of the party-state system.
    Keywords: China, system transformation, power network, local power, enterprise behavior, crisis, anti-corruption campaign, state intervention
    JEL: P12 P16 P2 P26 P31
    Date: 2020–09
  3. By: Liu, Chuncheng
    Abstract: Published on Economic Sociology: The European Electronic Newsletter, 2019, 21 (1): 22–32. In 2014, the Chinese government proposed to build a social credit system (SCS) to better collect and evaluate citizens’ creditworthiness and grant rewards and punishments based on one’s social credit. Since then, various SCS pilots have been enacted. While current media and scholars often perceive SCS as a single and unified system, this paper argues that there are in fact multiple SCSs in China. I identify four main types of SCS and articulate the relationships among them. Each SCS has different assumptions, operationalizations, and implementations. China’s central bank, the People’s Bank of China, and the macroeconomic management agency, the National Development and Reform Commission, are the two most important actors in the design and implementation of the multiple SCSs. Yet their distinctive views about what “credit” is and what an SCS should be produced great tensions on the SCS landscape. I also historicize current SCSs and show that many elements and assumptions of SCSs can be traced back to a broader political history of the People’s Republic of China (PRC). Finally, I propose an alternative theoretical framework to understand Chinese SCSs as a symbolic system with performative power that is more than a simple repressive and direct political project.
    Date: 2019–11–10
  4. By: Sunitha Raju (Indain Institute of Foreign Trade,New Delhi-IN); V.Raveendra Saradhi (Indain Institute of Foreign Trade,New Delhi-IN)
    Abstract: Manufacture imports from China increased from US$ 42.5 billion in 2010-11 to US $ 74.9 billion in 2017-18 thereby raising concerns about the adverse implication on the domestic manufacture sector. The focus of the paper is to assess the impact of imports from China on the manufacturing performance, in terms of output growth, value added growth, labour and capital productivity, capacity utilisation, Employment and Export intensity. A total of 26 industries corresponding to 18 HS chapters have been selected on the basis of imports from China accounting for over 40% of the total imports of that industry. The analysis was carried out separately for imports defined as Capital goods, Intermediate goods and Consumer Goods. Imports from China seem to have had a favourable impact on industry output / value added driven by increasing labour and capital productivities. The estimates reveal that in terms of value, the impact of imports of intermediate goods on output is 163%, while for capital goods it is 93% and consumer goods is 73%. These results negate the general perception of threat from Chinese imports.
    Keywords: China, Imports, International Trade, India, Manufacturing
    JEL: F14 F10 L6
    Date: 2019–01
  5. By: Xuejin Zuo; Xiujian Peng; Xin Yang; Philip Adams; Meifeng Wang
    Abstract: China's population is rapidly ageing because of the sustained low fertility and increasing life expectancy. At the end of 2019, the elderly 65 and older accounted for 12.6 percent of the total population, compared to around seven percent in 2000. It will continue to increase to 31 percent in 2050. Rapid ageing imposes a big challenge to sustainable growth. The Chinese government is considering increasing the retirement age as a remedy to the challenge of population ageing. Using a dynamic general equilibrium model of the Chinese economy, this paper explores the implications of raising the retirement age on economic growth and pension sustainability in China over the period of 2020 to 2100. In the baseline scenario, we assume that China maintains its current retirement age. The simulation results reveal that growth in the labour force would turn negative because of population ageing. Thus China has to rely on technology improvement and capital stock increases to support its economic growth. Without reforming the current pension system, China's pension account will accumulate huge debts. The debt plus the interest obligation will put high pressure on the general government budget. By the end of this century, the general government budget deficit will reach to 22 percent of GDP. In the policy scenario, we assume that China will gradually increase the retirement age from 58 to 65 years old starting from 2020. The simulation results show that increasing the retirement age is a powerful policy in the short to medium term. It will boost China's economic growth and reduce the pension fund deficit significantly because it will not only increase the labour force but also reduce the number of pensioners by delaying them access to the pension fund. However, the effectiveness of the policy depends on how much the labour force participation rate for people aged 58 to 65 can be increased.
    Keywords: Population ageing, retirement age, labour force participation, pension, economic growth, CGE model
    JEL: J11 J26 C68
    Date: 2020–04
  6. By: Garcia, Roberto J. (School of Economics and Business, Norwegian University of Life Sciences); Nguyen, Thi Ngan Giang (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: Much has been written in the popular press and studied in the political-economics literature about the link between the awarding of the 2010 Noble Peace Prize to a Chinese dissident and China’s trade sanction affecting Norway’s whole, fresh/chilled salmon exports. Trade patterns show a break in Norway’s salmon exports to China and a declining share of the Chinese market. However, since 2011 a curious trade pattern developed as Vietnam suddenly increased its import of Norwegian salmon. This paper establishes a relationship between the salmon markets of Vietnam and China since 2011, specifically addressing whether Vietnam’s increased import of salmon is related to China’s limiting of market access to Norwegian salmon. The sanction period acts as a structural break that divides trade flows into two sub-periods, July 1997 to February 2011 and March 2011 to December 2018. Vietnam’s current monthly imports are negatively affected by lags in China’s monthly imports with the sanction but had no effect before the sanction. An increase (decrease) in China’s salmon imports from Norway “Granger causes” a decrease (increase) in Vietnam’s imports from Norway. This provides statistical evidence of China’s sanction on Norwegian salmon, but that the sanction integrated China and Vietnam’s salmon markets through smuggling.
