nep-cna New Economics Papers
on China
Issue of 2021‒07‒12
eleven papers chosen by
Zheng Fang
Ohio State University

  1. Inequality of Opportunity in Household Income, China 2002-2018 By Yang, Xiuna; Gustafsson, Björn Anders; Sicular, Terry
  2. Energy Poverty and Subjective Well-Being in China: New Evidence from the China Family Panel Studies By Nie, Peng; Li, Qiaoge; Sousa-Poza, Alfonso
  3. The Impact of an Un(der)Funded Inclusive Education Policy: Evidence from the 2013 China Education Panel Survey By Tani, Massimiliano; Zhu, Yu; Xu, Lei
  4. The Impact of China's Place-based Environmental Regulations on its Hog Industry: A Synthetic Difference-in-differences Approach By Nieyan Cheng; Wendong Zhang; Tao Xiong
  5. Large-scale school meal programs and student health: Evidence from rural China By Wang, Jingxi; Hernandez, Manuel A.; Deng, Guoying
  6. China's Long-Term Growth Potential: Can Productivity Convergence Be Sustained? By Takatoshi Sasaki; Tomoya Sakata; Yui Mukoyama; Koichi Yoshino
  7. Optimal Central Banking Policies: Envisioning the Post-Digital Yuan Economy with Loan Prime Rate-setting By King Yoong Lim; Chunping Liu; Shuonan Zhang
  8. China's BRI diplomacy: What it means to India and India's rise By Panda, Jagannath P.
  9. The competition between China and Korea for export markets in Latin America: an analysis by technological categories By Gilberto Libanio; Diana Chaib
  10. Exports and new products in China - A generalized propensity score approach with firm-to-firm spillovers By Gong, Yundan; Hanley, Aoife
  11. The European Union and Korea between the US and China: Geopolitical aspects of connectivity from the soft to hard power approaches By Novotná, Tereza

  1. By: Yang, Xiuna (China Development Research Foundation); Gustafsson, Björn Anders (University of Gothenburg); Sicular, Terry (University of Western Ontario)
    Abstract: This study contributes to the literature on inequality of opportunity (IOp) in China by covering a longer and more recent span of time, employing better measures of given characteristics, and analyzing IOp for household income per capita with comparisons to individual income. Furthermore, we study how IOp differs between the rural- and urban-born, and how IOp changes across birth cohorts and with age. We use 2002, 2013 and 2018 data from the Chinese Household Income Study and focus on income inequality among working-age persons. Between the years of study, IOp in China declined, especially between 2013 and 2018. In 2002 the large contributors to IOp were region, hukou type at birth, and parents' characteristics. In 2018 the contributions of region, hukou type at birth and parents' occupation had decreased, but that of parents' education had increased. We find that IOp is larger among those born in rural than urban China. Furthermore, IOP's contribution to total inequality within each birth cohort is highest earlier in individuals' work lives and declines with age. IOp is higher for older than younger birth cohorts, reflecting that younger cohorts have benefited from increased opportunities associated with China's reforms and opening up.
    Keywords: Gini, income inequality, inequality of opportunity, China
    JEL: D31 D63 J62
    Date: 2021–06
  2. By: Nie, Peng (Xi’an Jiaotong University); Li, Qiaoge (Xi’an Jiaotong University); Sousa-Poza, Alfonso (University of Hohenheim)
    Abstract: Using the 2012-2018 waves of the China Family Panel Studies, we investigate the impact of energy poverty (EP) on subjective well-being (SWB) among Chinese adults aged 18 and over. In addition to documenting EP rates in the range of 13.2% to 35.3% (dependent on measurement used), we show that EP lowers life satisfaction, with more pronounced impacts among males, the poor, and those residing in central regions. These results are robust to both alternative EP and SWB measures and to a series of estimation approaches that control for endogeneity. An additional structural equation modelling analysis of underlying mechanisms confirms that individual self-reported health, housing quality, and household food expenditure mediate the EP-SWB relation.
    Keywords: energy poverty, life satisfaction, happiness, depression, China
    JEL: I10 I12 R21
    Date: 2021–05
  3. By: Tani, Massimiliano (University of New South Wales); Zhu, Yu (University of Dundee); Xu, Lei (National Institute of Economic and Social Research (NIESR))
    Abstract: Using the 2013 China Education Panel Survey (CEPS), we study the impact of a 2008 inclusive education policy, through which the central government mandated urban public schools to exempt migrant children from tuition and temporary schooling fees. Whereas the non-disclosure rule regarding geographical location of CEPS sampling units precludes the control of locational characteristics, we identify the causal effect of the policy through a novel identification strategy, which relies on the types of primary sampling units. Specifically, we only use non-migrant rural hukou children living in counties in the nationally representative sample as the control group (the never-takers), while, in the treatment group, we only include migrant children who are currently living in China's top 120 migrant-receiving counties or city districts, and Shanghai. We also distinguish migrant children who started urban schooling before and after 2008 as separate treatment groups of always-takers and compliers, respectively. Using the Inverse Probability Weighted Regression Adjustment (IPWRA) approach, we find that the average treatment effect of the policy on migrant children is around 0.18 SD, as measured by a standardised cognitive test score – a large effect. We also present complementary evidence that the average treatment effect tends to be larger for municipalities and provincial capitals, consistently with the notion that the (potential) value-added of attending urban schools is higher the larger the initial gap with rural schools.
