nep-cna New Economics Papers
on China
Issue of 2020‒10‒26
ten papers chosen by
Zheng Fang
Ohio State University

  1. Anxiety or Pain? The Impact of Tariffs and Uncertainty on Chinese Firms in the Trade War By Felipe Benguria; Jaerim Choi; Deborah L. Swenson; Mingzhi Xu
  2. States and Wars: China’s Long March towards Unity and its Consequences, 221 BC – 1911 AD By Shuo, Chen; Ma, Debin
  3. China’s debt relief actions overseas and macroeconomic implications By Gatien Bon; Gong Cheng
  4. Gender Wage Gap in China: A Large Meta-Analysis By Iwasaki, Ichiro; Ma, Xinxin
  5. Reference point adaptation and air quality – Experimental evidence with anti-PM 2.5 facemasks from China By Zhang, nan; Qin, Botao
  6. COVID-19 Has Temporarily Supercharged China’s Export Machine By Hunter L. Clark
  7. Covid-19 Shocking Global Value Chains By Peter Eppinger; Gabriel J. Felbermayr; Oliver Krebs; Bohdan Kukharskyy
  8. China’s Energy Law Draft and the Reform of its Electricity Supply Sector By Xu, J.; Pollitt, M.; Xie, B-C.; Yang, C-H.
  9. The Case for Healthy U.S.-China Agricultural Trade Relations despite Deglobalization Pressures By Wendong Zhang
  10. China's 2060 carbon neutrality goal will require up to 2.5 GtCO2/year of negative emissions technology deployment By Jay Fuhrman; Andres F. Clarens; Haewon McJeon; Pralit Patel; Scott C. Doney; William M. Shobe; Shreekar Pradhan

  1. By: Felipe Benguria; Jaerim Choi; Deborah L. Swenson; Mingzhi Xu
    Abstract: The unexpected outbreak of the U.S.-China trade war led to dramatic increases in the import and export tariffs confronting Chinese firms. Due to firm-level differences in trade engagement, customs trade data combined with tariff changes allow us to measure firm-level exposure to the trade war. Further, by adopting a new textual analysis approach to listed firms' annual reports, we develop trade policy uncertainty (TPU) measures that vary over firms and time. Our difference-in-differences examination of these firm-level data reveals that trade war increases in U.S. tariffs and Chinese retaliatory tariffs both raised Chinese firms’ TPU. The impact of tariffs on uncertainty is heterogeneous, and is most pronounced for smaller and less capital-intensive firms. This effect is also smaller for Chinese exporters that were more diversified in terms of partner countries. In the second stage of our analysis we explore and document the negative connection between Chinese firm-level increases in TPU and subsequent firm performance. Our estimates indicate that Chinese firms hit by a one standard deviation increase in TPU during the trade war reduced firm-level investment, R&D expenditures, and profits by 1.4, 2.7, and 8.9 percent, respectively.
    JEL: D81 F13 F14 F51
    Date: 2020–10
  2. By: Shuo, Chen (Fudan University, China); Ma, Debin (Hitotsubashi University, Tokyo, Japan and LSE, UK)
    Abstract: We examine the long-term pattern of state formation and the mythical historical Chinese unity under one single political regime based on the compilation of a large geocoded annual data series of political regimes and incidences of warfare between 221 BC and 1911 AD. By classifying our data sets into two types of regimes - agrarian and nomadic – and three types of warfare– agrarian/nomadic, agrarian/agrarian and internal rebellions – and applying an Autoregressive Distributed Lag (ARDL) model, we find that nomadic-agrarian warfare and internal rebellion strengthens unification but agrarian/agrarian warfare entrenches fragmentation. Our research highlights the combination of China’s precocious ideology of a single unified ruler, environmental circumscription on the easternmost end of Eurasia and persistent agrarian-nomadic warfare as the driving force behind China’s eventual unity. We further discuss the long-run implications of Chinese unity on economic performance in a global context.
