nep-cna New Economics Papers
on China
Issue of 2022‒06‒27
thirteen papers chosen by
Zheng Fang
Ohio State University

  1. Import liberalization as export destruction? Evidence from the United States By Holger Breinlich; Elsa Leromain; Dennis Novy; Thomas Sampson
  2. Returns to Education in China: Evidence from the Great Higher Education Expansion By Huang, Bin; Tani, Massimiliano; Wei, Yi; Zhu, Yu
  3. Opposing firm-level responses to the China shock: horizontal competition versus vertical relationships By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz; Thomas Zuber
  4. Does a Universal Pension Reduce Elderly Poverty in China? By Anqi Zhang; Katsushi S. Imai
  5. Millet, Rice, and Isolation: Origins and Persistence of the World's Most Enduring Mega-State By James Kai-sing Kung; Ömer Özak; Louis Putterman; Shuang Shi
  6. Does China’s Zero Covid Strategy Mean Zero Economic Growth? By Hunter L. Clark; Lawrence Lin
  7. China - winning the pandemic... for now: The People's Republic is exuding strength, but can they keep it up? By Hilpert, Hanns Günther; Stanzel, Angela
  8. Afghanistan: The West fails - a win for China and Russia? The views from Beijing and Moscow By Fischer, Sabine; Stanzel, Angela
  9. Xi Jinping thought on the rule of law: New substance in the conflict of systems with China By Rudolf, Moritz
  10. Global trends in the invention and diffusion of climate change mitigation technologies By Probst, Benedict; Touboul, Simon; Glachant, Matthieu; Dechezleprêtre, Antoine
  11. The Empirics of the China Trade Shock: A Summary of Estimation Methods and A Literature Review By Akira Sasahara
  12. China's health diplomacy during Covid-19: The Belt and Road Initiative (BRI) in action By Rudolf, Moritz
  13. New trade agreement in Asia: Liberalisation in times of geopolitical rivalry By Hilpert, Hanns Günther

  1. By: Holger Breinlich; Elsa Leromain; Dennis Novy; Thomas Sampson
    Abstract: How does import protection affect export performance? In trade models with scale economies, import liberalization can reduce an industry's exports by cutting domestic production. We find this export destruction mechanism reduced US export growth following the normalization of trade relations with China (PNTR). But there was also an offsetting boost to exports from lower input costs. We use our empirical results to calibrate the strength of scale economies in a quantitative trade model. Counterfactual analysis implies that while PNTR increased aggregate US exports relative to GDP, exports declined in the most exposed industries because of the export destruction effect. On aggregate, the US and China both gain from PNTR, but the gains are larger for China.
    Keywords: trade policy, import liberalization, comparative advantage, scale economies, China shock
    Date: 2021–06–30
  2. By: Huang, Bin; Tani, Massimiliano; Wei, Yi; Zhu, Yu
    Abstract: China experienced a near 5-fold increase in annual Higher Education (HE) enrolment in the decade starting in 1999. Using the China Household Finance Survey, we show that the Great HE Expansion has exacerbated a large pre-existing urban-rural gap in educational attainment underpinned by the hukou (household registration) system. We instrument the years of schooling with the interaction between urban hukou status during childhood and the timing of the expansion - in essence a difference-in-differences estimator using rural students to control for common time trends. We find that the Great HE raised earnings by 17% for men and 12% for women respectively, allowing for county fixed-effects. These Two Stage Least Squares (2SLS) estimates, which are robust to additional controls for hukou status at birth fully interacted with birth hukou province, can be interpreted as the Local Average Treatment Effect (LATE) of education on earnings for urban students who enrolled in HE only because of the Great HE Expansion. For the selected subsample of respondents with parental education information, we find that the 2SLS returns for students from more disadvantaged backgrounds are at least as high as their more advantaged counterparts, for both genders.
    Keywords: returns to education,2SLS,higher education expansion,China
    JEL: I26 I23
    Date: 2022
  3. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz; Thomas Zuber
    Abstract: We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: a horizontal shock affecting firms selling goods that compete with similar imported Chinese goods, and a vertical shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the horizontal shock is detrimental to firms' sales, employment and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the vertical shock on firms' sales, employment and innovation.