    Keywords: school access reform, migrant children, discrimination, inclusive education
    JEL: I21 I24 I25 I28 J15
    Date: 2021–06
  4. By: Nieyan Cheng; Wendong Zhang (Center for Agricultural and Rural Development (CARD)); Tao Xiong
    Abstract: Agricultural water pollution from the livestock industry is a growing concern in China and globally. As opposed to size-based regulations targeting larger facilities as in the United States, China's regulations are place-based in nature. In 2014, China classified eight urban provinces in the southeast as a Development Control Zone, which prohibits new hog facilities construction and encourages hog farms to relocate to other regions. Leveraging a novel identification strategy, synthetic difference-in-differences, and the place-based nature of China's environmental regulations, we provide one of the first systematic analyses of the impacts of the regulations on county-level hog and sow inventory. By relying on synthetic controls constructed with both county and year weights, synthetic difference-in-differences yields a more accurate and doubly robust estimate of regulations' treatment effects. Our results show that, on average, the 2014 regulations led to a 6.4% and 7.4% reduction in hog and sow inventories, respectively, from 2014 to 2017 in the treated counties in Development Control Zone provinces, mainly resulting from extensive margin changes due to the closures of existing hog farms. We also find the treatment effects vary substantially both within and across Development Control Zone provinces: wealthier urban provinces such as Zhejiang experienced greater reduction in hog and sow inventories of over 40%; and counties upstream of big cities or those designated as main hog counties saw steeper declines as well.
    Date: 2021–06
  5. By: Wang, Jingxi; Hernandez, Manuel A.; Deng, Guoying
    Abstract: Reducing urban-rural gaps in child health and nutrition is one of the most difficult challenges faced by many countries. This paper evaluates the impact of the Nutrition Improvement Program (NIP), a large-scale school meal program in rural China, on the health and nutritional status of compulsory education students aged 6-16. We use data from multiple rounds of the China Health and Nutrition Survey between 2004-2015 and implement a quasi-experimental approach exploiting cross-county variations in program implementation. We find that NIP participation is, on average, associated with a higher height-for-age z-score in the order of 0.22-0.42 standard deviations. The impacts are larger among students in a better health condition but small or not significant among the most disadvantaged. We do not observe heterogeneous effects across several individual and household characteristics. We also do not find significant effects on Body Mass Index-for-age and weight-for-age z scores. The results suggest that NIP partially improved students’ health over the first years of implementation, but more support is needed to achieve broader impacts that effectively reach all vulnerable students. Several robustness checks support our findings.
    Keywords: CHINA; EAST ASIA; ASIA; health; school feeding; children; child nutrition; nutrition; rural areas; school meals; school meal program; student health; program evaluation
    Date: 2021
  6. By: Takatoshi Sasaki (Bank of Japan); Tomoya Sakata (Bank of Japan); Yui Mukoyama (Bank of Japan); Koichi Yoshino (Bank of Japan)
    Abstract: This study estimates the growth rate of China's economy until 2035 based on the assumption that productivity will continue converging to that of frontier economies and assesses the feasibility of such an outcome. Our estimates imply that the size of China's economy can potentially double by 2035 as long as the country follows the "catch-up" process achieved by other East Asian economies. However, given the circumstances that China faces, such as the need to maintain agricultural output levels, limits to the growth of its export-dependent manufacturing industry, and the aging of the population, the obstacles to following the other East Asian economies' catch-up process are substantial. To overcome these obstacles and proceed with catch-up, China will need to boost TFP growth by promoting innovation and making steady progress in addressing institutional and resource allocation issues.
