nep-cna New Economics Papers
on China
Issue of 2021‒07‒26
six papers chosen by
Zheng Fang
Ohio State University

  1. Self-Employment in Rural China: Its Development, Characteristics, and Relation to Income By Gustafsson, Björn Anders; Zhang, Yudan
  2. The Rise of China's Global Middle Class in International Perspective By Sicular, Terry; Yang, Xiuna; Gustafsson, Björn Anders
  3. An Experimental Study of Within- and Cross-cultural Cooperation: Chinese and American Play in the Prisoner’s Dilemma Game By Michael Kuroda; Jieran Li; Jason Shachat; Lijia Wei; Bochen Zhu
  4. Non-Modernization: Power-Culture Trajectories and the Dynamics of Political Institutions By Daron Acemoglu; James A. Robinson
  5. People’s Republic of China–Hong Kong Special Administrative Region: Financial Sector Assessment Program-Technical Note-Insurance Sector Regulation and Supervision By International Monetary Fund
  6. Fundamentals vs. policies: can the US dollar’s dominance in global trade be dented? By Georgios Georgiadis; Helena Le Mezo; Arnaud Mehl; Cedric Tille

  1. By: Gustafsson, Björn Anders (University of Gothenburg); Zhang, Yudan (Beijing Normal University)
    Abstract: The changes in the employment structure in rural China are studied with a focus on off farm self-employment. Data from the China Household Income Project surveys covering the same 14 provinces from 1988 to 2018 are used. We find that the proportion of adults in rural China with self-employment as their primary form of off-farm employment increased from only 2 percent in 1988 to 11 percent in 2013, with no further increases through 2018. In 1988 and 1995, the rate of self-employment was highest in the eastern region, but thereafter, this regional pattern disappeared. The probability of being self-employed in rural China was higher among married males than among unmarried persons. Having had a migration experience increases the probability of being self-employed. We also report that since 1995, self-employed households have a higher average income than other categories of households. Based on estimates of income functions, we conclude that the income premium from being self-employed increased rapidly from 1988 to 1995 to become remarkably large when only a few adults were self-employed. However, as a larger fraction of the rural population has entered self-employment, the payoff from being self-employed has rapidly diminished, although in 2018, it was nevertheless still substantial.
    Keywords: China, off farm self-employment, wage-employment, income
    JEL: L26 M13 O12 P32
    Date: 2021–07
  2. By: Sicular, Terry (University of Western Ontario); Yang, Xiuna (China Development Research Foundation); Gustafsson, Björn Anders (University of Gothenburg)
    Abstract: Defining the 'global middle class' as being neither poor nor rich in the developed world, we estimate the size of the global middle class in China and 33 other countries and analyze China's expanding middle class in international perspective. China's global middle class has grown rapidly and has been catching up with that in developed countries. By 2018 China's global middle class constituted 25 percent of China's population; in absolute size it was nearly double the size of the global middle class in the US and similar in size to that in Europe. Cross-country analysis of the relationship between the middle-class population share versus GDP per capita reveals an inverted-U pattern. China is not an outlier from the cross-country pattern, but the speed with which its middle-class has expanded is unusual. The only other countries with similarly large, rapid expansions of the middle class are transition economies.
    Keywords: China, middle class, income distribution, transition
    JEL: D31 O53 P3
    Date: 2021–07
  3. By: Michael Kuroda (Economic Science Institute, Chapman University); Jieran Li (Economic Science Institute, Chapman University); Jason Shachat (Durham University and Wuhan University); Lijia Wei (Wuhan University); Bochen Zhu (Wuhan University)
    Abstract: We study whether cross- and within-culture groups have different cooperation rates in the Prisoner’s Dilemma Game. In an experiment, university students in China and America engage in a single iteration of the game, complete belief elicitation tasks regarding their opponents’ play and take a survey including attitudinal measurements regarding their in- and out-group attitudes. Cooperation rates are higher across the two countries are higher in both cross-culture and in within-culture interactions, although not significantly. We also find that Chinese participants cooperate less than American ones. Further, female Chinese participants are more cooperative than Chinese male ones. In the cross-culture treatment, Chinese participants underestimate the likelihood of cooperative behavior of their American counterparts, while Americans overestimate the same likelihood of their Chinese counterparts. Our results also show that Chinese participants cooperate more conditionally than American ones. Finally, while we find some attitudinal in- and out-biases both they do not generate meaningful impact on cooperative behavior.
    Keywords: Cross-culture; Prisoner’s Dilemma; Cooperation; Experiment
    JEL: C72 C92 D91
    Date: 2021
  4. By: Daron Acemoglu; James A. Robinson
