nep-cna New Economics Papers
on China
Issue of 2020‒11‒23
eight papers chosen by
Zheng Fang
Ohio State University

  1. Hukou Status, Housing Tenure Choice and Wealth Accumulation in Urban China By Liao, Yu; Zhang, Junfu
  2. The Health Consequence of Rising Housing Prices in China By Xu, Yuanwei; Wang, Feicheng
  3. Trade war from the Chinese trenches By Liu, Nan
  4. FinTech Adoption and Household Risk-Taking By Claire Yurong Hong; Xiaomeng Lu; Jun Pan
  5. The Structure of Business Taxation in China By Zhao Chen; Yuxuan He; Zhikuo Liu; Juan Carlos Suárez Serrato; Daniel Yi Xu
  6. The Effects of Parental Retirement on Adult Children’s Labor Supply: Evidence From China By Wu, Qi; Gao, Xin
  7. The heterogeneous effects of China's accession to the world trade organization By Jung, Benjamin
  8. Covid-19 in China: the pandemic exacerbates the speculative mechanism in residential real estate By Natacha Aveline-Dubach; Natacha Aveline

  1. By: Liao, Yu (Clark University); Zhang, Junfu (Clark University)
    Abstract: In Chinese cities, migrants with rural hukou, compared to residents with local urban hukou, face more uncertainty, have limited access to mortgage finance, and are less eligible for low-cost housing. A simple model demonstrates that for these reasons, rural- to-urban migrants are less likely to own housing units in cities and as a result accumulate less wealth. Our empirical analysis examines a nationally representative household survey from 2013 and uses mother's hukou status as an instrumental variable. We find that household heads with rural hukou are about 20 percentage points less likely to own housing units in cities than comparable household heads with local urban hukou. Consequently, the average household head with a rural hukou owns 310 thousand yuan less housing wealth and 213 thousand yuan less total wealth than comparable household heads with local urban hukou. The average household head with a rural hukou has 286 thousand yuan less in housing capital gains than comparable household heads with local urban hukou. Moreover, we find that these differences are much larger in the first- and second-tier cities, cities with more stringent hukou regulations, and among younger cohorts.
    Keywords: hukou, tenure choice, wealth, Chinese economy
    JEL: R0 R2 H0
    Date: 2020–11
  2. By: Xu, Yuanwei; Wang, Feicheng
    Abstract: China has experienced a rapid boom in real estate prices in the last few decades, leading to a substantial increase in living costs and heavy financial burdens on households. Using an instrumental variable approach, this paper exploits spatial and temporal variation in housing price appreciation linked to individual-level health data in China from 2000 to 2011. We find robust evidence that increases in housing prices significantly raise the probability of residents having chronic diseases. This negative health impact is more pronounced among individuals from low-income families, households that purchased rather than inherited or was allocated the home, and those who migrated from rural to urban areas. We also find evidence that marriage market competition exacerbates these negative health effects, particularly for males and parents with young adult sons. Further empirical results suggest that housing price appreciation induces negative health consequences through increased work intensity, higher mental stress, and reduced sleep time. This paper provides a novel explanation to the increased prevalence of chronic diseases in China.
    Keywords: Housing Prices,Chronic Diseases,Health,Marriage Competition,China
    JEL: R20 R21 R31 I12 I14 I15 I31
    Date: 2020
  3. By: Liu, Nan
    Abstract: From 2018 through 2019, the United States and China imposed a series of wide-ranging increases in import tariffs which have dramatically raised trade barriers between the two largest economies in the world. With a focus on the import side, this paper provides evidence on the impact of the trade war on China's trade quantities and prices, and estimates related trade elasticities. Both Chinese import quantities and values dropped sharply following the tariffs and there is evidence for incomplete pass-through of Chinese import tariffs in the very short run. More importantly, this paper shows that while China's non-processing imports declined dramatically during the trade war, the processing imports almost remain un-affected. The results suggest that the Chinese special duty-free policy on processing trade may have served as a built-in mechanism to better protect domestic firms from the damage of the trade war through the global value chain channel.
    Keywords: Trade war; Tariff; China; Processing trade; Global value chain
    JEL: F10 F13 F14
    Date: 2020–11–03
  4. By: Claire Yurong Hong; Xiaomeng Lu; Jun Pan