    Keywords: Vietnam; China; Norway; salmon trade; sanction; Granger causality; smuggling
    JEL: F13 F14 F51 P33
    Date: 2020–01–17
  7. By: Frank Packer; Mark M. Spiegel
    Abstract: Theory suggests that initial public offerings (IPOs) can adversely impact listed firms, both directly by increasing intra-industry competition, and in-directly by completing related asset market spaces. However, the endogeneity of individual IPO activity hinders testing these channels. This paper examines listing suspensions in China in a panel specification that accounts for macroeconomic and financial conditions, isolating the firm-level IPO impact. We measure the competi-tive impact of listing suspensions through the value share of postponed firms in the IPO queue in their industry, and asset-space competition by firms’ historical covariance with a synthetic portfolio of listed firms with the IPO queue industry mix at the time of suspension. Our results support the predicted IPO effects through both channels. We also document heterogeneity in IPO effects. Stronger firms–measured through a variety of proxies–benefit less from the suspension news. These results are robust to a battery of sensitivity tests
    Keywords: Initial public offerings; China; competition; asset space
    JEL: G14 G18 G32
    Date: 2020–09–23
  8. By: Maria Csanádi (Institute of Economics, Centre for Economic and Regional Studies, 1097 Budapest, Tóth Kálmán u. 4, Hungary); Ferenc Gyuris (Department of Regional Science, Eötvös Loránd University , 1117 Budapest, Hungary, Pázmány Péter stny. 1/C.,)
    Abstract: We scrutinize the systemic consequences of state intervention triggered by external shocks in the transforming Chinese economy before and after the global crisis. We interpret investment dynamics using a comparative party-state model concept framework. We identify the overinvestment as an outcome of the dynamics of party-state power formed by relations of dependence and interest promotion between party, state and economic decision-makers and of emerging structural motivations inside of this network. Due to the structural and operational characteristics of the party-state network, which are self-similar in time, space and at various aggregation levels, overinvestment and economic overheating can also be detected on the provincial level. This local phenomena is intensified by the specific decentralized pattern of power distribution of the Chinese party-state system. Thus, local intensity of overheating is further increased by major state interventions reacting to external shocks. Overheating is further amplified during economic transformation by market actors adapting to network priorities. Investment swings in both heating and cooling periods hide different forms of behavior in enterprises with different ownership types.
    Keywords: China; crisis; overheating; overinvestment; party-state; system transformation; enterprise behaviour
    JEL: P12 P16 P2 P26 P31
    Date: 2020–09
  9. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: The Corona Virus (COVID-19) epidemic represents a major challenge for the world economy. While a detailed longer-term diffusion path of the new virus cannot be anticipated for individual countries, with the possible exception of China, which was the starting point of the international epidemic, one should expect falling asset prices in Asia, the United States and the European Union plus the United Kingdom Ð except for the price of risk-free government bonds. In the course of 2020/21 the US, the EU and the UK, as well as other countries, will face both an increasing number of infected patients as well as a higher case fatality ratio. Health care expenditures in the US will increase more than in the Eurozone and the EU in the medium term, a development that undermines the international competitiveness of the United States. In the US, the spread of the COVID-19 could raise the ratio of health expenditures relative to GDP beyond the current 18% while the health care expenditure of Western EU countries will not rise much beyond the current 10% (12% in France, 11% in Germany in 2018). To the extent that morbidity and mortality in industrialized countries is a positive function of age, higher health expenditures for patients above 65 years of age should be anticipated; in the US with considerable higher government health expenditures. Hence, the US deficit-GDP ratio will remain high. A rising health care-GDP ratio in the US is equivalent to a rising US export tariff; already in the current situation Ð prior to 2020 Ð the transatlantic differential in health care-GDP ratios implies that Western European countries will face a relative cost advantage in the context of the Corona virus epidemic so that the trade balance surplus of the Eurozone could rise unless supply-side shocks in the EU exceed those of the US. The COVID-19 challenge for the US Trump Administration is a serious one, since the lack of experts in the Administration will become more apparent in such a systemic stress situation Ð and this might well affect the November 2020 US presidential election which, in turn, would itself have considerable impacts on the UK and the EU27 as well as EU-UK trade negotiations.
    Keywords: Coronavirus, Health System, Macroeconomics, EU, US, China
    JEL: I11 I18 F01 H51
    Date: 2020–03

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