nep-cna New Economics Papers
on China
Issue of 2021‒11‒01
thirteen papers chosen by
Zheng Fang
Ohio State University

  1. The Economic Consequences of the Opium War By Wolfgang Keller; Carol H. Shiue
  2. Do Homeowners Benefit When Coal-fired Power Plants Switch to Natural Gas? Evidence from Beijing, China By Yingdan Mei; Li Gao; Wendong Zhang; Feng-An Yang
  3. Fleshing Out the Olive? On Income Polarization in China By Martin Ravallion; Shaohua Chen
  4. China, Europe, and the Great Divergence: Further Concerns about the Historical GDP Estimates for China By Peter M. Solar
  5. Information, Belief, and Health Behavior: Evidence from China By Lei, Xiaoyan; Song, Guangxiang; Su, Xuejuan
  6. On the Persistence of the China Shock By David Autor; David Dorn; Gordon H. Hanson
  7. The Impact of Chinese Import Competition on Italian Manufactoring By Luca Citino; Andrea Linarello
  8. How did China rise its manufacturing domestic value added in exports through GVC moving up? By Ping Hua
  9. Changing GVC in Post-Pandemic Asia: Korea, China and Southeast Asia By Keun Lee; Taeyoung Park
  10. Firm Dynamics and SOE Transformation During China's Economic Reform By Shijun Gu; Chengcheng Jia
  11. Policy Experimentation in China: the Political Economy of Policy Learning By Shaoda Wang; David Y. Yang
  12. Housing property rights and social integration of migrant population: based on the 2017 china migrants' dynamic survey By Jingwen Tan; Shixi Kang
  13. A study of Chinese market efficiency, Shanghai versus Shenzhen: Evidence based on multifractional models By Pierre Bertrand; Marie-Eliette Dury; Bing Xiao

  1. By: Wolfgang Keller; Carol H. Shiue
    Abstract: This paper studies the economic consequences of the West’s foray into China after the Opium War (1839-42), when Western colonial influence was introduced in dozens of so-called treaty ports. We document a turnaround during the 19th century in the nature of China’s capital markets. Whereas before the Opium War, coastal cities were of relatively minor importance, the treaty port system of the West transformed China into an economy focused on coastal areas and on international trade that aligned with the trading interests of the West. We show, first, that the West had a positive impact on China’s economy during the 19th century. It brought down local interest rates, and regions under Western influence exhibited both higher rates of industry growth and technology adoption. Second, the geographic scope of influence went far beyond the ports, impacting most of China. Interest rates fell by more than a quarter in the immediate vicinity of the ports and still by almost ten percent at distances of 450 kilometers from treaty ports. The development of China was not simply propelled by its own pre-1800 history, or by post-1978 reforms. The nearly 100 years of semi-colonization have shaped China’s economy today as one focused on the coastal areas.
    JEL: F63 G10 N25 O11
    Date: 2021–10
  2. By: Yingdan Mei; Li Gao; Wendong Zhang (Center for Agricultural and Rural Development (CARD)); Feng-An Yang
    Abstract: Coal-fired power plants are among the biggest air polluters both in China and globally. In 2013, China launched a pilot project to switch its power plants from coal to natural gas to curb coal-fired plants' detrimental effects on air quality. Debates about this policy mainly invoke the costs, but no study examines whether the change led to cleaner air and associated economic benefits. This article provides the first causal estimate of the capitalization effect of coal-to-gas conversion on housing prices. We estimate a triple difference model using housing transaction data from 2011 to 2015 and administrative data on all power plants in Beijing. Our results, although marginally significant, show that coal-to-gas conversion leads to a positive price premium of 11% for nearby properties. We provide suggestive evidence that our findings of positive price premiums are likely attributable to the reduction in air pollutants following the coal-to-gas switch, including a 4.9% reduction in particulate matter and 5.2% decrease in SO2.