    Abstract: This paper examines how FinTech can lower investment barriers and help households move toward optimal risk-taking, using a unique account-level data on consumption, investments, and FinTech usage from Ant Group. During our sample period, China experienced a rapid increase in FinTech penetration in the form of offline digital payment, and our measure of FinTech adoption is constructed relative to this fast-developing trend of new technology. Taking advantage of our consumption data, we further infer individuals’ risk tolerance from their consumption volatility. We find that, while Fin-Tech adoption improves risk-taking for all, the more risk-tolerant individuals benefit more from FinTech advancement. The magnitude of FinTech improvement is further quantified relative to the optimal alignment of risk-taking and consumption prescribed by Merton (1971). Aggregating to the city-level, we find significant variations in Fin-Tech adoption across cities in China, owing to the gradual spread of the new technology from Hangzhou to inner China. Examining the enhancement in risk-taking across geographical locations, we find that cities with low financial-service coverage benefit the most from FinTech penetration. Overall, our results show that, by unshackling the traditional constraints, FinTech improves risk-taking for individuals who need it the most.
    JEL: G11
    Date: 2020–11
  5. By: Zhao Chen; Yuxuan He; Zhikuo Liu; Juan Carlos Suárez Serrato; Daniel Yi Xu
    Abstract: This paper documents facts about the structure of business taxation in China using administrative tax data from 2007 to 2011 from the State Taxation Administration. We first document the importance of different business taxes across industries. While corporate income taxes play an important role for manufacturing firms, these firms also remit a large share of their tax payments through the value-added tax system, through the excise tax system and through payroll taxes. Gross receipts taxes play an important role for firms in other industries, leading to spillovers that may affect the overall economy. Second, we evaluate whether the structure of China’s tax revenue matches its stage of development. A cross-country comparison of sources of government revenue shows that China collects a high share of tax revenue from taxes on goods and services and a high share of income tax on corporations. Finally, we study whether firm-level differences in effective tax rates can be an important source of allocative inefficiencies. Decomposing the variation in effective tax rates across firms, we find that government policies, including loss carry-forward provisions and preferential policies for regional, foreign, small, and high-tech firms, have significant explanatory power. Nonetheless, while effective tax rates vary along a number of dimensions, tax policy does not explain the large dispersion in the returns to factors of production across firms.
    JEL: E22 H25
    Date: 2020–11
  6. By: Wu, Qi; Gao, Xin
    Abstract: Aging and an increasing retired population are a global challenge. Previous studies suggest that retirement affects economic behaviors of the retiree and his or her spouse, including consumption, health outcome, and time use. However, little is known about the intergenerational effects of parental retirement on adult children. This paper studies the effects of parental retirement on adult children's labor supply through intergenerational time and monetary transfer. We exploit the mandatory retirement age in China as the cut-off point and apply a regression discontinuity (RD) approach to four waves of the China Family Panel Studies (CFPS) Dataset. Our findings suggest that parental retirement reduces adult children's annual hours of labor supply by 3 to 4 percent. This reduction is especially pronounced for female children. We find that the reduction can be explained by parents' increasing demand for time and care from children due to the significant drop in parents' self-rated health upon retirement. Although both male and female children increased their monetary and time transfers to parents, we find that parents tend to make more transfers to sons compared to daughters. Daughters are also more likely to make transfers to parents after they retire, both in terms of money and in terms of time. We therefore urge policy makers to increase formal eldercare provisions and provide workplace amenities such as flexible working hours, especially for female employees.
    Keywords: Retirement, Labor Supply, Intergenerational Transfer, Gender Role
    JEL: D13 D64 J0 J22 J26
    Date: 2020–10–23
  7. By: Jung, Benjamin
    Abstract: China's accession to the World Trade Organization (WTO) in 2001 was a massive boostfor the multilateral trading system. We present descriptive evidence on the trade effects of China's WTO accession. Moreover, we combine the most recent approaches from the gravity literature of international trade to provide a causal analysis of the effects of China's WTO accession on bilateral trade with other WTO members. We find that the trade effectis positive on average. Moreover, we document substantial heterogeneity in the trade effects across China's trading partners. These findings seem to be consistent with China's position in global value chains.
    Keywords: GATT/WTO,China,international trade,structual gravity
    JEL: F13 F14
    Date: 2020
  8. By: Natacha Aveline-Dubach (GC (UMR_8504) - Géographie-cités - UP1 - Université Panthéon-Sorbonne - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - UP - Université de Paris); Natacha Aveline
    Abstract: Since 2008, China has been currently experiencing a disjuncture between house prices and economic fundamentals. This paper highlights the drivers of the speculative mechanism in China's residential markets, and shows that the pandemic is not likely to call them into question, quite the contrary.
    Date: 2020–10–26

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