    Abstract: Modernization theory is a cornerstone of much of political science, despite the mounting evidence against its predictions. In this paper, we argue that the theory's failings are rooted in predictions that are not conditioned on history and cultural configurations. We outline a theory in which the interplay of the distribution of political power and cultural configurations lead to three distinct self-reinforcing paths of political development, with very different state-society relations, institutions, and economic structures. These are paths to Despotic, Absent and Shackled leviathans. The role of cultural configurations, made up of attributes in a society's culture set, is critical in legitimizing the social arrangements in each path. For example, a Despotic Leviathan, as in China, cannot be understood without appreciating how Confucian culture has been used to bolster a worldview in which rulers are supposed to be virtuous and regular people are discouraged from political participation. We argued that this interpretation is not inherent to Confucian thought, but has to be understood as an endogenous outcome along the trajectory to the Despotic Leviathan. None of the three different paths we highlight support modernization theory. Under the Absent Leviathan, there is no economic modernization. Under the Despotic Leviathan, economic growth bolsters the existing regime and its supporting cultural configuration, with no tendency towards democracy or associate political changes. Under the Shackled Leviathan, there are dynamics leading to economic growth and political changes with greater bottom-up participation. Nevertheless, the causation does not go from the former to the latter, and these changes are critically dependent on cultural and political entrepreneurship in order to formulate and popularize new cultural configurations and institutionalize political changes.
    JEL: N10 O10 P16
    Date: 2021–07
  5. By: International Monetary Fund
    Abstract: This note provides an update and assessment of developments in insurance supervision since 2014. It is part of the 2020 Financial Sector Assessment Program (FSAP) for the Hong Kong SAR (HKSAR) and draws on discussions there from September 10 to 24, 2019. It has not been updated for the impact of recent global events associated with the COVID-19 pandemic. The insurance sector is large, especially long-term (life) insurance, highly international and has been growing steadily. The long-term market is amongst the world’s largest, particularly by penetration (premiums to GDP). Growth has been supported by the popularity of savings products, including sales of policies to Mainland Chinese visitors (MCVs), although these have declined from their peak. The general insurance sector, though comprising many more companies, is relatively small and spread over many lines. The authorities have identified scope for growth in protection policies as well as opportunities for captive and specialty lines related to China’s Belt and Road Initiative. Tax incentives have supported the recent successful introduction of new annuity and health insurance products. Although foreign-owned companies account for a large share of business, the HKSAR is the home of three major domestic groups operating internationally.
    Keywords: HKSAR insurance; E. insurance conduct; context of a Financial Sector Assessment Program; FSAP assessment's finding; insurance Authority; People's republic of china-Hong kong special administrative region; Insurance companies; Insurance; Financial Sector Assessment Program; Solvency; Insurance supervision; Global
    Date: 2021–06–15
  6. By: Georgios Georgiadis (European Central Bank); Helena Le Mezo (European Central Bank); Arnaud Mehl (European Central Bank & CEPR); Cedric Tille (Geneva Graduate Institute & CEPR)
    Abstract: The US dollar plays a dominant role in the invoicing of international trade, albeit not an exclusive one as more than half of global trade is invoiced in other currencies. Of particular interest are the euro, with a large role, and the renminbi, with a rising role. These two currencies are well suited to contrast the roles of economic fundamentals and policies, as European policy makers have taken a neutral stance in contrast to the promotion of the international role of the renminbi by the Chinese authorities. We assess the drivers of invoicing using the most recent and comprehensive data set for 115 countries over 1999-2019. We find that standard mechanisms that foster use of a large economy’s currency predicted by theory—i.e. strategic complementarities in price setting and integration in cross-border value chains—underpin use of the dollar and the euro for trade with the United States and the euro area. These mechanisms also support the role of the dollar, but not the euro, in trade between non-US and non-euro area countries, making the dollar the globally dominant invoicing currency. Fundamentals and policies have played a contrasted role for the use of the renminbi. We find that China’s integration into global trade has further strengthened the dominant status of the dollar at the expense of the euro. At the same time, the establishment of currency swap lines by the People’s Bank of China has been associated with increases in renminbi invoicing, with an adverse effect on dollar use that is larger than for the euro.
    Keywords: International trade invoicing, dominant currency paradigm, markets vs. policies
    JEL: F14 F31 F44
    Date: 2021–07–06

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