nep-cna New Economics Papers
on China
Issue of 2021‒06‒21
eighteen papers chosen by
Zheng Fang
Ohio State University

  1. High-Technology Zones, Misallocation of Resources among Cities and Aggregate Productivity: Evidence from China By Laiqun Jin; Xiuyan Liu; Sam Hak Kan Tang
  2. Does India use development finance to compete with China? A subnational analysis By Asmus, Gerda; Eichenauer, Vera; Fuchs, Andreas; Parks, Bradley
  3. An Empirical Assessment of the Impact of Subsidies on EV adoption in China: A Difference-in-Differences Approach By Xuemei Zheng; Flavio Menezes; Xiaofeng Zheng; Chengkuan Wu
  4. COVID-19, City Lockdowns, And Air Pollution: Evidence from China By Guojun He; Yuhang Pan; Takanao Tanaka
  5. From parvenu to “highbrow” tastes: the rise of cultural capital in China’s intergenerational elites By Li, Gordon C.
  6. Four great Asian trade collapses By Alan de Bromhead; Alan Fernihough; Markus Lampe; Kevin Hjortshøj O’Rourke
  7. Estimating air quality co-benefits of energy transition using machine learning By Da Zhang; Qingyi Wang; Shaojie Song; Simiao Chen; Mingwei Li; Lu Shen; Siqi Zheng; Bofeng Cai; Shenhao Wang
  8. Organisation Capital, Knowledge Spillover and Firm Performance: Evidence from Chinese Manufacturing Sector By Qing Li; Yanrui Wu
  9. Curse of Democracy: Evidence from 2020 By NARITA Yusuke; SUDO Ayumi
  10. Estimating the Ex-ante and the Ex-post Effects of Chinese Outward FDI By Donatella Baiardi; Valeria Gattai; Piergiovanna Natale
  11. Local Bank, Digital Financial Inclusion and SME Financing Constraints: Empirical Evidence from China By Zhiqiang Lu; Junjie Wu; Hongyu Li; Duc Khuong Nguyen
  12. China's Investment in Intangible Assets by Industry: A Preliminary Estimation in an Extended Sources-of-Growth Framework By Janet X. HAO; Harry X. WU
  13. Delay the Pension Age or Adjust the Pension Benefit? Implications for Labor Supply and Individual Welfare in China By Yuanyuan Deng; Hanming Fang; Katja Hanewald; Shang Wu
  14. The Winter Choke: Coal-Fired Heating, Air Pollution, and Mortality in China By Maoyong Fan; Guojun He; Maigeng Zhou
  15. Digital Retailing as a Promoter of Employment: Evidence from China By Xu, Tao
  16. The Trade Impact of the Covid-19 Pandemic By Xuepeng Liu; Emanuel Ornelas; Huimin Shi
  17. Representation of Chinese Language and Culture Through Analysis of Media Coverage of Linguistic Education in France By Joël Bellassen; Charlotte Wang
  18. The changing nature of work and earnings inequality in China By Chunbing Xing

  1. By: Laiqun Jin (School of Business, Ningbo University); Xiuyan Liu (School of Economics and Management, Southeast University); Sam Hak Kan Tang (Business School, The University of Western Australia)
    Abstract: Recent literature has been debating the performance of high-technology zones (HTZs) in developing countries. This paper contributes to this debate by examining how national HTZs in China affect the allocative efficiency of resources among Chinese cities as well as China’s total factor productivity (TFP) growth. This paper has two key findings: Firstly, results show that resource misallocation among cities reduces China’s TFP growth by 4.5%. In the absence of national HTZs, China’s TFP loss would have been higher by about 1.5%. Secondly, we find that China’s national HTZs improve the allocative efficiency of capital among cities by channelling capital to where there is a shortage. Interestingly, we find little evidence of productivity growth driven by technical efficiency following the establishment of HTZs. The positive effect of national HTZs on allocative efficiency can be found in cities located in the Eastern and Central regions and cities without an administrative designation.
