nep-cna New Economics Papers
on China
Issue of 2021‒04‒19
fifteen papers chosen by
Zheng Fang
Ohio State University

  1. Is green always attractive? The location choices of Chinese outward FDI By Andrea Ascani; Simona Iammarino
  2. Performance Evaluation, Influence Activities, and Bureaucratic Work Behavior: Evidence from China By de Janvry, Alain; He, Guojun; Sadoulet, Elisabeth; Wang, Shaoda; Zhang, Qiong
  3. Educational technologies in China. Pre- and post-pandemic lessons By Claudio Feijoo; Javier Fernández; Alberto Arenal; Cristina Armuña; Sergio Ramos
  4. Option to survive or surrender: carbon asset management and optimization in thermal power enterprises from China By Yue Liu; Lixin Tian; Zhuyun Xie; Zaili Zhen; Huaping Sun
  5. Decoding China's Covid-19 "virus exceptionalism": Community-based digital contact tracing in Wuhan By Boeing, Philipp; Wang, Yihan
  6. Entropy-based China income distributions and inequality measures By Fu, Q; Villas-Boas, SB; Judge, G
  7. Unprecedented decarbonization of China's power system in the post-COVID era By Biqing Zhu; Rui Guo; Zhu Deng; Wenli Zhao; Piyu Ke; Xinyu Dou; Steven J. Davis; Philippe Ciais; Pierre Gentine; Zhu Liu
  8. Foreign Direct Investment in China and Domestic Activities of Japanese Firms By OKUBO Toshihiro
  9. Examining the Impact of Home Purchase Restrictions on China’s Housing Market By Zhentong Lu; Sisi Zhang; Jian Hong
  10. Windows of opportunity for catching up in formative clean-tech sectors and the rise of China in concentrated solar power By Jorrit Gosens; Alina Gilmanova; Johan Lilliestam
  11. Reassessing China's GDP Growth Performance: an Exploration of The Underestimated Price Effect By Harry X. WU; Zhan LI
  12. Assessing the Potential Economic Gains of China-Pakistan-Economic-Corridor Energy Projects for Pakistan By Saddam Hussain; Chunjiao Yu; Ali Sohail; Sadaf Manzoor; Ao Li
  13. Productivity effects of processing and ordinary export market entry: A time-varying treatments approach By Girma, Sourafel; Görg, Holger
  14. Curse of Democracy: Evidence from 2020 By Yusuke Narita; Ayumi Sudo
  15. Exporters' reaction to positive foreign demand shocks By Asier Minondo

  1. By: Andrea Ascani (Gran Sasso Science Institute); Simona Iammarino (London School of Economics)
    Abstract: With the exponential growth of the role of China in the global economy, the environmental implications of its international expansion are serious but still scarcely investigated. This paper analyses the location of 6,494 manufacturing subsidiaries of Chinese Multinational Enterprises (MNEs) in 78 countries over the period 2008-2015, in response to the environmental performance of host economies, in order to explore whether degraded environmental contexts represent a pull factor for Chinese outward foreign direct investment (FDI). We build an original conceptual framework combining traditional race-to-the-bottom arguments with a set of conditioning factors pertaining to heterogeneity of both host countries and MNEs. By empirically accounting for endogeneity concerns, our results suggest that Chinese outward FDI may feed a downward spiral by systematically favouring locations with more fragile ecosystem vitality, that is, a weakly sustainable use of local natural resources and the consequent erosion of the quality of the natural ecosystems. These results characterise Chinese subsidiaries (i) locating in developing countries, (ii) operating within deficient institutional frameworks and (iii) privately owned
    Keywords: multinational enterprises, outward FDI, environment, location strategies, China
    JEL: F23 F64 Q5
    Date: 2020–11
  2. By: de Janvry, Alain; He, Guojun; Sadoulet, Elisabeth; Wang, Shaoda; Zhang, Qiong
    Abstract: Subjective performance evaluation is widely used by firms and governments toprovide work incentives. However, delegating evaluation power to local seniorleadership could induce influence activities: agents might devote much effortsto please their supervisors, rather than focusing on productive tasks that benefittheir organizations. We conduct a large-scale randomized field experimentamong Chinese local government employees and provide the first rigorousempirical evidence on the existence and implications of influence activities. Wefind that employees do engage in evaluator-specific influence to affectevaluation outcomes, and that this process can be partly observed by their coworkers.However, introducing uncertainty in the identity of the evaluatordiscourages evaluator-specific influence activities and significantly improves thework performance of local government employees.
