nep-cna New Economics Papers
on China
Issue of 2021‒03‒01
sixteen papers chosen by
Zheng Fang
Ohio State University

  1. Health Technology and Inequality in China: Insights from Analysis of Hospital Patents By Yue Dong; Kam Ki Tang; Dongjie Wut
  2. "Study hard and make progress every day": Updates on returns to education in China By Chen, Jie; Pastore, Francesco
  3. Special Deals from Special Investors: The Rise of State-Connected Private Owners in China By Chong-En Bai; Chang-Tai Hsieh; Zheng Song; Xin Wang
  4. China’s state-owned enterprises and competitive neutrality By Alicia García-Herrero; Gary Ng
  5. Can Technology Solve the Principal-Agent Problem? Evidence from China’s War on Air Pollution By Michael Greenstone; Guojun He; Ruixue Jia; Tong Liu
  6. Decentralization and health resource allocation: Quasi-experimental evidence from China By Yue Dong; Dipanwita Sarkar; Jayanta Sarkar
  7. Air Pollution and COVID-19 Transmission in China By Guojun He; Yuhang Pan; Takanao TANAKA
  8. Revisiting the determinants of house prices in China’s megacities: cross-sectional heterogeneity, interdependencies and spillovers By Liu, Chunping; Ou, Zhirong
  9. Factors Affecting Recent U.S. Tariffs on Imports from China By Aaron Flaaen; Kathryn Langemeier; Justin R. Pierce
  10. Growth, development, and structural change at the firm level: The example of the PR China By Heinrich, Torsten; Yang, Jangho; Dai, Shuanping
  11. Regional and Sectoral Structures and Their Dynamics of Chinese Economy: A Network Perspective from Multi-Regional Input-Output Tables By Tao Wang; Shiying Xiao; Jun Yan; Panpan Zhang
  12. Reshaping Trade Ties with China in the Aftermath of COVID-19 By Julia Grübler
  13. Financial crisis of 2008 and outward foreign investments from China and India By Suma Athreye; Abubakr Saeed; Muhammad Saad Baloch
  14. Does gender affect medical decisions? Results from a behavioral experiment with physicians and medical students By Godager, Geir; Hennig-Schmidt, Heike; Li, Jing Jing; Wang, Jian; Yang, Fan
  15. Stock Prices, Lockdowns, and Economic Activity in the Time of Coronavirus By Stephen J. Davis; Dingqian Liu; Xuguang Simon Sheng
  16. Raising a caution flag on US financial sanctions against China By Jeffrey J. Schott

  1. By: Yue Dong; Kam Ki Tang; Dongjie Wut
    Abstract: Background: Health technology has great potential to promote public health, yet it also contributes to health inequalities through uneven diffusion and utilization. This article examines the quantity, quality, and distribution of innovative technologies in China’s health sector over 1985-2015. Methods: We use data on hospital patents as a proxy of innovative health technologies. We use the Gini coefficient and the concentration index to measure the distribution of hospital patents. Regression models are used to examine the degree of convergence of hospital patents over 2000 to 2015. Results: Compared with hospital beds and doctors, inequality in hospital patents was remarkably large in China. Hospital patents are concentrated in the well-developed eastern and coastal regions. These results still hold after adjustment for quality differences between the different types of patents. We do not observe any overall reduction in the unequal distribution of patents over time. Conclusion: Substantial spatial and socioeconomic inequalities in innovative technologies have been observed in China’s health sector but have not yet been addressed. Inequality in health technology is not only much larger than the inequalities in labour and capital inputs in the health sector but also rising steadily.
    Date: 2021–02–04
  2. By: Chen, Jie; Pastore, Francesco
    Abstract: In this paper, we apply Generalized Propensity Score matching (GPSM) method, which deals with a continuous treatment variable, to estimate the returns to education in China from 2010 to 2017. Results are compared with OLS estimates from the classical Mincerian equation, as well as estimates from two instrumental variable methods (i.e., 2SLS and Lewbel). We use the Chinese General Social Survey data, including a subset newly released in 2020. We find that returns to education in China experienced a slight decrease in 2010-2015, but reverted back in 2017. With the more exible GPSM method, we also find that returns to university education remain higher than returns to secondary or compulsory education. The GPSM estimates are also closer to OLS estimates, compared to both instrumental variable methods.