    Keywords: High-technology zones, Misallocation of resources, Total factor productivity, China
    JEL: O11 O53
    Date: 2021
  2. By: Asmus, Gerda; Eichenauer, Vera; Fuchs, Andreas; Parks, Bradley
    Abstract: China and India increasingly provide aid and credit to developing countries. This paper explores whether India uses these financial instruments to compete for geopolitical and commercial influence with China (and vice versa). To do so, we build a new geocoded dataset of Indian government-financed projects abroad between 2007 and 2014 and combine it with data on Chinese government-financed projects. Our regression results for 2,333 provinces within 123 countries demonstrate that India's Exim Bank is significantly more likely to locate a project in a given jurisdiction if China provided government financing there in the previous year. Since this effect is more pronounced in countries where China has made public opinion gains relative to India and where both lenders have a similar export structure, we interpret this as evidence of India competing with China. By contrast, we do not find evidence that China uses official aid or credit to compete with India through co-located projects.
    Keywords: development finance,foreign aid,social development assistance,official credits,new donors,China,India,geospatial analysis
    JEL: F34 F35 F59 H77 H81 O19 O22 P33 R58
    Date: 2021
  3. By: Xuemei Zheng (School of Economics, Southwestern University of Finance and Economics, Chengdu, China); Flavio Menezes (School of Economics, University of Queensland, Brisbane, Australia); Xiaofeng Zheng (Industrial Bank Company Ltd., Taiyuan, China); Chengkuan Wu (School of Economics, Southwestern University of Finance and Economics, Chengdu, China)
    Abstract: It is widely recognized that Electric vehicles (EVs) will play a crucial role in the electrification of transport, which is necessary for reaching a net-zero emissions economy. This recognition is reflected in the number of initiatives introduced worldwide to promote the EV industry, ranging from purchase subsidies to the provision of charging infrastructure and direct industry assistance. In this context, the Chinese government introduced a comprehensive program of government subsidies to support the sale of EVs. This paper estimates the impacts of these subsidies on EV sales in China using the difference-in-differences (DID) and propensity score matching (PSM) approach. Based on the panel data at city level from 2009 to 2018, we show that subsidies were the major contributor to the increase in EV sales. Our results suggest that the provision of infrastructure such as charging piles is also an important contributing factor. These findings are robust across model specifications and regression approaches. The heterogeneity analysis indicates that the treatment effect is heterogeneous across EV types, city sizes and regions. Our results provide empirical support for the current policy settings designed to promote EV sales in China.
    Keywords: Electric vehicles, subsidy policies, difference-in-differences approach, China.
    JEL: Q48 C13 C54
    Date: 2021–06–07
  4. By: Guojun He (Division of Social Science, Division of Environment and Sustainability, and Department of Economics, The Hong Kong University of Science and Technology, HK, China); 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: The rapid spread of COVID-19 is a global public health challenge. To prevent the escalation of its transmission, China locked down one-third of its cities and strictly restricted personal mobility and economic activities. Using timely and comprehensive air quality data in China, we show that these counter-COVID-19 measures led to a remarkable improvement in air quality. Within weeks, the Air Quality Index and PM2.5 concentrations were brought down by 25%. The effects are larger in colder, richer, and more industrialized cities. We estimate that such improvement would avert 24,000 to 36,000 premature deaths from air pollution on a monthly basis.
    Keywords: COVID-19, coronavirus, PM2.5, lockdown, health
    JEL: Q53 Q52 I18 I15
    Date: 2020–03
  5. By: Li, Gordon C.
    Abstract: A new generation of elites distinguished by their cultural endowments has emerged in China. Unlike the older generation of elites who signaled status through the display of wealth but shared similar tastes, the new generation of cultured elites has sophisticated, often Western-oriented “highbrow” tastes in their cultural consumption. By comparing the upbringings and the tastes of interviewees from various backgrounds, this study suggests a widening taste-chasm between the elites and the underclasses in urban cities. The social process behind this is argued to be the rapid formation of cultural capital in China, in which parental privileges accumulated in the market economy converted into cultural privileges in the new generation of new elites.