    Keywords: Agrarian-nomadic warfare, China, country size, state formation, warfare JEL Classification:
    Date: 2020
  3. By: Gatien Bon; Gong Cheng
    Abstract: This paper explores a novel database of 140 cases of debt restructurings that China conducted between 2000 and 2019 in 65 debtor countries. It uncovers a number of salient features of the restructuring terms that China has offered and the ways in which China has interacted with other creditors and the International Monetary Fund (IMF). The majority of debt relief operations have been executed through debt forgiveness rather than debt rescheduling through maturity extension or/and interest rate reduction. Interestingly, a large number of Chinese debt relief operations took place within a two-year timeframe of debt relief agreements with Paris Club or private sector creditors and in the context of financial assistance from the IMF. Using local projections, this paper sheds light on the negative impact of China’s debt relief operations on growth and development prospects in debtor countries, especially when China provides debt rescheduling and does not treat the stock of nominal debt. Subdued domestic fixed capital investment and fiscal policy tightening seem to be the main drag on economic growth in debtor countries after a restructuring.
    Keywords: China, Paris Club, Sovereign debt, Restructuring, Development, Africa
    JEL: F33 F34 H63
    Date: 2020
  4. By: Iwasaki, Ichiro; Ma, Xinxin
    Abstract: This paper performs a meta-analysis of 1472 estimates extracted from 199 previous studies to investigate the gender wage gap in China. The results show that, although the gender wage gap in China during the transition period has an impact that statistically significant and economically meaningful, it remains at a low level. It is also revealed that the wage gap between men and women is more severe in rural regions and the private sector than those in urban regions and the public sector. Furthermore, we found that, in China, the gender wage gap has been increasing rapidly in recent years.
    Keywords: gender wage gap, meta-synthesis, meta-regression analysis, publication selection bias, China
    JEL: D63
    Date: 2020–09
  5. By: Zhang, nan; Qin, Botao
    Abstract: The formation of reference points has drawn increasing interest ever since the introduction of prospect theory. Given that most studies focus on tradable goods such as stocks, for which the prices are observable, while few have focused on environmental goods. This paper attempts to fill this gap in the literature in this regard. In our experiment, we divided the subjects into buyers and sellers and asked them to trade four PM 2.5 filters using the Becker–DeGroot–Marschak mechanism. We have two treatments in this experiment: a) the experience of seven weeks of heavy air pollution; and b) the receiving of information on the relationship between death rates and air pollution. The different bidding prices for the four PM 2.5 filters in these treatment groups make it possible to trace the adjustment of the reference points as a result of these treatments without having to know their precise values. Our results show that, for buyers, the heavy air pollution drives them to fully downwardly adjust their reference points on air quality. For sellers, however, the reference points adaptation caused by heavy pollution is not a full adaptation. Moreover, the new information on the damage to health from air pollution causes buyers to upwardly adjust their reference points on air quality but does not significantly change the sellers’ reference points. We show that, for both treatments, sellers are more reluctant to adjust their reference points on air quality than are buyers. Our results confirm the asymmetric reference point adaptation in that adaptation after a loss is harder than adaptation after a gain.
    Keywords: prospect theory; reference point; asymmetric adaptation; air pollution; BDM auction
    JEL: C90 D44 Q53
    Date: 2020–06–01
  6. By: Hunter L. Clark
    Abstract: China’s export performance this year has been stronger than expected. After a sharp slump at the beginning of 2020, the country’s exports have posted positive growth—the only major economy’s to do so. However, a closer look at the data reveals that this growth has not been very broad-based, but rather concentrated in areas where China’s export structure was well-positioned to take advantage of the global crisis—namely, production of medical supplies and school-from-home and work-from-home (S/WFH) goods. Once the COVID-19 crisis passes, China’s exports will likely return to their pre-coronavirus growth path, including a gradual loss of market share to other countries.
    Keywords: China; COVID-19; exports
    JEL: F00 F1
    Date: 2020–10–15
  7. By: Peter Eppinger; Gabriel J. Felbermayr; Oliver Krebs; Bohdan Kukharskyy
    Abstract: In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmitting the shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects are magnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.