    Keywords: Social and Behavioral Sciences, influence activities, subjective evaluation, civil servants, work performance, China
    Date: 2020–10–21
  3. By: Claudio Feijoo (UPM – Higher Technical School of Engineers in Telecommunication); Javier Fernández; Alberto Arenal; Cristina Armuña; Sergio Ramos
    Abstract: China is leading in the application of new digital technologies in education. The market is young, albeit highly competitive, as parents willingly adopt any technological innovation that could help their children, and schools as well, since they are judged on their pupils’ success. To foster such a flourishing, there is a wealth of available data under a loose regulatory framework, growing technical expertise and massive public funding and hands-on support. However, structural barriers for educational technologies do exist, such as the pre-eminence granted to admission exams for students above anything else, or an insufficient critical mass of AI talent and deployment. Aware of these limitations, the Chinese administration promotes changes in local education systems that are later extended nationally if they prove to be successful. What happened to the education field during the Covid-19 confinement in China encompasses a vibrant display of public and private initiatives that led to what every expert called a ʻboom timeʼ for educational technologies. This report presents in detail the educational technologies ecosystem in China and, from there, analyses the learning outcomes of the pandemic days and potential learnings of significance to Europe. Thus, for instance, China’s pursuit of decreasing the education divide between areas lacking infrastructures and urban zones could create economies of scale for affordable and technologically advanced innovations that can be inspirational for Europe.
    Keywords: Educational technologies, Education, Artificial Intelligence, China
    Date: 2021–03
  4. By: Yue Liu; Lixin Tian; Zhuyun Xie; Zaili Zhen; Huaping Sun
    Abstract: Carbon emission right allowance is a double-edged sword, one edge is to reduce emission as its original design intention, another edge has in practice slain many less developed coal-consuming enterprises, especially for those in thermal power industry. Partially governed on the hilt in hands of the authority, body of this sword is the prices of carbon emission right. How should the thermal power plants dance on the blade motivates this research. Considering the impact of price fluctuations of carbon emission right allowance, we investigate the operation of Chinese thermal power plant by modeling the decision-making with optimal stopping problem, which is established on the stochastic environment with carbon emission allowance price process simulated by geometric Brownian motion. Under the overall goal of maximizing the ultimate profitability, the optimal stopping indicates the timing of suspend or halt of production, hence the optimal stopping boundary curve implies the edge of life and death with regard to this enterprise. Applying this methodology, real cases of failure and survival of several Chinese representative thermal power plants were analyzed to explore the industry ecotope, which leads to the findings that: 1) The survival environment of existed thermal power plants becomes severer when facing more pressure from the newborn carbon-finance market. 2) Boundaries of survival environment is mainly drawn by the technical improvements for rising the utilization rate of carbon emission. Based on the same optimal stopping model, outlook of this industry is drawn with a demarcation surface defining the vivosphere of thermal power plants with different levels of profitability. This finding provides benchmarks for those enterprises struggling for survival and policy makers scheming better supervision and necessary intervene.
    Date: 2021–04
  5. By: Boeing, Philipp; Wang, Yihan
    Abstract: During the COVID-19 pandemic, comprehensive, accurate, and timely digital contact tracing serves as a decisive measure in curbing viral transmission. Such a strategy integrates corporate innovation, government decision-making, citizen participation, and community coordination with big data analytics. This article explores how key stakeholders in an open innovation ecosystem interact within the digital context to overcome challenges to public health and socio-economic welfare imposed by the pandemic. To enhance the digital contact tracing effectiveness, communities are deployed to moderate the interactions between government, enterprises and citizens. As an example, we study the community-based digital contact tracing in Wuhan, a representative case of China's 'virus exceptionalism' in COVID-19 mitigation. We discuss the effectiveness of this strategy and raise critical ethical concerns regarding decision-making in R&D management.