    Keywords: China; cultural capital; cultural consumption; intergenerational mobility; music taste
    JEL: J1
    Date: 2021–05–25
  6. By: Alan de Bromhead; Alan Fernihough; Markus Lampe; Kevin Hjortshøj O’Rourke
    Abstract: This paper introduces a new dataset of commodity-specific, bilateral import data for four large Asian economies in the interwar period: China, the Dutch East Indies, India, and Japan. It uses these data to describe the interwar trade collapses in the economies concerned. These resembled the post-2008 Great Trade Collapse in some respects but not in others: they occurred along the intensive margin, imports of cars were particularly badly affected, and imports of durable goods fell by more than those of non-durables, except in China and India which were rapidly industrializing. On the other hand the import declines were geographically imbalanced, while prices were more important than quantities in driving the overall collapse.
    Keywords: Trade collapses; interwar economy; protection
    JEL: N75 F14
    Date: 2021–04–01
  7. By: Da Zhang; Qingyi Wang; Shaojie Song; Simiao Chen; Mingwei Li; Lu Shen; Siqi Zheng; Bofeng Cai; Shenhao Wang
    Abstract: Estimating health benefits of reducing fossil fuel use from improved air quality provides important rationales for carbon emissions abatement. Simulating pollution concentration is a crucial step of the estimation, but traditional approaches often rely on complicated chemical transport models that require extensive expertise and computational resources. In this study, we develop a novel and succinct machine learning framework that is able to provide precise and robust annual average fine particle (PM2.5) concentration estimations directly from a high-resolution fossil energy use data set. The accessibility and applicability of this framework show great potentials of machine learning approaches for integrated assessment studies. Applications of the framework with Chinese data reveal highly heterogeneous health benefits of reducing fossil fuel use in different sectors and regions in China with a mean of \$34/tCO2 and a standard deviation of \$84/tCO2. Reducing rural and residential coal use offers the highest co-benefits with a mean of \$360/tCO2. Our findings prompt careful policy designs to maximize cost-effectiveness in the transition towards a carbon-neutral energy system.
    Date: 2021–05
  8. By: Qing Li (Qing Li, SHU-UTS SILC Business School, Shanghai University); Yanrui Wu (Business School, The University of Western Australia)
    Abstract: This study explores organisation capital and its spillover effects among Chinese manufacturing firms. By linking patent data with China’s annual survey of industrial enterprises database, we examine technological proximity as one potential channel for organisational spillover but find weak evidence. This result is consistent with previous findings from developed countries. In contrast, organisation capital is found to generate positive spillover in China when geographical proximity is considered. In other words, it is found that spillover from organisation capital is likely among Chinese firms due to geographical proximity rather than technological proximity.
    Keywords: Organisation capital; knowledge spillover; intangible capital; patent portfolio; Chinese firms
    JEL: D21 D24 L22
    Date: 2021
  9. By: NARITA Yusuke; SUDO Ayumi
    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, not the speed of introducing policies.
    Date: 2021–04
  10. By: Donatella Baiardi; Valeria Gattai; Piergiovanna Natale
    Abstract: This study investigates the relationship between outward Foreign Direct Investment (FDI) and the performance of Chinese enterprises. Using firm-level panel data over the period 2008–2014, we introduce a taxonomy of outward FDI that accounts for the decision to invest abroad and the location of foreign affiliates. Through different specifications, we show systematic differences in performance between FDI starters and non-starters two years before and two years after the first investment by the starters. This fact points to the existence of strong ex-ante and ex-post effects of Chinese outward FDI. On one hand, we provide evidence — so far not present in the literature — that the best performing Chinese firms self-select into outward FDI. On the other hand, controlling for endogeneity through propensity score matching (PSM) techniques, we detect significant learning effects from outward FDI to firm-level performance. Interestingly, these effects are heterogeneous with respect to destination, with deeper learning for Chinese enterprises investing in Asia.
