nep-cna New Economics Papers
on China
Issue of 2021‒05‒17
seven papers chosen by
Zheng Fang
Ohio State University

  1. Measuring the Impact of Electricity Market Reform in a Chinese Context By Pollitt, M.
  2. The Impact of Foreign Direct Investment on Innovation: Evidence from Patent Fillings and Citations in China By Chen, Yongmin; Jiang, Haiwei; Liang, Yousha; Pan, Shiyuan
  3. Road and Belt, Iron Silk Road and Russian-Chinese geopolitical cooperation and competition By Lukin, Artyom
  4. The roles of inter-fuel substitution and inter-market contagion in driving energy prices: evidences from China’s coal market By Li, Jianglong; Xie, Chunping; Long, Houyin
  5. Duisburg and its port, endpoint of China's silk road: Opportunities and risks By Pascha, Werner
  6. Diversification, economies of scope, and exports growth of Chinese firms By Mercedes Campi; Marco Dueñas; Le Li; Huabin Wu
  7. The Effect of the COVID-19 Pandemic on Global Production Sharing in East Asia By Archanun Kohpaiboon; Juthathip Jongwanich

  1. By: Pollitt, M.
    Abstract: This paper draws on international experience to examine how the ongoing power sector reform (PSR) in China since 2015 should be measured and assessed. We proceed by reviewing some relevant international reform experience and then applying this to the Chinese context. Thus we focus on some of the extensive previous literature which has documented reforms in cross-country and in single country studies. We pay particular attention to the European Union (EU) single electricity market, which is the largest integrated electricity market in the world. We also look at a social cost benefit analyses of UK electricity market reforms and how these might applied in a given Chinese province. We go on to examine the actual price impact evidence from two leading provinces – Guangdong and Zhejiang – on the overall price effect and on exactly how those price effects have been achieved. We then offer some insights from the extensive regulatory reporting by leading regulators on market performance that is relevant to PSR in China based on excellent annual reporting from the UK, Australia and the US.
    Keywords: Power sector reform, social cost benefit analysis, state of the market
    JEL: L94
    Date: 2021–04–27
  2. By: Chen, Yongmin; Jiang, Haiwei; Liang, Yousha; Pan, Shiyuan
    Abstract: This paper studies how foreign direct investment (FDI) affects innovation in the host country, using matched firm-level patent data of Chinese firms. The data contain multidimensional information about patent counts and citations which, together with an identification strategy based on Lu et al. (2017), allows us to measure innovation comprehensively and to uncover the causal relationship. Our empirical analysis shows that FDI has positive intra-industry effects on the quantity and quality of innovation by Chinese firms. We show that these positive effects are driven by increases in competition, rather than by knowledge spillover from FDI which is measured by patent citations between domestic firms and foreign invested enterprises (FIEs). We further investigate the inter-industry effects of FDI and find that FDI has positive vertical effects on innovation in upstream sectors.
    Keywords: FDI; Innovation; Patent; Competition; Spillover
    JEL: F2 L5 O3
    Date: 2021–05–11
  3. By: Lukin, Artyom
    Abstract: This paper examines political and economic dimensions of the Russia-China relationship, with an emphasis on Russia's involvement in Beijing's Belt and Road Initiative (BRI). Being the largest, and trans-continental, Eurasian country, Russia occupies an important place in China's BRI. The current relationship between the two great Eurasian powers can be characterized as an entente, or quasi-alliance. Moscow welcomes the BRI, but, unlike many other governments across the world, it has never signed an agreement to formally join the initiative. This signals Russia's stance that Eurasian integration should not be dominated by China, as well as the Kremlin's insistence on status equality with China. In recent years there has been a noticeable rise in shipments from China to Europe, and in the reverse direction, using the rail routes via Russia. However, despite the increase in its trans-continental freight traffic going via Russia, China still refrains from investing in the upgrade of Russia's transport networks, such as railroads, ports and highways, and is overall reluctant to invest in the Russian economy. The reasons are both economic, such as the relatively high risks and low profit margins in the Russian market, and political ones, related to Russia's insistence on parity and equality with China.
    Keywords: Russia-China relations,the Belt and Road Initiative,Eurasia
    Date: 2021
  4. By: Li, Jianglong; Xie, Chunping; Long, Houyin
    Abstract: Coal has been dominating energy supply and consumption in China, with the country becoming the largest energy supplier and consumer worldwide. Due to inter-fuel substitution of crude oil and inter-market contagion of international coal market, China's coal price might be interrelated with crude oil price and international coal price. However, the precise roles of these two effects in determining China's coal price are unknown. This paper contributes to previous literature by investigating this issue. We find that co-movements between China's coal price and crude oil price largely hinge on the shares of oil and coal in China’s energy mix, while its co-movements with international coal price depend on scales of coal trade. Inter-fuel substitution dominated the interaction of China's coal market with other energy types, but the importance of inter-market contagion has been increasing. We also find that China might have become an originator for driving the returns of crude oil and international coal, in particular after 2008. Furthermore, China's coal market is still a net volatility recipient for shocks from both crude oil market and international coal market. Given the increased integration of global energy markets, we anticipate this paper to provide a better understanding on the dynamic changes in China's coal prices.