    Keywords: competition shock, patent, firms, import
    Date: 2021–08–09
  4. By: Anqi Zhang (Department of Economics, The University of Manchester, UK and Institute of Belt and Road & Global Governance, Fudan University, CHINA); Katsushi S. Imai (Department of Economics, The University of Manchester, UK and Research Institute for Economics and Business Administration, Kobe University, JAPAN)
    Abstract: This paper studies the impact of the universal pension programme on elderly poverty in both rural and urban China. Using the three rounds of panel data based on the Health and Retirement Longitudinal Study (CHARLS) in 2011-2015, we examine whether the universal pension programme reduced elderly poverty, comprehensively defined to cover both unidimensional and multidimensional poverty indices of the households and individuals. To utilise the longitudinal nature of the data, we apply the robust Fixed-Effects (FE) Model with Propensity Score Matching (PSM) and the FE Quantile Model with PSM taking into account the unobservable individual characteristics, such as entrepreneurship or risk preference. Our results show that the universal pension programme reduced poverty in monetary and non-monetary terms in both rural and urban areas. While rural people tend to continue to work in the labour market after the receipt of the pension, urban people work less due to the negative income effect of the programme. The panel quantile regression results suggest that the programme decreased the inequality in both monetary and non-monetary dimensions. Our results provide strong evidence to underscore the success of the Chinese universal pension programme in reducing poverty and inequality in both rural and urban areas.
    Keywords: Poverty; Inequality; Multidimensional Poverty Index (MPI); Pension; Impact evaluation; China
    JEL: C23 I32 I38 H75
    Date: 2022–06
  5. By: James Kai-sing Kung (The University of Hong Kong); Ömer Özak (Southern Methodist University); Louis Putterman (Brown University); Shuang Shi (The University of Hong Kong)
    Abstract: We propose and test empirically a theory describing the endogenous formation and persistence of mega-states, using China as an example. We suggest that the relative timing of the emergence of agricultural societies, and their distance from each other, set off a race between their autochthonous state-building projects, which determines their extent and persistence. Using a novel dataset describing the historical presence of Chinese states, prehistoric development, the diffusion of agriculture, and migratory distance across 1-degree x 1-degree grid cells in eastern Asia, we find that cells that adopted agriculture earlier and were close to Erlitou -- the earliest political center in eastern Asia -- remained under Chinese control for longer and continue to be a part of China today. By contrast, cells that adopted agriculture early and were located further from Erlitou developed into independent states, as agriculture provided the fertile ground for state-formation, while isolation provided time for them to develop and confront the expanding Chinese empire. Our study sheds important light on why eastern Asia kept reproducing a mega-state in the area that became China and on the determinants of its borders with other states.
    Keywords: Comparative Development, State-Building, Emergence of States, Agricultural Adoption, Isolation, Neolithic Revolution, Social Complexity, East Asia, China, Erlitou
    JEL: F50 F59 H70 H79 N90 O10 R10 Z10 Z13
    Date: 2020–12
  6. By: Hunter L. Clark; Lawrence Lin
    Abstract: The Chinese government has followed a “zero covid strategy” (ZCS) ever since the world’s first COVID-19 lockdowns ended in China around late March and early April of 2020. While this strategy has been effective at maintaining low infection levels and robust manufacturing and export activity, its viability is being severely strained by the spread of increasingly infectious coronavirus variants. As a result, there now appears to be a fundamental incompatibility between the ZCS and the government’s economic growth objectives.
    Keywords: China; COVID-19; growth
    JEL: E2 F00 I15
    Date: 2022–06–02
  7. By: Hilpert, Hanns Günther; Stanzel, Angela
    Abstract: Is it not ironic that the Coronavirus pandemic, which arguably began in a Wuhan animal market in late 2019, has accelerated China's rise? Indeed, early interim assessments show that Beijing's draconian, sometimes inhumane, disease control measures have proven highly successful. China's containment of Covid-19 domestically has enabled a return to normality and laid the foundation for a strong economic upswing. Party and state leaders are using these achievements for political advancement at home and abroad. China's effective crisis management - epidemiological, economic, and political - reveal that the country is winning this crisis in the end of 2020. Nonetheless, the sustainability of these economic and political successes is debatable.
    Date: 2021
  8. By: Fischer, Sabine; Stanzel, Angela
    Abstract: Russia and China are seen as the main beneficiaries of the Western withdrawal from Afghanistan regarding their political influence and potential exertion of power. In both the Chinese and Russian debate, however, alongside triumphant comments about Western failure, serious concerns about the regional security situation are being voiced. Western actors should seek a more nuanced understanding of Beijing's and Moscow's perspectives. This could also lead to opportunities for cooperation that would serve to stabilise Central Asia and Afghanistan. In view of the intensifying global systemic rivalry, however, the scope for cooperation will remain limited.