    Date: 2021–10
  3. By: Martin Ravallion; Shaohua Chen
    Abstract: In a rare example of an explicit national goal for income distribution besides reducing poverty, China’s leadership has recently committed to expanding the middle-income share—moving to a less polarized “olive-shaped” distribution. Recognizing the potential trade-offs, the paper asks whether China’s experience indicates that income-polarization was a by-product of past economic progress, including poverty reduction. The paper does not find robust time-series evidence of polarizing effects alongside either economic growth or population urbanization (including among those below the national median). There was strong co-movement between polarization and inequality. Larger urban-rural gaps in mean incomes are strongly polarizing in China.
    JEL: I32 O15
    Date: 2021–10
  4. By: Peter M. Solar (CEREC, Université Saint-Louis - Bruxelles and Faculty of History, University of Oxford)
    Abstract: Broadberry, Guan and Li (2018) made estimates for China’s GDP per capita from 980 to 1840 in order to date the onset of the Great Divergence between China and western European economies. In response to Solar’s (2021) criticisms, they (2021) made some revisions to the estimates but largely dismissed most of Solar’s concerns, particularly those about their series for China’s population and its implications for dating the Great Divergence. This working paper assesses their revisions, reaffirms concerns about the level of their 1840 benchmark, and points out the weaknesses of the population figures in greater detail. The dating of the Great Divergence turns out to depend on the population series used and on the interpretation of what was happening to incomes in China during the mid-seventeenth century. This paper recommends considerable skepticism about Broadberry, Guan and Li’s estimates.
    Keywords: China, Great Divergence, historical national accounts, population
    JEL: E1 N15 O47 O53
    Date: 2021–10
  5. By: Lei, Xiaoyan (Peking University); Song, Guangxiang (Pennsylvania State University); Su, Xuejuan (University of Alberta, Department of Economics)
    Abstract: Individuals with imperfect information may make suboptimal choices, but providing more information may not effectively improve decision making if the information is not turned into updated belief. We build a Bayesian updating model to illustrate this phenomenon and use a unique Chinese survey that provides data on information shock, belief updating, and corresponding behaviors to test it. We find that when individuals receive signals about their hypertension status, behavioral changes, such as quitting smoking and take medication, are more likely if the new information leads to updated belief. Furthermore, we find heterogeneous effects across subgroups of individuals: Males are more likely to quit smoking and taking medication after belief updating; rural people are more likely to quit smoking but less likely to take medication, possibly due to lack of affordability or accessibility to medical services. We find no significant impacts on drinking.
    Keywords: Imperfect Information; Bayesian Updating; Belief; Health Behaviors
    JEL: D83 H12 J14
    Date: 2021–10–21
  6. By: David Autor; David Dorn; Gordon H. Hanson
    Abstract: Abstract We evaluate the duration of the China trade shock and its impact on a wide range of outcomes over the period 2000 to 2019. The shock plateaued in 2010, enabling analysis of its effects for nearly a decade past its culmination. Adverse impacts of import competition on manufacturing employment, overall employment-population ratios, and income per capita in more trade-exposed U.S. commuting zones are present out to 2019. Over the full study period, greater import competition implies a reduction in the manufacturing employment-population ratio of 1.54 percentage points, which is 55% of the observed change in the value, and the absorption of 86% of this net job loss via a corresponding decrease in the overall employment rate. Reductions in population headcounts, which indicate net out-migration, register only for foreign-born workers and the native-born 25-39 years old, implying that exit from work is a primary means of adjustment to trade-induced contractions in labor demand. More negatively affected regions see modest increases in the uptake of government transfers, but these transfers primarily take the form of Social Security and Medicare benefits. Adverse outcomes are more acute in regions that initially had fewer college-educated workers and were more industrially specialized. Impacts are qualitatively—but not quantitatively—similar to those caused by the decline of employment in coal production since the 1980s, indicating that the China trade shock holds lessons for other episodes of localized job loss. Import competition from China induced changes in income per capita across local labor markets that are much larger than the spatial heterogeneity of income effects predicted by standard quantitative trade models. Even using higher-end estimates of the consumer benefits of rising trade with China, a substantial fraction of commuting zones appears to have suffered absolute declines in average real incomes.