    Keywords: COVID-19,digital contact tracing,open innovation ecosystem,community,big data
    Date: 2021
  6. By: Fu, Q; Villas-Boas, SB; Judge, G
    Abstract: We use information theoretic information recovery methods, on a 2005 sample of household income data from the Chinese InterCensus, to estimate the income distribution for China and each of its 31 provinces and to obtain corresponding measures of income inequality. Using entropy divergence methods, we seek a probability density function solution that is as close to a uniform probability distribution of income (with the least inequality), as the data will permit. These entropy measures of income inequality reflect how the allocation and distribution systems are performing, and we show the advantages of investigating province variation in income inequality using entropy measures rather than Gini coefficients. Finally, we use a sample of data from the China Family Panel Study to recover an estimate of the 2010 and the 2016 to investigate possible directions of inequality changes using these different additional data sources, given that the 2015 Inter-Census is not yet available.
    Keywords: Applied Economics
    Date: 2019–09–02
  7. By: Biqing Zhu; Rui Guo; Zhu Deng; Wenli Zhao; Piyu Ke; Xinyu Dou; Steven J. Davis; Philippe Ciais; Pierre Gentine; Zhu Liu
    Abstract: In October of 2020, China announced that it aims to start reducing its carbon dioxide (CO2) emissions before 2030 and achieve carbon neutrality before 20601. The surprise announcement came in the midst of the COVID-19 pandemic which caused a transient drop in China's emissions in the first half of 2020. Here, we show an unprecedented de-carbonization of China's power system in late 2020: although China's power related carbon emissions were 0.5% higher in 2020 than 2019, the majority (92.9%) of the increased power demand was met by increases in low-carbon (renewables and nuclear) generation (increased by 9.3%), as compared to only 0.4% increase for fossil fuels. China's low-carbon generation in the country grew in the second half of 2020, supplying a record high of 36.7% (increased by 1.9% compared to 2019) of total electricity in 2020, when the fossil production dropped to a historical low of 63.3%. Combined, the carbon intensity of China's power sector decreased to an historical low of 519.9 tCO2/GWh in 2020. If the fast decarbonization and slowed down power demand growth from 2019 to 2020 were to continue, by 2030, over half (50.8%) of China's power demand could be provided by low carbon sources. Our results thus reveal that China made progress towards its carbon neutrality target during the pandemic, and suggest the potential for substantial further decarbonization in the next few years if the latest trends persist.
    Date: 2021–04
  8. By: OKUBO Toshihiro
    Abstract: China has seen dramatic economic growth in the last decades and attracted foreign capital and human resources. This paper studies firm characteristics of the Japanese firms investing in China. We combine several sources of micro-data and construct panel data on Japanese manufacturing firms from 1995 to 2009. As a result we find that the number of firms investing in China steadily increased over time and FDI in China increased domestic sales, productivity, wages and number of employees of Japanese firms, rather than increasing technological development.
    Date: 2021–03
  9. By: Zhentong Lu; Sisi Zhang; Jian Hong
    Abstract: This paper studies the impact of home purchase restrictions on China's housing market. We estimate a structural model of household preference for housing, real estate developers’ pricing decisions, and equilibrium market outcome in five large cities. By comparing the estimation results from pre- and post-policy intervention, we find that after home purchase restrictions are implemented, overall housing demand in most cities becomes weaker and less price elastic; meanwhile, real estate developers face higher holding costs and thus are willing to lower prices and sell more quickly. Counterfactual analyses show that in some cities, alternative policy designs that cause less structural change of demand could improve consumer welfare and social welfare better than the implemented policy.
    Keywords: Housing; Market structure and pricing
    JEL: R31 R38 O18
    Date: 2021–04
  10. By: Jorrit Gosens (Crawford School of Public Policy, Australian National University); Alina Gilmanova (Key Laboratory of Solar Thermal Energy and Photovoltaic Systems, Institute for Electrical Engineering, Chinese Academy of Sciences); Johan Lilliestam (Institute for Advanced Sustainability Studies (IASS))
    Abstract: We analyse the potential for industry entry and catching up by latecomer countries or firms in formative sectors, by deriving a framework that builds on the concept of windows of opportunity for catching up. This framework highlights differences in technological, market, and institutional characteristics between formative and mature sectors, and elaborates how this may affect opportunities for catching up. We apply this framework to the global Concentrated Solar Power sector, in which China has rapidly narrowed the gap to the global forefront in terms of technological capabilities and market competitiveness. We find that the formative nature of the sector resulted in turbulent development of the technological, market, and institutional dimensions, making it more difficult for early leaders to retain leadership, and therefore easier for latecomer firms or countries to catch up. This signals an increased role in early-stage technology development in the next phase of the energy transition.
