nep-cna New Economics Papers
on China
Issue of 2022‒05‒16
twenty-one papers chosen by
Zheng Fang
Ohio State University

  1. Import Competition from China and Markup Dispersion By HAYAKAWA Kazunobu; URATA Shujiro; YAMANOUCHI Kenta
  2. How far is China from hitting its climate targets? An overview of China's energy sector By Kaaresvirta, Juuso; Kerola, Eeva; Nuutilainen, Riikka; Parviainen, Seija; Solanko, Laura
  3. China shock on Japanese firms: Firms’ differential reactions to the increase in Chinese imports By ITO Tadashi; MATSUURA Toshiyuki
  4. Integration of Technological and Social Components in a Smart Urban Development Model: A Case Study of China By Heshmati, Almas; Koohborfardhaghighi, Somayeh; Summers, Christopher R.
  5. Grandfathers and Grandsons: Social Security Expansion and Child Health in China By Yang, Jinyang; Chen, Xi
  6. An overview of China's regional trade agreements By Lintunen, Julia
  7. Performance of the Chinese energy market in times of Russian military interventions By Tapia, Pablo; Pastén, Boris; Sepulveda Velasquez, Jorge
  8. China as an international creditor By Kaaresvirta, Juuso; Laakkonen, Helinä
  9. The Impact of U.S.-China Tensions on U.S. Science By Ruixue Jia; Margaret E. Roberts; Ye Wang; Eddie Yang
  10. Economic Transition and Wage Gap Between Communist Party Members and Nonmembers in China By MA Xinxin
  11. How Distortive Are Turnover Taxes? Evidence from Replacing Turnover Tax with VAT By Jing Xing; Katarzyna Anna Bilicka; Xipei Hou
  12. Less Cash, Less Theft? Evidence from Fintech Development in the People’s Republic of China By Jiang, Hongze; Liang, Pinghan
  13. Trading Favours through the Revolving Door: Evidence from China’s Primary Land Market By Ting Chen; Han Li; James Kung; Jiaxin Xie
  14. China's New Trade Strategy amid US-China Confrontation and Implications By Hyun, Sang Baek; Yeon, Wonho; Na, Su Yeob; Kim, Young Sun; Oh, Yun Mi
  15. How did China adopt social protection responses to the COVID-19 pandemic so quickly? By Xiwen Yang
  16. Digital Technology and Economic Impacts of COVID-19: Experiences of the People’s Republic of China By Huang, Yiping; Qiu, Han; Wang, Jingyi
  17. The Hidden Cost of Having More Children: The Impact of Fertility on the Elderly's Healthcare Utilization By XIE Mingjia; YIN Ting; ZHANG Yi; OSHIO Takashi
  18. The Impacts of the Dollar-Renminbi Exchange Rate Misalignment on the China-United States Commodity Trade: An Asymmetric Analysis By Ferjani, Sabrine; Saafi, Sami; Nouira, Ridha; Rault, Christophe
  19. Emerging economies, global inflation, and growth deceleration By Otaviano Canuto
  20. CBAM! - Assessing potential costs of the EU carbon border adjustment mechanism for emerging economies By Simola, Heli
  21. EU Strategic Autonomy: Industry Implications in the Changing World Trade Order. By Gérard Pogorel

  1. By: HAYAKAWA Kazunobu; URATA Shujiro; YAMANOUCHI Kenta
    Abstract: In this study, we explore the impacts of import competition from China on Japan's manufacturing industry. Specifically, we focus on the effects on markup dispersion from the perspective of resource allocation. We first show that the markups and prices of the plants in Japan are negatively affected by the import competition from China. The negative effect is specific to the imports from China and not observed for the import competition from other countries. Second, we found that while non-Chinese import competition reduces the markup dispersion, Chinese import competition has no effects on the dispersion of the markups. The import competition from China is relatively stronger for relatively low-markup plants and forces them to lower their markups further. While consumers can enjoy the lower markups or prices, allocation efficiency may not be improved by the import competition from China.
    Date: 2022–04
  2. By: Kaaresvirta, Juuso; Kerola, Eeva; Nuutilainen, Riikka; Parviainen, Seija; Solanko, Laura
    Abstract: China is by far the world's largest consumer of primary energy. Its vast energy demands are a leading issue for global energy use, driving pollution trends and prices on commodity markets. Despite huge increases in non-fossil capacity from nuclear and renewables, China still burns tremendous amounts of coal to meet its primary energy needs. Domestic energy consumption has risen faster than energy production, and thereby increased China's dependence on energy imports. China is the world's largest polluter, so any effort on the country's part towards cleaner energy has major implications for global decarbonisation efforts. This overview comprises ten briefs on China's energy sector. They cover recent developments in energy use and the shifting dynamics in primary power generation aimed at meeting China's energy needs.