    Keywords: FDI; China; ex-ante effects; ex-post effects; panel data
    JEL: F23 L25 O53
    Date: 2021–06
  11. By: Zhiqiang Lu; Junjie Wu; Hongyu Li; Duc Khuong Nguyen
    Abstract: This paper investigates the impact of local banks and digital financial inclusion on small and medium enterprise (SME) financing constraints. Using data of Chinese SMEs for the period 2007?2017, our robust results find (1) SMEs financing constraints are negatively associated with the proportion of local bank branches and the degree of digital financial inclusion; (2) the effect of local banks is more pronounced for small, transparent, and firms in the regions less dependent on bank credit; and (3) local bank branches and digital financial inclusion have a substitution effect on alleviating SMEs financial constraints. The findings shed light on how digital finance technologies could influence traditional SME-bank relationship and have important policy and managerial implications.
    Keywords: local banks; digital financial inclusion; financing constraints; SMEs; China.
    Date: 2021–01–01
  12. By: Janet X. HAO; Harry X. WU
    Abstract: This paper documents our major procedures in estimating China's intangible investment by industry for the period 1995-2013. The estimation is controlled by China's aggregate intangible investment estimated in Hulten and Hao (2012, revised and updated) and integrated with the industry-level estimates for tangible investment and value added of the national accounts constructed by the China Industry Productivity Data Project or CIP (Wu 2016). We show that China's intangible investment intensity, measured as the share of intangible investment in nominal value added, grew by 5.3 percent per annum. By 2013 China had reached 8.1 percent in this intensity, compared to 16.7 in the US and 13.9 in the UK. China caught up with the industrialized economies more quickly in the industrial sector than in the service sector. In the industrial sector, China achieved 12.2 percent in intangible intensity, about 90 percent of that of the U.K. (13.4) and 70 percent of that of the U.S. (19.4). In the service sector, China achieved 6.1 percent, about half of that of the U.K. (12.3) and 45 percent of that of the U.S. (14.1). We also show that among major types of intangible investment in the industrial sector, unlike advanced economies, China tended to focus more on computerized information such as software and R&D that are promoted together with government-engineered industrial and infrastructural projects, rather than economic competencies such as branding that rely more on firms competing in the marketplace.
    Date: 2021–04
  13. By: Yuanyuan Deng; Hanming Fang; Katja Hanewald; Shang Wu
    Abstract: We develop and calibrate a life-cycle model of labor supply and consumption to quantify the implications of alternative pension reforms on labor supply, individual welfare, and government budget for China’s basic old-age insurance program. We focus on urban males and distinguish low-skilled and high-skilled individuals, who differ in their preferences, health and labor income dynamics, and medical expense processes. We use the calibrated model to evaluate three potential pension reforms: (i) increasing the pension eligibility age from 60 to 65, but keeping the current pension benefit rule unchanged; (ii) keeping the pension eligibility age at 60, but proportionally lowering pension benefits so that the pension program’s budget is the same as under Reform (i); and (iii) increasing the pension eligibility age to 65 and simultaneously increasing the pension benefits so that individuals of both skill types attain the same individual welfare levels as in the status quo. We find that relative to the baseline, both Reforms (i) and (ii) can substantially improve the budgets of the pension system, but at the cost of substantial individual welfare loss for both skill types. In contrast, we find that Reform (iii) can modestly improve the budget of the pension system while ensuring that both skill types are as well off as in the status quo. We find that Reforms (i) and (ii) slightly increases, but Reform (iii) slightly decreases, the overall labor supply.