    Keywords: returns to education,endogeneity,continuous treatment,sample selection,GPSM,IV,Lewbel,China
    JEL: I26 J30
    Date: 2021
  3. By: Chong-En Bai (Tsinghua University - School of Economics & Management); Chang-Tai Hsieh (University of Chicago - Booth School of Business; NBER); Zheng Song (City University of Hong Kong); Xin Wang (The Chinese University of Hong Kong - Department of Economics)
    Abstract: We use administrative registration records with information on the owners of all Chinese firms to document the importance of “connected†investors, defined as state-owned firms or private owners with equity ties with state-owned firms, in the businesses of private owners. We document a hierarchy of private owners: the largest private owners have direct investments from state-owned firms, the next largest private owners have equity investments from private owners that themselves have equity ties with state owners, and the smallest private owners do not have any ties with state owners. The network of connected private owners has expanded over the last two decades. The share of registered capital of connected private owners increased by almost 20 percentage points between 2000 and 2019, driven by two trends. First, state owned firms have increased their investments in joint ventures with private owners. Second, private owners with equity ties to state owners also increasingly invest in joint ventures with other (smaller) private owners. The expansion in the “span†of connected owners from these investments with private owners may have increased aggregate output of the private sector by 4.2% a year between 2000 and 2019.
    Date: 2020
  4. By: Alicia García-Herrero; Gary Ng
    Abstract: As China’s economic weight continues to grow, so does the global impact of its companies. Chinese state-owned enterprises (SOEs) produce a large share of Chinese goods and services. Given their importance both in China and increasingly globally, it should be measured whether SOEs introduce distortions into markets and how significant those distortions are. Foreign governments negotiating trade or investment deals with China need this information so they can better measure...
    Date: 2021–02
  5. By: Michael Greenstone (University of Chicago - Department of Economics; NBER); Guojun He (The Hong Kong University of Science and Technology); Ruixue Jia (University of California San Diego - School of Global Policy and Strategy; CIFAR; NBER); Tong Liu (The Hong Kong University of Science and Technology - Division of Social Science)
    Abstract: We examine the introduction of automatic air pollution monitoring, which is a central feature of China’s “war on pollution.†Exploiting 654 regression discontinuity designs based on city-level variation in the day that monitoring was automated, we find that reported PM10 concentrations increased by 35% immediately post–automation and were sustained. City-level variation in underreporting is negatively correlated with income per capita and positively correlated with true pre-automation PM10 concentrations. Further, automation’s introduction increased online searches for face masks and air filters, suggesting that the biased and imperfect pre-automation information imposed welfare costs by leading to suboptimal purchases of protective goods.
    Keywords: Technology, automation, air pollution, China, monitoring and surveillance, moral hazard, data quality
    Date: 2020
  6. By: Yue Dong; Dipanwita Sarkar; Jayanta Sarkar
    Abstract: This paper examines the causal impacts of decentralization of health resource allocation in China. We use the province-managing-county reform that expanded the administrative and fiscal powers of the counties as a quasi-natural experiment and exploit its staggered implementation across counties for identification. Combining a longitudinal county-level data from 2000 to 2012 with a generalized difference-in-difference design, we find that the introduction of the reform led to an increase in health resources at the county level. Moreover, the expansion of administrative power at the county level had a greater impact on health resources than fiscal power, while the simultaneous expansion of both powers had a more significant impact. Our results highlight the importance of designing deep and appropriate decentralization reforms to balance local health resources and promote health equity in China.
    Keywords: Decentralization, Health resources, Intergovernmental relations, policy evaluation, China
    JEL: H75 H77 I14 I18 R58
    Date: 2021–02–04
  7. By: Guojun He (Division of Social Science, Division of Environment and Sustainability, and Department of Economics, Hong Kong University of Science and Technology); Yuhang Pan (Division of Environment and Sustainability, Hong Kong University of Science and Technology, Clear Water Bay,Hong Kong); Takanao TANAKA (Division of Social Science, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)
    Abstract: Accurately estimating the effect of air pollution on COVID-19 transmission requires researchers to account for the epidemiological characteristics, deal with endogeneity, and capture the dynamic impact of air pollution. To do so, we propose a new econometric framework by combining the Susceptible-Infectious-Recovered-Deceased model, the Instrument Variable model, and the Flexible-Distributed-Lag model. Using data covering all Chinese cities, we find that a 10-point increase in the Air Quality Index would lead to a 2.80 percentage point increase in the daily COVID-19 growth rate with 2 to 13 days of delay, implying that improving air quality can help slow the COVID-19 spread.
    Date: 2020–12
  8. By: Liu, Chunping (Nottingham Trent University); Ou, Zhirong (Cardiff Business School)
    Abstract: We revisit the determinants of house prices in Chinaís megacities. Previous work on similar topics fails to account for the widespread cross-sectional heterogeneity and interdependencies, despite the importance of them. Using a PVAR estimated by the Bayesian method allowing for these features, we Önd each city is rather unique, especially on the extent to which local house prices are disturbed by external house price shocks. The spillovers are mainly due to direct housing market interdependence, which seems related more to demand before 2010, but more to supply thereafter due to property purchase restrictions. The new evidence we establish therefore suggests that city-level stabilisation of house prices should fully respect local features, including how local markets respond to external disturbances.