    JEL: E24 F16 J23 J31 R12 R23
    Date: 2021–10
  7. By: Luca Citino (Bank of Italy); Andrea Linarello (Bank of Italy)
    Abstract: This paper documents the effects of increased import competition from China on the Italian labour market. In line with recent studies (Autor et al., 2013, 2014), we take two complementary approaches and study the effects on both local labour markets and manufacturing workers. Our analysis shows that Italy’s local labour markets, which were more exposed to Chinese trade because of their industry composition, ended up suffering larger manufacturing and overall employment losses. Nevertheless, back-of-the-envelope calculations suggest that the aggregate effect on total manufacturing employment is modest. At the individual level, contrary to what has been documented for many developed countries, workers initially employed in more exposed manufacturing industries did not suffer long-term losses in terms of lower earnings or more discontinuous careers. While they were indeed less likely than other similar workers to continue working in manufacturing, they were also able to carry out successful transitions towards the non-tradable sector, in other areas with better job opportunities.
    Keywords: import competition, Italy, China, manufacturing, local labor market, worker mobility.
    JEL: F14 F16
    Date: 2021–10
  8. By: Ping Hua (CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Despite its high implication into global value chains (GVCs), the Chinese real domestic value added in exports increased at an annual average growth rate of 14% over the 2000-2016 period and its ratio from 65% to 83%. To understand this evolution, a GVC augmented function of domestic value added in exports is proposed and estimated using panel data of 16 Chinese manufacturing sectors over the 2005-2014 period from OCDE TiVA and WIOD databases. Besides the traditional positive effects of labor productivity, capital intensity and employment on domestic value added in exports, we find that China's GVC positon improvement through withdrawing backward links and increasing forward links exerted positive effects. The negative elasticity of backward links multiplied by the decreasing share of foreign value added and by its indirect productivity effect contributed to increase Chinese domestic value added in exports. This contribution is 3.5 times higher than that of GVC forward links, measured as the product of the positive elasticity of forward links multiplied by the increasing share of exports of intermediate goods embodied to exports of third countries. This successful moving up from low cost labor-intensive processing and assembly to relatively higher value-added intermediated goods decreased the risk of being stuck in low-value-added tasks, while the future one should be much more complicated in the context of increasing trade protectionism.
    Keywords: China,domestic value added,global value chains JEL: F15,F41,F62
    Date: 2021–10–11
  9. By: Keun Lee; Taeyoung Park
    Abstract: This paper has provided some overview of the changing GVC in Asia, especially since the outbreak of Covid-19, focusing on the phenomena of reshoring and nearshoring. It first discussed the role of the three factors responsible for changing and shaping GVC in Asia, and they are digitalization with Industry 4.0 since the 2010s, the US-China trade conflict since 2018, and the Covid-19 since 2020. Thus, an emerging trend is that FDI firms in China and Asia are either reshoring their factories back to their home bases or relocating to nearby locations, such as Vietnam and other Southeast Asian economies. These changes are also associated with MNCs¡¯ move to increase the resiliency of their value chains and by the national government to promote domestic jobs by offering incentives to reshoring. Investigating the cases of reshoring involving Korean firms getting out of China or SEA, the paper identifies three types, 1) reshoring of production of labour-intensive products requiring monetary or tax incentives, 2) reshoring getting possible by flattening of GVC by innovation, such as skipping a stage where semi-finished products are processed in foreign countries, and 3) large scale automation or transformation into Smart Factory, which requires considerable investment and innovation capabilities. These cases and typology suggest that effective reshoring requires not just monetary incentives but also technical assistance to realize the potentials for innovation and automation. In the meantime, some FDI firms are moving out of China and relocating into nearby SEA countries mainly for labour-saving reasons and avoiding tariffs imposed by the US on made-in-China products. Such exit from China might mean a new opportunity for SEA, as exemplified by Vietnam receiving many FDI firms out of China. It could be a new opportunity for SEA to overcome the challenges posed by 4IR and keep existing FDI (onshoring) and/or attract new factories getting out of China (nearshoring).