    JEL: D14 D15 H55 J22
    Date: 2021–06
  14. By: Maoyong Fan (Department of Economics, Ball State University, Whitinger Business Building, Room 201, 2000 W. University Avenue, Muncie, IN 47306); Guojun He (Division of Social Science, Division of Environment and Sustainability, and Department of Economics, The Hong Kong University of Science and Technology, HK, China); Maigeng Zhou (National Center for Chronic and Noncommunicable Disease Control and Prevention, Chinese Center for Disease Control and Prevention, China)
    Abstract: China’s coal-fired winter heating systems generate large amounts of hazardous emissions that significantly deteriorate air quality. Exploiting regression discontinuity designs based on the exact starting dates of winter heating across different cities, we estimate the contemporaneous impact of winter heating on air pollution and health. We find that turning on the winter heating system increased the weekly Air Quality Index by 36% and caused 14% increase in mortality rate. This implies that a 10-point increase in the weekly Air Quality Index causes a 2.2% increase in overall mortality. People in poor and rural areas are particularly affected by the rapid deterioration in air quality; this implies that the health impact of air pollution may be mitigated by improved socio- economic conditions. Exploratory cost-benefit analysis suggests that replacing coal with natural gas for heating can improve social welfare.
    Keywords: Winter Heating Policy, Air Pollution, Mortality, Coal to Gas, Regression Discontinuity
    JEL: Q53 I18 Q48
    Date: 2020–03
  15. By: Xu, Tao
    Abstract: This paper applies the Digital Retail Development Index, matching employment statistics from 2010 to 2019, to empirically analyze the relationship between the development of digital retailing and employment. Considering endogenous factors, the paper proves that the development of digital retailing plays a significant positive role in promoting popular employment and that production, logistics, service, transaction and environment of digital retailing are positively correlated with employment. Based on mechanism analysis, the paper finds that the optimization of logistics, service and transaction is closely related to the improvement of employment, which reflects the ecosystem and experience of digital retailing.
    Keywords: Digital retailing; Employment; New retailing
    JEL: E2 J21 O32
    Date: 2020–11–01
  16. By: Xuepeng Liu; Emanuel Ornelas; Huimin Shi
    Abstract: Using a gravity-like approach, we study how Covid-19 deaths and lockdown policies affected countries’ imports from China during 2020. We find that a country’s own Covid-19 deaths and lockdowns significantly reduced its imports from China, suggesting that the negative demand effects prevailed over the negative supply effects of the pandemic. On the other hand, Covid-19 deaths in the main trading partners of a country (excluding China) induces more imports from China, partially offsetting countries’ own effects. The net effect of moving from the pre-pandemic situation to another where the main variables are evaluated at their 2020 mean is, on average, a reduction of nearly 10% in imports from China. There is also significant heterogeneity. For example, the negative own effects of the pandemic vanish when we restrict the sample to medical goods and are significantly mitigated for products with a high “work-from-home” share or a high contract intensity for products exported under processing trade, and for capital goods. We also find that deaths and lockdowns in previous months tend to increase current imports from China, partially offsetting the contemporaneous trade loss, suggesting that trade is not simply “destroyed,” but partially “postponed".
    Keywords: trade flows, Covid-19, lockdown, stringency, China
    JEL: F14
    Date: 2021
  17. By: Joël Bellassen; Charlotte Wang
    Abstract: This paper focuses on the media representation of Chinese language and culture through examining the coverage of linguistic education in the French press. It shows first that the media coverage of Chinese language teaching in recent years was much greater than could be predicted from the still small share of French pupils learning Chinese (less than 1%). Secondly, it reveals that the tone used by press articles was far more positive than could have been expected given the tense nature of economic and strategic interactions between China and the West. Overall it appears that the Chinese language and culture are still perceived in France, and perhaps in other European countries, as a source of richness and openness that go far beyond narrowly economic benefits.
    Keywords: representation; media coverage, Chinese language; culture, education
    Date: 2021–01–01
  18. By: Chunbing Xing
    Abstract: This paper examines the evolution of China's industrial and occupational structure in the last two decades and its impact on wage inequality. We find that non-routine cognitive and interpersonal tasks have increased, while routine cognitive tasks first increased and then declined. Occupation structural change is accompanying rising wage inequality. The wage premium for educated workers rose sharply in the 1990s and remained high thereafter. Occupations with high routine task intensity are associated with lower wages.
    Keywords: Occupations, Wage inequality, Education, China, Earnings inequality
    Date: 2021

This nep-cna issue is ©2021 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.