    Keywords: House price; Chinese megacities; PVAR; cross-sectional heterogeneity and interdependencies
    JEL: C11 R15 R31
    Date: 2021–02
  9. By: Aaron Flaaen; Kathryn Langemeier; Justin R. Pierce
    Abstract: The period from January 2018 to September 2019 saw an unprecedented increase in tariffs placed on U.S. imports, especially on those originating in China. We document the extent to which tariff exclusions and other factors lowered the average effective tariff on Chinese goods. Given that the large majority of tariff exclusions expired on December 31, 2020, our analysis also indicates that U.S. effective tariffs on Chinese goods increased notably at the start of 2021.
    Date: 2021–02–17
  10. By: Heinrich, Torsten; Yang, Jangho; Dai, Shuanping
    Abstract: Understanding the microeconomic details of technological catch-up processes offers great potential for informing both innovation economics and development policy. We study the economic transition of the PR China from an agrarian country to a high-tech economy as one example for such a case. It is clear from past literature that rapidly rising productivity levels played a crucial role. However, the distribution of labor productivity in Chinese firms has not been comprehensively investigated and it remains an open question if this can be used to guide economic development. We analyze labor productivity and the dynamic change of labor productivity in firm-level data for the years 1998-2013 from the Chinese Industrial Enterprise Database. We demonstrate that both variables are conveniently modeled as Lévy alpha-stable distributions, provide parameter estimates and analyze dynamic changes to this distribution. We find that the productivity gains were not due to super-star firms, but due to a systematic shift of the entire distribution with otherwise mostly unchanged characteristics. We also found an emerging right-skew in the distribution of labor productivity change. While there are significant differences between the 31 provinces and autonomous regions of the PR China, we also show that there are systematic relations between micro-level and province-level variables. We conclude with some implications of these findings for development policy.
    Date: 2021
  11. By: Tao Wang; Shiying Xiao; Jun Yan; Panpan Zhang
    Abstract: A multi-regional input-output table (MRIOT) containing the transactions among the region-sectors in an economy defines a weighted and directed network. Using network analysis tools, we analyze the regional and sectoral structure of the Chinese economy and their temporal dynamics from 2007 to 2012 via the MRIOTs of China. Global analyses are done with network topology measures. Growth-driving province-sector clusters are identified with community detection methods. Influential province-sectors are ranked by weighted PageRank scores. The results revealed a few interesting and telling insights. The level of inter-province-sector activities increased with the rapid growth of the national economy, but not as fast as that of intra-province economic activities. Regional community structures were deeply associated with geographical factors. The community heterogeneity across the regions was high and the regional fragmentation increased during the study period. Quantified metrics assessing the relative importance of the province-sectors in the national economy echo the national and regional economic development policies to a certain extent.
    Date: 2021–02
  12. By: Julia Grübler (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The effects of travel bans, and the disruption of production and shipping due to COVID-19 quickly rippled through global production and supply chains, even when the virus SARS-CoV-2 was still contained within East Asia. The global spread of the virus resulted in export restrictions on goods needed to fight the pandemic, while the import of similar goods was liberalised. Short-sighted panic reactions increased the vulnerability of global value chains and revealed dependencies on imported goods, particularly from China. Despite changes in European attitudes towards China during the COVID-19 crisis, the pandemic does not seem to be a major game changer. Instead, it acts as a catalyst for trends that were already observable before the crisis and that were amplified by the clashes between the US and China. The European Commission recommends diversifying supplies to mitigate risks, while preserving international competition, but defending the EU market against unfair trade practices. In Europe, major uncertainties in the field of international trade concern Brexit, the future of transatlantic trade ties after the presidential election in the US, the stability of the rules-based trade order under the World Trade Organization and the shift of institutional power towards East Asia surrounding the trade blocs of the Association of Southeast Asian Nations (ASEAN), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the newly established Regional Comprehensive Economic Partnership (RCEP) agreement. In view of China’s shift in main principles of action away from adopting existing international norms, the fragility of the liberal international order, and the ambiguous competition and co-operation relationship between the EU and China, it is more important than ever that EU member states follow a co-ordinated approach at the EU level in full unity to achieve the goal of ‘open strategic autonomy’. Small open European economies, such as Austria, should re-evaluate their trade dependencies and consider supporting partial near-shoring to neighbouring Central, East and Southeast Europe. Furthermore, it is recommended to the EU and its member states to step up investment with European value added, for instance in common health, rail transport and energy infrastructure in order to foster the EU’s long-run growth prospects and its green transition.