    Keywords: China,energy,oil,natural gas,coal,electricity,renewable energy,production,investment,foreign trade,emissions
    Date: 2021
  3. By: ITO Tadashi; MATSUURA Toshiyuki
    Abstract: This study investigates the impact of import competition from China, using the firm/establishment level data from the Census of Manufacturer with a particular focus on firms’ choice of multiple reactions. We find that product switching is an important reaction for firms facing increasingly harsh competition with imports from China. Firms tend to choose, first, employment adjustment only, and then with stronger import competition, product switching only, and finally, both of employment adjustment and product switching as import competition from China increases.
    Date: 2022–04
  4. By: Heshmati, Almas (Jönköping University, Sogang University); Koohborfardhaghighi, Somayeh (University of Amsterdam); Summers, Christopher R. (University of Missouri-St. Louis)
    Abstract: The path of urbanization around the world and in particular in China has been rapid. This study addresses measurement of a composite index of networking among key components of societal infrastructure and how it affects the process of urbanization. This study has a number of objectives. First we identify key determinants of public infrastructure components in China at the province level. Second a multidimensional index of the networking among the components is computed. The index belongs to parametric family of composite indices. It is composed of a number of components: Economic, Hospitality, Public Facilities, Human Development, and Communication Facility. Each component of the index is composed of a number of indicators. The index is used to rank provinces in China by development of level of the networking among public infrastructure components. In another step we estimate the effects of the composite index and its underlying components on urbanization. Finally, the findings is used to achieve smooth urbanization strategy for Chinese provinces. The empirical results are based on China's province level data covering the period 2005-2014. Our investigations provide evidence that integration of technological and social components are necessary to promote the development of an optimal and a smart urban development model. The necessity of an optimal and targeted urban infrastructure investment strategy emerges from our analysis. We briefly discuss the possible lessons learned from some of the successful provincial urbanization strategies.
    Keywords: multidimensional index, composite index, principal component, urban infrastructure, China’s provinces
    JEL: D31 I10 I20 I30 J13
    Date: 2022–04
  5. By: Yang, Jinyang (Virginia Tech); Chen, Xi (Yale University)
    Abstract: We examine the multigenerational impacts of a nationwide social pension program in China, the New Rural Pension Scheme (NRPS). NRPS was rolled out in full scale since 2012, and rural enrollees over age 60 are eligible to receive a minimum of 70 CNY non-contributory monthly pension. We leverage age eligibility and variations in pension receipt to identify the inter-generational effect of NRPS on health among grandchildren. We find NRPS substantially increases child weight without impacting height. Overall, child BMI z score increases by 1.09, which is largely driven by grandfathers' pension receipt raising rates of overweight and obesity among grandsons. Among the potential mechanisms, our findings are more plausibly explained by a mixture of income effect, son preference, and rising inter-generational co-residence and childcare.
    Keywords: social pension, child health, inter-generational relationship, intra-household allocation, migration, living arrangement, China
    JEL: H23 H31 H55 I38 J22 O15
    Date: 2022–04
  6. By: Lintunen, Julia
    Abstract: Since becoming a WTO member in 2001, China has negotiated numerous regional trade agreements with astonishing speed. This paper provides an overview of China's current free trade agreements and examines the economic importance of two major Asian regional trade agreements for China. The academic literature often treats China's free trade agreements as driven more by political, rather than economic, interests. The agreements are seen as shallow and concluded with minor economic partners. In fact, China's approach to trade agreements has evolved over time and cumulative impact of these agreements has been positive for trade between China and its agreement partners. The recently concluded Asian regional free trade agreement, the Regional Comprehensive Economic Partnership (RCEP), should positively influence trade for both China and other participating Asian countries. China could also benefit economically from joining the other major regional trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
    Keywords: trade policy,free trade agreements,RCEP,CPTPP
    Date: 2021
  7. By: Tapia, Pablo; Pastén, Boris; Sepulveda Velasquez, Jorge
    Abstract: China is the world’s largest importer and Russia one of its main exporters, particularly of energy. Consequently, foreign military activities by Russia could influence the performance of China’s energy market. The research objective is to present evidence on the effects of the 2002-2022 Russian military interventions on the returns of the Chinese energy market. Using event study methodology, we found evidence that Russian military intervention announcements had positive and negative effects on these returns. These findings suggest that the effect of these interventions could be related to the level of acceptance of each intervention and relationship between China and Russia.