    Keywords: Reshoring; Near-shoring; China; Korea; Southeast Asia; Digital Factory;
    Date: 2021–10
  10. By: Shijun Gu; Chengcheng Jia
    Abstract: We study China’s state-owned enterprises (SOE) reform with a focus on the corporatization of SOEs. We first empirically document that small SOEs are more likely to exit or become privatized, whereas big SOEs are more likely to be corporatized while remaining under state ownership. We then build a heterogeneous-firm model featuring financial frictions, endogenous entry and exit, and optimal firm-type choices. Our calibrated model suggests that in the long run, the SOE reform increases the aggregate output by facilitating resource reallocation to the private sector. Along the transition, the corporatization option leads to higher aggregate output than the privatization-only policy by giving a higher financing capacity to more productive incumbent SOEs.
    Keywords: firm dynamics; economic reform; Chinese economy
    JEL: E23 E44 O16 O41 O43
    Date: 2021–10–19
  11. By: Shaoda Wang; David Y. Yang
    Abstract: Many governments have engaged in policy experimentation in various forms to resolve uncertainty and facilitate learning. However, little is understood about the characteristics of policy experimentation, and how the structure of experimentation may affect policy learning and policy outcomes. We aim to describe and understand China’s policy experimentation since 1980, among the largest and most systematic in recent history. We collect comprehensive data on policy experimentation conducted in China over the past four decades. We find three main results. First, more than 80% of the experiments exhibit positive sample selection in terms of a locality’s economic development, and much of this can be attributed to misaligned incentives across political hierarchies. Second, local politicians allocate more resources to ensure the experiments’ success, and such effort is not replicable when policies roll out to the entire country. Third, the presence of sample selection and strategic effort is not fully accounted for by the central government, thus affecting policy learning and distorting national policies originating from the experimentation. Taken together, these results suggest that while China’s bureaucratic and institutional conditions make policy experimentation at such scale possible, the complex political environments can also limit the scope and bias the direction of policy learning.
    JEL: D72 D8 O2 P16 P21
    Date: 2021–10
  12. By: Jingwen Tan (School of Economics, Henan University); Shixi Kang (School of Economics, Henan University)
    Abstract: Push-pull theory, one of the most important macro theories in demography, argues that population migration is driven by a combination of push (repulsive) forces at the place of emigration and pull (attractive) forces at the place of emigration. Based on the push-pull theory, this paper shows another practical perspective of the theory by measuring the reverse push and pull forces from the perspective of housing property rights. We use OLS and sequential Probit models to analyze the impact of urban and rural property rights factors on the social integration of the migrant population-based, on "China Migrants' Dynamic Survey". We found that after controlling for personal and urban characteristics, there is a significant negative effect of rural property rights (homestead) ownership of the mobile population on their socio-economic integration, and cultural and psychological integration in the inflow area. The effect of urban house price on social integration of the migrant population is consistent with the "inverted U-shaped" nonlinear assumption: when the house price to income ratio of the migrant population in the inflow area increases beyond the inflection point, its social integration level decreases. That is, there is an inverse push force and pull force mechanism of housing property rights on population mobility.
    Date: 2021–10
  13. By: Pierre Bertrand (LAPSCO - Laboratoire de Psychologie Sociale et Cognitive - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique, LMBP - Laboratoire de Mathématiques Blaise Pascal - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique); Marie-Eliette Dury (CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique); Bing Xiao (CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA [2017-2020] - Université Clermont Auvergne [2017-2020])
    Abstract: The Chinese equity market is one of the emerging equity markets which offers an opportunity for international diversification, as a emerging markets, the Chinese stock markets are not mature. Since the 1990s, the reforms in regulations as well as in the attitudes of regulators have rendered the stock market more efficient. The progressive reform process of the stock market has improved the functioning of capital markets and implemented market-based mechanisms. China's stocks pricing mechanism has been pushed toward a more market-oriented approach, in such cases, we expect an alteration in anomalies in the Chinese stock market. In this paper, we examine the daily data from the Shanghai Ashare market, and Shenzhen A-share market over the 2006-2019 period. It would seem that in the Chinese stock market, the seasonal anomalies persist. But at the same time, by employing the Hurst exponent analysis, we find that the Chinese stock markets had a trend of becoming more and more efficient after the reform in October 2011.
    Keywords: Seasonal anomalies,Stock markets,Efficient market hypothesis,Hurst exponent,Multifractional Brownian motion
    Date: 2020–11

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