    Keywords: China; Catch-up Process (Convergence); Aging of the Population; Savings Rate; Total Factor Productivity (TFP) Growth
    JEL: E21 E22 J11 O11 O47
    Date: 2021–06–30
  7. By: King Yoong Lim; Chunping Liu; Shuonan Zhang
    Abstract: We develop a DSGE model with cash and digital currency to study the financial stability properties of two potential central banking policies in China. Specifically, a Loan Prime Rate (LPR)-setting policy function and central bank digital currency (CBDC) implementation are examined. Distinguish between a benchmark model and a "Post-CBDC world", we Bayesian-estimate the model. Post-CBDC implementation, we find macroeconomic variables to display greater procyclicality to real shocks. However, we also find a potential LPR-setting policy to exhibit an improved stabilization property in the post-CBDC world. We uncover an optimal design of LPR policy function, which targets more specifically housing and capital asset markets, as well as the growth in CBDC. This suggests a potential policy complementarity between these two seemingly unrelated central banking policies in the financial stability agenda of China going forward.
    Keywords: China, Digital Currency, Loan Prime Rate, Monetary Policy, Bayesian DSGE models.
    JEL: E4 E52 E58 C11
    Date: 2021–06
  8. By: Panda, Jagannath P.
    Abstract: Despite the political differences, China and India are in an interdependent trade relationship. Both major powers are each other's largest trading partner. Nevertheless, there is competition between the two countries for supremacy in the Indo-Pacific. India's democratic system and rules-based regulatory policies promote India's rise while standing in the way of China's rise and destabilizing the trade partnership. In addition, the Indian government strongly opposes the BRI. Although competition from the U.S. and India is increasingly pressuring the Chinese government, KpCh is simultaneously responding to the recent Covid-19 pandemic with sovereignty and offering assistance to many countries. That follows Xi's goal to build a strong, sovereign Chinese state that is a global leader and no longer relies on bilateral agreements (such as with India).
    Keywords: BRI Diplomacy,India,Foreign Policy
    Date: 2021
  9. By: Gilberto Libanio (CEDEPLAR/UFMG); Diana Chaib (CEDEPLAR/UFMG)
    Abstract: Taking into account the increasing competition between Korea and China in international markets, the proposed study aims to investigate the competition between the two countries for export markets in Latin America, between 2001 and 2019. The paper builds an index of exports quality, based on the classification of exports by technological intensity: primary products, resource-based manufactures, low-tech, medium-tech and high-tech manufactures. Besides that, we calculate an index of competition between Korea and China in Latin American markets, for the period. Then, we estimate an exports function for Korean exports to Latin America by using dynamic panel-data analysis, taking the index of competition, the Chinese exchange rate, and Latin American GDP as explanatory variables. The results suggest a negative impact of the Chinese exchange rate and of competition between China and Korea on Korean exports and a positive impact of the Latin American countries’ GDP on Korean exports.
    Keywords: exports, exchange rate, China, Korea, panel data
    JEL: F14 O33
    Date: 2021–06
  10. By: Gong, Yundan; Hanley, Aoife
    Abstract: Underpinning China's technological advancement are the twin-engines of exports and innovation. To better understand China's meteoric economic transformation, we explore the extent to which new products are triggered by exports (direct effects) and by exposure to other exporters (indirect effects). Our methodology (generalized propensity score model) tackles two sources of selectivity bias - at the level of the firm and neighbourhood. Given that production is highly specialized and localized, it would be unusual if firms failed to learn from exposure to local exporters. Our findings reveal an overwhelmingly positive direct effect of exports on new product introductions. Also, a more modest spillover effect. Interestingly, firms with a reduced need to innovate (processing exporters) can also appropriate export spillovers. Our findings have implications for other developing countries seeking to maximise exporting in economic clusters, promoting innovation and ultimately growth.
    Keywords: export and innovation,export spillovers,Generalized Propensity Score
    JEL: C38 D22 O12 O33
    Date: 2021
  11. By: Novotná, Tereza
    Abstract: The paper examines the question how the EU and other countries who are in a similar position of "being caught between the US and China", such as South Korea, will shape their relationship with China and how their strategies complement, or contradict, the policies pursued by the US under the Trump and Biden Administrations. Even though Donald Trump has been more vocal in his bid to oppose China, the paper argues that there might be more continuity between Biden and Trump than Biden and Obama and the other Democratic predecessors. The second part of this paper investigates how the EU and South Korea interact with China's pre- and postCovid19 policies such as the Belt and Road Initiative (BRI). The paper explores how BRI has been countered by various forms of connectivity by Brussels and Seoul, how BRI fits within today's geopolitical landscape and whether and where there is any space for creating synergies between the EU and South Korea to offset it. Furthermore, the paper looks at other types of actions, such as the EU-China investment agreement (CAI) and human rights sanctions and how Beijing responded to these EU initiatives. The paper argues that a combination of softand hard-power approaches which Brussels have put forward towards Beijing may in the end work well for the EU as well as the US. The paper concludes by suggesting policy areas where cooperation rather than confrontation between all the actors is possible, such as health, trade, climate action and people-to-people exchanges.
    Keywords: EU foreign policy,connectivity,Korean peninsula,China,United States,Covid19
    Date: 2021

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