    Keywords: China; energy markets; war; market efficiency; event study
    JEL: G11 G14 G15
    Date: 2022–04–10
  8. By: Kaaresvirta, Juuso; Laakkonen, Helinä
    Abstract: China became the world's largest lender to emerging and developing economies over the past decade. At the same time, concerns on the debt sustainability of many of these countries have grown. Some countries have found themselves struggling to repay their loans and China has had to renegotiate debt restructurings bilaterally. As covid-19 pandemic hit many of the borrowers hard in 2020, China committed with all other G20 countries to the Debt Service Suspension Initiative (DSSI) to temporarily suspend official bilateral debt payment of 73 beneficiary countries. While China's overseas lending remain opaque, there is little evidence that China intentionally practices "debt-trap diplomacy."
    Keywords: China,loans,loan restructuring,low-income and emerging economies
    Date: 2021
  9. By: Ruixue Jia; Margaret E. Roberts; Ye Wang; Eddie Yang
    Abstract: This paper studies how recent investigations of foreign influence in research have affected the productivity of U.S. scientists in the field of life sciences. Using data from PubMed and Dimensions during 2010–2020, we compare scientists who collaborated with scientists in China during 2010–2014 with those who collaborated with scientists in other countries outside the U.S. By studying the publication records for over 102,000 scientists during 2015–2020, we find that the investigations coincide with a decline in the productivity of scientists with previous collaborations with scientists in China, especially when the quality of publications is considered. he decline is particularly salient for the fields with more pre-investigation NIH funding and U.S.-China collaborations. We also provide suggestive evidence that our findings matter for the aggregate productivity by fields for both the U.S. and China.
    JEL: H1 I28 O31 O32 O38
    Date: 2022–04
  10. By: MA Xinxin
    Abstract: Using the data from the Chinese Household Income Project Survey, this study investigates the influence of membership in the Communist Party of China (CPC) on wage levels during the 2000s, and the determinants of wage gaps between CPC members and nonmembers. We apply the wage function estimations considering the sample selection bias and use three decomposition methods. Three new findings emerge. First, the probability of joining a CPC organization is higher for a male worker, a well-educated worker, and a worker with parents who are CPC members: there is an inheritance of CPC membership in China. Second, the wage premium of CPC membership differs by models, which indicates that the selection bias may affect the wage premium greatly. Third, the contribution rate of the explained component including human capital on wage gap is larger than that of the unexplained component, and it became larger from 2002 to 2013. When the sample selection bias is addressed, the main factor is the explained part in 2002, while it is the unexplained part in 2013. It is indicated that as the economic transition advanced, discrimination against CPC nonmembers and factors that determine the probability of gaining CPC membership such as the inheritance of CPC membership grew in influence and contributed even further to the expansion of the wage gap.
    Date: 2022–04
  11. By: Jing Xing; Katarzyna Anna Bilicka; Xipei Hou
    Abstract: In this paper, we investigate distortions created by turnover taxes. As a natural experiment, we explore a reform that replaced turnover taxes with value-added taxes for some service industries in China, while the taxation of manufacturing industries remained unchanged. The reform increased sales, R&D investment, and employment for affected service firms, which is primarily driven by outsourcing from downstream manufacturing _rms. We document that smaller and less innovative manufacturing firms outsource more, and reallocation increases the quality of innovation for affected service firms. Our study provides new evidence on the negative impact of turnover taxes imposed on business inputs.
    Keywords: turnover tax, value-added tax, outsourcing, R&D investment
    JEL: H25 H26 O32 D25
    Date: 2022
  12. By: Jiang, Hongze (Asian Development Bank Institute); Liang, Pinghan (Asian Development Bank Institute)
    Abstract: We investigate the impact of fintech development on an important type of crime: theft. Based on Becker’s rational criminal theory, we suggest that fintech development could mitigate theft activities by increasing the earnings from legitimate work, relaxing potential criminals’ financial constraints, and reducing the expected gains from theft. We established a unique dataset containing information on more than 1 million theft defendants during the period 2014–2018, which we extracted from 874,000 judgment statements. Then, we aggregated them to construct a city-year panel of theft activities and matched it with the city-level economic activities and Fintech development level. The results show that a 1 standard deviation increase in the fintech development level has a significant association with a 0.39 standard deviation decrease in thefts’ density. Robustness checks and instrumental variable estimation support the main results. Further, the development of fintech reduces the density of thefts by reducing residents’ cash holding and providing more job opportunities. Finally, we utilized a nationally representative household survey to estimate the cost of theft for households, finding that victims suffer from more mental health problems, increasing their health expenditure. Our results suggest an unexpected source of welfare gain from the development of fintech: an improvement in public security.