    Keywords: EU, China, COVID-19, pandemic, trade policy, value chains
    JEL: H53 F13 F21 L1
    Date: 2021–02
  13. By: Suma Athreye (Essex Business School, University of Essex, UK); Abubakr Saeed (Department of Management Sciences, COMSATS University, Islamabad, Pakistan); Muhammad Saad Baloch (Department of Management Sciences, COMSATS University, Islamabad, Pakistan)
    Date: 2021–01
  14. By: Godager, Geir (Department of Health Management and Health Economics); Hennig-Schmidt, Heike (BonnEconLab, University of Bonn, Germany); Li, Jing Jing (Shandong Provincial Hospital Affiliated to Shandong First Medical University, Jinan, Shandong, China); Wang, Jian (Dong Fureng Institute of Economic and Social Development, Wuhan University, China); Yang, Fan (Department of Health Management and Health Economics)
    Abstract: It is rarely the case that differences in behaviors of females and males are described under a ceteris paribus condition, and behaviors can potentially be influenced by the environment in which decisions are made. In the case of medical decisions, physicians are expected to account for patient characteristics as well as observed and unobserved contextual factors, such as whether the patient has a healthy lifestyle. Since one usually do not randomize physicians to context, reported gender differences in medical practice can have several alternative interpretations. <p> A key question is whether the medical treatment of a given patient is expected to depend on the gender of the physician. To address this question, we quantify gender effects using data from an incentivized laboratory experiment, where Chinese medical doctors and Chinese medical students choose medical treatment under different payment schemes. We estimate preference parameters of females and males assuming decision-makers have patient-regarding preferences. We cannot reject the hypothesis that gender differences in treatment choices are absent. Preference parameters of females and males are not statistically different in a log-likelihood ratio test, and there is no evidence that the degree of randomness in choices differs between genders. <p> The absence of gender effects in the laboratory, where choice context is fixed, provides nuance to previous findings on gender differences, and highlights the general difficulty of separating individuals’ behavior from the context they are in.
    Keywords: Gender; Laboratory experiment; Bounded rationality; Physician behavior
    JEL: C92 D82 H40 I11 J33
    Date: 2021–02–22
  15. By: Stephen J. Davis (University of Chicago - Booth School of Business); Dingqian Liu (American University - Department of Economics); Xuguang Simon Sheng (American University - Department of Economics)
    Abstract: Stock prices and workplace mobility trace out striking clockwise paths in daily data from mid-February to late May 2020. Global stock prices fell 30 percent from 17 February to 12 March, before mobility declined. Over the next 11 days, stocks fell another 10 percentage points as mobility dropped 40 percent. From 23 March to 9 April, stocks recovered half their losses and mobility fell further. From 9 April to late May, both stocks and mobility rose modestly. This dynamic plays out across the 35 countries in our sample, with a few notable exceptions. We also find that stricter lockdown policies, both in-country and globally, drove larger declines in national stock prices conditional on pandemic severity, workplace mobility, and income support and debt relief policies. Looking more closely at the two largest economies, the pandemic had greater effects on stock market levels and volatilities in the U.S. than in China. Narrative evidence confirms the dominant – and historically unprecedented – role of pandemic-related developments for stock prices in both countries. The size of the global stock market crash in reaction to the pandemic is many times larger than a standard asset-pricing model implies.
    Keywords: Stock prices, lockdown policies, market shutdowns, coronavirus, COVID-19, workplace mobility, China
    JEL: E32 E44 E65 G12 G18 I18
    Date: 2020
  16. By: Jeffrey J. Schott (Peterson Institute for International Economics)
    Abstract: China’s policies in Xinjiang, Hong Kong, and the South China Sea and its ongoing support for Iran, North Korea, and Venezuela pose major challenges for the United States, where bipartisan pressure is growing to ramp up punitive sanctions against leading Chinese firms and financial institutions. Financial sanctions freeze the US assets or bar US entry of the targeted individuals and firms and prohibit US financial firms from doing business with them. Schott explains why US officials should carefully weigh the risks to international financial markets and US economic interests before imposing punitive sanctions on major financial institutions engaged with China. The collateral costs of such sanctions would be sizable, damaging US producers, financial institutions, and US alliances. By restricting access of major banks to international payments in US dollars and barring use of messaging systems like SWIFT, tougher US financial sanctions would effectively “weaponize” the dollar; friends and foes alike would be pushed to seek alternatives to dollar transactions that, over time, would weaken the international role of the dollar. Instead of doubling down on current unilateral financial sanctions, US policy should deploy sanctions in collaboration with allies and calibrate trade and financial controls to match the expected policy achievements.
    Date: 2021–01

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