    Keywords: Covid-19, quantitative trade model, input-output linkages, global value chains, supply chain contagion, shock transmission
    JEL: F11 F12 F14 F17 F62
    Date: 2020
  8. By: Xu, J.; Pollitt, M.; Xie, B-C.; Yang, C-H.
    Abstract: China is reforming its electricity supply industry under the guidance of the No.9 document published in 2015. However, such reform has not been supported by new legislation until now. China unveiled an Energy Law draft in April 2020 for public consultation. It is widely regarded as an attempt to provide a legal foundation for ongoing energy sector reforms. This paper introduces the legislative background to China’s Energy Law and then identifies the weaknesses of the April 2020 Energy Law draft from the perspective of international experience. We find that although the Energy Law draft represents positive progress on the vertical unbundling and the price mechanism with respect to the competitive and natural monopoly segments of the power sector, it still does not provide adequate support for most other elements. The enacted Energy Law needs to make more explicit provision on horizontal restructuring, incentive regulation, privatization and independent regulation, while the 1995 Electricity Law should also be updated to include reference to the spot market and efficient allocation of transmission capacity as secondary legislation.
    Keywords: No.9 Document, Energy Law, power market reform
    JEL: K32
    Date: 2020–10–01
  9. By: Wendong Zhang (Center for Agricultural and Rural Development (CARD))
    Abstract: The COVID-19 pandemic is crippling the global economy and heightening distrust and political disagreements among major countries. Furthermore, ongoing deglobalization efforts taken by firms and countries are fueling the rise of economic nationalism. A prime example is the possible decoupling of U.S.-China economic and trade relations, which the ongoing trade war has already significantly disrupted. This paper analyzes the impacts of COVID-19 on U.S. agricultural exports to China, especially the added delays and uncertainty on China's food imports meeting the U.S.-China phase one trade deal target. I present the views of U.S. farmers and the general public toward China and argue that healthy U.S.-China agricultural trade relations are not only critical for both countries but welcomed by U.S. farmers. I also discuss the possible rise in non-tariff barriers following the pandemic as well as trade policies that are increasingly intertwined with political tensions. Finally, I discuss how the U.S.-China phase one trade deal could possibly lead to a more balanced bilateral agricultural trade portfolio with greater share of protein and retail food products.
    Date: 2020–10
  10. By: Jay Fuhrman (Department of Engineering Systems and Environment, University of Virginia, Charlottesville, Virginia, USA); Andres F. Clarens (Department of Engineering Systems and Environment, University of Virginia, Charlottesville, Virginia, USA); Haewon McJeon (Joint Global Change Research Institute, University of Maryland and Pacific Northwest National Laboratory, College Park, Maryland, USA); Pralit Patel (Joint Global Change Research Institute, University of Maryland and Pacific Northwest National Laboratory, College Park, Maryland, USA); Scott C. Doney (Department of Environmental Sciences, University of Virginia, Charlottesville, Virginia, USA); William M. Shobe (Batten School of Leadership and Public Policy, University of Virginia, Charlottesville, Virginia, USA); Shreekar Pradhan (Department of Engineering Systems and Environment, University of Virginia, Charlottesville, Virginia, USA)
    Abstract: China's pledge to reach carbon neutrality by 2060 is ambitious and could provide the world with much-needed leadership on how to achieve a +1.5 degC warming target above pre-industrial levels by the end of the century. But the pathways that would achieve net zero by 2060 are still unclear including the dependence on negative emissions technologies. Here, we use the Global Change Analysis Model (GCAM 5.3), a dynamic-recursive, technology-rich integrated assessment model, to simulate how negative emissions technologies, in general, and direct air capture (DAC), in particular, will contribute to China's meeting this target. Our results show that, for China to be net-zero in 2060, it would need to deploy negative emissions technologies (NETs) at very large scales, on the order of 2.5 GtCO2 negative emissions per year with up to 1.5 GtCO2 per year of that coming from DAC. DAC, like other forms of negative emissions, such as bioenergy with carbon capture and storage and afforestation is an emerging technology that has not been demonstrated at a commercial scale. Deploying NETs at this scale will have widespread impacts on financial systems and resources availability such as water, land, and energy in China and beyond.
    Date: 2020–10

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