    Keywords: fintech; theft; crime; People’s Republic of China
    JEL: C81 G59 K14 K42
    Date: 2021–08
  13. By: Ting Chen (Department of Economics, Hong Kong Baptist University); Han Li (Division of Social Science, The Hong Kong University of Science and Technology); James Kung (Faculty of Business and Economics, University of Hong Kong); Jiaxin Xie (Institute for Economic and Social Research, Jinan University)
    Abstract: By matching data on land transactions in China’s primary land market with detailed curriculum-vitae of board directors in publicly listed firms, we identify a pattern of “revolving door†exchanges between local officials and firms. The officials discounted the price of land which they sold to the said firms, and were subsequently rewarded with board appointments upon retirement. Specifically, these “client-officials†are three times as likely to be recruited by the “patron-firms†as board directors and enjoy a salary that is 23% higher and 81% more company shares by comparison with directors who did not help firms to secure cheap land deals. All of these, however, are conditional on patron-firms being able to receive a price discount, which averaged 19% when they purchased them in normal times. However, when client-officials were constrained from providing a price discount during a surprise audit, the likelihood of client-officials recruited as board directors was halved, with the price discount and extra compensation received by the patrons and clients respectively vanishing altogether. By providing evidence of the reciprocal benefits received by both parties, we demonstrate that the revolving door is used as a “payment†rather than a “connection†device in the Chinese context.
    Keywords: Revolving door; Trading Favours; Surprise Audit; Primary Land market; China
    JEL: D73 P26 R52
    Date: 2021–11
    Abstract: In 2021, China has reached the point of entering a new stage of socialist development by declaring the achievement of the goal of building ‘a comprehensive well-off society’. Since the reform and opening up of China, the paradigm of economic and social development is facing the greatest turning point from ‘getting rich first’ to ‘common prosperity’. As the US checks on China intensify during this period of economic transition in China, China is pursuing a new trade strategy to respond to it. In order to understand the changes in the global trade environment in the era of the US-China conflict, it is necessary to understand both the US checks with China and China's trade strategy to respond to them. Most of the recent US-China conflicts are analyzed from the perspective of the US checking in with China, but it is necessary to take a balanced look at what kind of countermeasures China is seeking in order to correctly forecast and prepare for changes in the global trade environment in the future.
    Keywords: China; US-China conflict; trade strategy
    Date: 2022–03–23
  15. By: Xiwen Yang (IPC-IG)
    Keywords: COVID-19; social protection; crisis response
    Date: 2022–02
  16. By: Huang, Yiping (Asian Development Bank Institute); Qiu, Han (Asian Development Bank Institute); Wang, Jingyi (Asian Development Bank Institute)
    Abstract: Digital technology has rapidly transformed the economy of the People's Republic of China (PRC) over the past decade, especially in areas of e-commerce and digital finance. In many ways, digital technology changes the pattern of economic operation, as it enlarges business scale, increases economic efficiency, improves user experiences, reduces operating costs, and controls financial risks. Digital technology served as an important economic stabilizer during COVID-19, by accurately tracking down confirmed infected cases, moving a lot of economic activities online ,and issuing consumption coupons by local governments. These not only enabled the PRC to be the first to come out of the pandemic and to achieve impressive V-shaped recovery, but also with 5G and other technological and infrastructural development. The digital economy in the PRC will likely grow more rapidly in the coming years, bringing about more fundamental changes. However, the authorities will also need to address a wide range of policy issues to ensure the smooth development of the digital economy, including the easing of the data inequality problem, protection of individual rights, and regulation of platform behavior.