    Keywords: China's coal price; Inter-fuel substitution; Inter-market contagion; Crude oil market; International coal market
    JEL: J1
    Date: 2019–10–14
  5. By: Pascha, Werner
    Abstract: The question to what extent the EU, Germany, its regional states or individual localities can and should cooperate with China has gained considerable importance recently. This paper discusses the city of Duisburg, an important logistics hub in western Germany, next to the rivers Rhine and Ruhr, as a particularly interesting case study. Its location is ideal as the "western terminus" for the rail services of the "new silk road", but the precarious economic situation as a former city of steel and coal make Duisburg particularly vulnerable to economic and political risks. The paper identifies relevant pro and con factors and evaluates the available evidence. The economic heritage and current situation of Duisburg are indeed challenging. Duisburg has noticeably profited from the Chinese interest in its logistics network, but the impetus is not significant enough for the city to fully recover from the decline of coal and steel industries. A large share of the potential benefits has probably already been realized, while current plans to increase the container capacity of the port further should be duly acknowledged. Positive linkage effects with other industries, beyond rail and logistics, still seem rather limited. With respect to the political dimension, the typical risks for local communities often associated with the Belt and Road Initiative were somewhat limited in Duisburg's case, because Duisburg, as a part of Germany, is not in a particularly dire situation and as Duisburg's port activities are profitable even without the China business, so the potential leverage of Chinese actors is limited, and because Duisburg is not the home of many high-tech companies that might be attractive targets. In the case of the Duisburg-Huawei cooperation, which does indeed hold some political risks, the momentum has declined recently, due to the various checks and balances that are in place, while the win-win projects of the agenda will hopefully still be realized. Both the idea of an economic bonanza beckoning on the horizon and the concern about looming political risks seem to have been exaggerated. Currently, the city seems to be in a phase of reconsidering its future options and possible trajectories with respect to China.
    Keywords: Duisburg,China,New silk road,Belt and Road Initiative,regional economic development
    Date: 2021
  6. By: Mercedes Campi (Universidad de Buenos Aires / CONICET); Marco Dueñas (Universidad de Bogotá Jorge Tadeo Lozano); Le Li (Sant’Anna School of Advanced Studies); Huabin Wu (Shangai University)
    Abstract: In the 1990s, China started a process of structural reforms and of trade liberalization, which was followed by the accession to the World Trade Organization (WTO) in 2001. In this paper, we analyze trade patterns of Chinese firms for the period 2000-2006, characterized by a notable increase in exports volumes. Theoretically, in a more open economy, firms are expected to move from the production of a set of less-competitive products towards more internationally competitive ones, which implies specialization. We study several stylized facts on the distribution of Chinese firms trade and growth rates, and we analyze whether firms have diversified or specialized their trade patterns between 2000 and 2006. We show that Chinese export patterns are very heterogeneous, that the volatility of growth rates depends on the level of exports, and that volatility is stronger after trade liberalization. Both, diversification in products and destinations have a positive impact on trade growth, but diversification of destinations has a stronger effect. We conclude that the success of Chinese exports is not only due to an increase in the intensive margin, related to the existence of economies of scale, but also due to an increase in the extensive margin, related to the existence of economies of scope.
    Keywords: Industrial dynamics Margins of trade Diversification and specialization Economies of scope
    JEL: F14 F L25
    Date: 2021–04
  7. By: Archanun Kohpaiboon; Juthathip Jongwanich (Faculty of Economics, Thammasat University)
    Abstract: This paper examines the effect of the COVID-19 pandemic on global production sharing in ASEAN Member States. Product-level analysis – on hard disk drives, air conditioners, microwaves, televisions, washing machines, and automotive parts – is undertaken to examine trade patterns between January 2019 and October/November 2020. The key finding suggests that the pandemic caused parts shortages, but this effect has been short-lived. There is no strong evidence that multi-national enterprises have altered their supply chains or means of sourcing parts and components in response to the pandemic. There is some indication that multi-national enterprises are moving away from China, but whether this reflects a ‘COVID-19 effect’ or the trade war between the United States and China is not clear. COVID-19, a once-in-a-century event, may not alone be a compelling reason to restructure supply chain management relating to global production sharing, which has been a structural phenomenon driving economic globalisation.
    Keywords: COVID-19, global production sharing, ASEAN
    JEL: F14 F20
    Date: 2021–04–21

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