    Date: 2021–04
  11. By: Harry X. WU; Zhan LI
    Abstract: Instead of searching for alternative indicators, this study accepts the official nominal GDP statistics at face value and reassesses real growth by investigating the underlying price effect that is intrinsic to and coherent with the national accounts. Based on reconstructed national input-output tables in time series, we address two major biases that may have significantly distorted the official growth estimates of China, i.e., a single-deflation bias caused by discrepancies between input and output prices and an aggregation bias that is caused by a constant-price value aggregation problem. Compared to the smooth official growth rates, our procedures have exposed more volatile movements of, and greater impacts of external shocks on the Chinese economy. We estimate an annual growth rate at 8.3 percent for the entire reform period 1978-2018, which is 1.2 percentage points below the officially claimed rate of 9.5 percent. In real terms, this downward adjustment means that until 2018, China's accumulated national income over the past forty years could be 36 percent smaller than that suggested by the official data.
    Date: 2021–03
  12. By: Saddam Hussain (Hubei University); Chunjiao Yu (Hubei University); Ali Sohail (Xjtu - Xi'an Jiaotong University); Sadaf Manzoor (Riphah International University); Ao Li (Hubei University)
    Abstract: As the extended part of One Belt One Road (OBOR) initiative that aims to interconnect the economic world, China-Pakistan-Economic-Corridor consists of different projects like road and railway, agricultural projects and energy projects in Pakistan. This paper aims to assess the current situation and the potential economic benefits of the energy projects of CPEC for Pakistan. Through research based on the statistical data, we find CPEC enormous contribution of $35 billion investment in the energy sector will bring some positive changes in energy sector of Pakistan. Actually, CPEC is playing a vital role in economic development of Pakistan.The potential economic gains include the following: increasing of supply energy mix with cheaper pricesgenerating energy by utilizing local resources-coal, wind, solar energy and water which help decreasing energy importdecrease trade depicts, encourage Foreign Direct Investment (FDI), reducing unemployment, infrastructural development, industrial zones, trade and local manufacturing industries.This study also explores some risks and challenges to the economy of Pakistan from CPEC.
    Keywords: CPEC,OBOR,Social-Economic Development,Pakistan
    Date: 2020–11–30
  13. By: Girma, Sourafel; Görg, Holger
    Abstract: China's policy of encouraging export processing has been the topic of much discussion in the academic literature and policy debate. We use a recently developed econometric approach that allows for time varying "treatments" and estimate economically and statistically significant positive causal effects of entering into export processing and ordinary export markets on subsequent firm level productivity. These productivity effects are shown to be larger than those accruing to firms who enter into ordinary exporting. Interestingly, the estimation of quantile treatment effects shows that the positive effects do not accrue similarly to all types of firms, but are strongest for those at the low to medium end of the distribution of the productivity variable. We also find that export processors gain more when entering the industrialised North rather than the South, while this does not appear to matter much for ordinary exporting.
    Keywords: export processing,firm performance,China,time varying treatments
    JEL: F14 F61 O14
    Date: 2021
  14. By: Yusuke Narita; Ayumi Sudo
    Abstract: Countries with more democratic political regimes experienced greater GDP loss and more deaths from Covid-19 in 2020. Using five different instrumental variable strategies, we find that democracy is a major cause of the wealth and health losses. This impact is global and is not driven by China and the US alone. A key channel for democracy's negative impact is weaker and narrower containment policies at the beginning of the outbreak, \textit{not} the speed of introducing policies.
    Date: 2021–04
  15. By: Asier Minondo
    Abstract: I use the quasi-natural experiment of the 2018 African swine fever (ASF) outbreak in China to analyze swine exporters' reaction to a foreign market's positive demand shock. I use the universe of Spanish firms' export transactions to China and other countries, and compare the performance of swine and other exporters before and after the ASF. The ASF increased Spanish swine exporters' sales to China three times. Swine exporters did not increase exported product portfolio or export revenue concentration in their best-performing products in China after the ASF. The increase in exports to China positively impacted export revenue and survival in third markets. This positive impact was especially intense for small swine exporters.
    Date: 2021–04

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