    Keywords: digital technology; digital economy; COVID-19; PRC
    JEL: E60 G23 O31
    Date: 2021–07
  17. By: XIE Mingjia; YIN Ting; ZHANG Yi; OSHIO Takashi
    Abstract: Declining fertility and increasing health expenditure associated with aging populations pose great challenges to public finance globally. This paper studies the hidden cost of fertility by analyzing the causal effect of fertility on the elderly’s healthcare utilization. We use the instrumental variable approach to account for the potential endogeneity in the fertility choice, exploiting the exogenous variations in fertility induced by the "1.5-Child Policy" in rural China. We find that having more children increases the probability and out-of-pocket expenditures of using formal and informal healthcare. Increased healthcare use can be driven by deteriorating physical and mental health and increasing intergenerational support. Children of the elderly are more likely to help them pay health costs and make monetary transfers to their parents, suggesting that the increased burden of healthcare cost is partly borne by the children. Women and lower educated parents who have limited economic resources and less generous health insurance tend to bear a higher increase in health costs with more children. The results imply that the true cost of birth-encouraging policies can be underestimated if the effect of fertility on healthcare utilization is overlooked, and such policies might increase inequality if no supportive measures are provided to disadvantaged groups.
    Date: 2022–04
  18. By: Ferjani, Sabrine (University of Sousse); Saafi, Sami (University of Sousse); Nouira, Ridha (University of Sousse); Rault, Christophe (University of Orléans)
    Abstract: Contrary to most existing studies of the literature that assumed that the effects of real exchange rate (RE) misalignment on trade flows are symmetric, this paper considers a more general and realistic framework allowing for possible asymmetric effects. We use monthly time-series data over the January 2002-October 2020 period from 66 two-digit industries that trade between China and the U.S. in order to avoid the well-known aggregation bias. Estimates of symmetric error-correction models (ECM) revealed that real dollar-renminbi rate misalignment has short-run effects on 35 U.S. exporting and 53 U.S. importing industries. These short-run effects translated into the long run in 18 and 17 industries, respectively. The numbers increased considerably when estimating asymmetric ECM. Indeed, short-run asymmetric effects were then found in 47 U.S. exporting and 62 U.S. importing industries, which translated into long-run asymmetric effects in 20 U.S. exporting and 21 U.S. importing industries. Our analysis highlights the importance of separating currency overvaluation from currency undervaluation in assessing the effects of the RE misalignment on trade flows between the U.S. and China and confirms that the impacts are industry specific. Our findings (robust to possible structural breaks) are useful for trading industries, and policymakers, and advocate accounting for asymmetries when examining the RE misalignment-trade flows nexus.
    Keywords: asymmetry, nonlinear ARDL, exchange rate misalignment, commodity trade, China, the United States
    JEL: F14 F31 C10
    Date: 2022–04
  19. By: Otaviano Canuto
    Abstract: Emerging market and developing economies (EMDE) face a common set of external shocks: rising energy and food prices; tightening in global financial conditions caused by the prospect of sharper interest rate hikes and anticipation of "quantitative tightening"; and return of restrictions on mobility in China, on account of the Covid zero policy, leading to slumping in growth and weakening one of the primary growth drivers for the other EMDE. However, the impacts of those common shocks on EMDE have been heterogeneous.
    Date: 2022–04
  20. By: Simola, Heli
    Abstract: With the EU adopting more ambitious emission reduction targets this year, the European Commission in July published a proposal on measures for adjusting EU climate policy. Measures include a carbon border adjustment mechanism (CBAM) that imposes a price on emissions embodied in products imported to the EU. In this policy note, we review the main lines of the CBAM proposal and discuss its potential economic effects on China, India, Russia, Turkey and Ukraine – the EU's largest import sources for products subject to CBAM. We calculate illustrative estimates for the potential cost effectsof several specifications of the CBAM for these countries and compare them against earlier estimates. We also discuss the potential aggregate economic effects of the CBAM for these economies based on earlier literature. Despite considerable variation across countries and sectors, our analysis suggests that the aggregate economic effects of the CBAM would be limited for most exporting countries.
    Keywords: carbon border adjustment mechanism,climate policy,international trade,emerging economies
    Date: 2021
  21. By: Gérard Pogorel (ECOGE - Economie Gestion - I3, une unité mixte de recherche CNRS (UMR 9217) - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique - X - École polytechnique - Télécom ParisTech - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - Université Paris sciences et lettres, IP Paris - Institut Polytechnique de Paris, SES - Département Sciences Economiques et Sociales - Télécom ParisTech)
    Abstract: Concurrent factors are rapidly reshaping our vision of the international economy: the COVID-19 pandemic and its impact on industries and value chains; the growth and growing assertiveness of China; and the United States' redefinition of its role in the various regions of the world. How do these major factors affect the present and future of the EU and what are the implications for its policies? This paper analyses the main characteristics of European strategic autonomy in the wider context of the economic and social changes observed in international trade and international relations, in order to better understand what strategic autonomy means for European democracy.
    Keywords: International trade,Strategic sovereignty,Strategic autonomy
    Date: 2021

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