    Date: 2021
  9. By: Rudolf, Moritz
    Abstract: In its first 'Plan on Building the Rule of Law in China (2020-2025)', the leadership in Beijing has set out its vision for a coherent and genuinely Chinese legal system. The focus here is on the term 'socialist rule of law with Chinese characteristics'. It should 'basically take shape' by 2035. Marxist-Leninist legal concepts remain fundamental. The aim is to use the law as a political instrument to make the state more efficient and to reduce the arbitrariness of how the law is applied for the majority of the popu­lation, among other things, with the help of advanced technology. In some areas, for example on procedural issues, Beijing continues to draw inspiration from the West in establishing its Chinese 'rule of law'. However, the party-state leadership rejects an independent judiciary and the principle of separation of powers as 'erroneous west­ern thought'. Beijing is explicitly interested in propagating China's conception of law and legal practice internationally, establishing new legal standards and enforcing its interests through the law. Berlin and Brussels should, therefore, pay special attention to the Chinese leadership's concept of the law. In-depth knowledge on this topic will be imperative in order to grasp the strategic implications of China's legal policy, to better understand the logic of their actions and respond appropriately.
    Date: 2021
  10. By: Probst, Benedict; Touboul, Simon; Glachant, Matthieu; Dechezleprêtre, Antoine
    Abstract: Increasing the development and diffusion of climate change mitigation technologies on a global scale is critical to reaching net-zero emissions. We have analysed over a quarter of a million high-value inventions in all major climate change mitigation technologies patented from 1995 to 2017 by inventors located in 170 countries. Our analysis shows an annual growth rate of 10% from 1995 to 2012 in these high-value inventions. Yet, from 2013 to 2017, the growth rate of these inventions fell by around 6% annually, likely driven by declining fossil fuel prices, low carbon prices and increasing technological maturity for some technologies, such as solar photovoltaics. Invention has remained highly concentrated geographically over the past decade, with inventors in Germany, Japan and the United States accounting for more than half of global inventions, and the top ten countries for almost 90%. Except for inventors in China, most middle-income economies have not caught up and remain less specialized in low-carbon technologies than high-income economies.
    Keywords: ES/R009708/1
    JEL: R14 J01
    Date: 2021–11
  11. By: Akira Sasahara (Faculty of Economics, Keio University)
    Abstract: Given a number of trade liberalization episodes and the advent of newer empirical methods, there has been a growth in the number of empirical studies on trade. This paper surveys existing studies focused on the impact of import competition, especially from China, on various aspects of the economy. First, it summarizes estimation methods commonly employed to investigate the effect of import competition and clarifies the methodological development. Second, it discusses existing studies on import competition by country and topic. Lastly, it outlines future research directions.
    Keywords: China trade shock;Import competition;Local labor markets;Shift-share instruments
    JEL: F14 F16 F66
    Date: 2022–05–25
  12. By: Rudolf, Moritz
    Abstract: International cooperation in the health sector has been a firm component of China's Belt and Road Initiative (BRI) for over five years. Since the outbreak of the Covid-19 pandemic, the Chinese leadership has been promoting this aspect of the initiative ("health silk road") as essential to building a "global community of common destiny". The pandemic has revealed the strengths of the BRI and the way it functions. China's health diplomacy is farsighted and strategic. Beijing has been linking measures to combat the Covid-19 pandemic in aid recipient countries with the prospect of post-pandemic cooperation within the BRI framework. Above all, Beijing wants to be perceived internationally as a "responsible great power". The West's often narrow focus on the qualitative defects of Chinese aid fails to recognise that, in the absence of traditional aid donors, Beijing has supported many third countries effectively and extensively. To counter China's increasing influence in regions that are strategically important for Germany and Europe, greater sensitivity is needed to the geopolitical implications of the pandemic, as well as specific European proposals for third countries for the post-pandemic period. In parallel with more commitment at the multilateral level (for instance within the World Health Organisation, WHO), other options include strengthening bilateral initiatives (e.g. via regional EU+x formats) and coordination with the new US government under Joe Biden.
    Date: 2021
  13. By: Hilpert, Hanns Günther
    Abstract: With the signing of the Regional Comprehensive Economic Partnership (RCEP) on 15 November 2020, the announcement of the EU-China Comprehensive Agreement on Investment (CAI) on 30 December, and the prospects of enlarging the Compre­hensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), trade policy with and within Asia is gathering speed. In the greater East Asia region, consisting of Japan, South Korea, China and the Association of Southeast Asian nations (ASEAN), economic integration via trade, investment, supply chains and digital connectivity will accelerate. In contrast, regions that remain on the outside - i.e. North America, Europe and India - surely fear that trade flows will be diverted. At the same time, geopolitics have become a determining factor of trade policy. Any agreement also represents political positioning in the context of the Sino-American rivalry, or at least a reinsurance against the risks of economic or technological decoupling. What are the economic and political perspectives of these trade and investment agreements? What goals and strategies are the relevant actors pursuing? And what are the con­sequences for Europe's trade policy?
    Date: 2021

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