nep-cna New Economics Papers
on China
Issue of 2022‒07‒18
twelve papers chosen by
Zheng Fang
Ohio State University

  1. Millet, Rice, and Isolation: Origins and Persistence of the World's Most Enduring Mega-State By Kung, James Kai-sing; Özak, Ömer; Putterman, Louis; Shi, Shuang
  2. Attractiveness of Chinese Bonds Financing Climate and Environmental Projects. By Karel Janda; Binyi Zhang
  3. China’s new growth story: linking the 14th Five-Year plan with the 2060 carbon neutrality pledge By Stern, Nicholas; Xie, Chunping
  4. Elementary education in India versus China: Guidelines for NEP implementation By Naveen Kumar; Vinitha Varghese
  5. Growing Apart: Declining Within- and Across-Locality Insurance in Rural China By Orazio Attanasio; Costas Meghir; Corina Mommaerts; Yu Zheng
  6. Public responses to foreign protectionism: Evidence from the US-China trade war By David Steinberg; Yeling Tan
  7. When Europe Dances with the Dragon: Legal novelties and the policy implications of the China–EU investment agreement By Alisher UMIRDINOV
  8. How street greenery facilitates active travel for university students By Bai, Yihang; Cao, Mengqiu; Wang, Ruoyu; Liu, Yuqi; Wang, Seunghyeon
  9. The Effects of Energy Supply Shocks and Interest Rate Liberalization in China By Yihao Xue; Qiaoyu Liang; Bing Tong
  10. Is the Global Carbon Market Integrated? Return and Volatility Connectedness in ETS Systems By Lyu, Chenyan; Scholtens, Bert
  11. A Game-Theory Analysis of Electric Vehicle Adoption in Beijing under License Plate Control Policy By Lijing Zhu; Jingzhou Wang; Arash Farnoosh; Xunzhang Pan
  12. The Welfare Effects of Law Enforcement in the Illegal Money Lending Market By Leong, Kaiwen; Li, Huailu; Pavanini, Nicola; Walsh, Christoph

  1. By: Kung, James Kai-sing (City University of Hong Kong); Özak, Ömer (Southern Methodist University); Putterman, Louis (Brown University); Shi, Shuang (City 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° × 1° 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: state, agriculture, isolation, social complexity, stickiness to China, Erlitou, East Asia
    JEL: F50 F59 H70 H79 N90 O10 R10 Z10 Z13
    Date: 2022–06
  2. By: Karel Janda; Binyi Zhang
    Abstract: As facilitated by governmental authorities promising sustainable economic growth, green bonds have gained prominence in China's capital market to scale up the transition to a climate-resilient economy. Although the issuance volume of the Chinese green bond market has been growing rapidly in recent years, the impact of green label on bond pricing is not adequately studied. Thus, this paper aims to investigate whether this newly developed financial instrument offers investors in China an attractive yield compared to other equivalent conventional bonds. By applying a matching method and subsequently a fixed-effects estimation, our empirical results reveal a significant negative yield premium of green bonds on average -1.8 bps lower than their conventional counterparts in the Chinese secondary market. In addition to that, the yield premium is found to vary across issuers' business sectors mainly due to the public reputation of bond issuers. Moreover, our empirical results reveal an insignificant relationship between the green certification and the yield premium, reflecting an inconsistent green definition in the Chinese market. Our results point to some practical implications for policymakers and investors.
    Keywords: Green bonds, Green bond premium, ESG, China
    JEL: G12 Q56
    Date: 2021–11–25
  3. By: Stern, Nicholas; Xie, Chunping
    Abstract: China has announced its commitment to achieving carbon neutrality by 2060, and for this challenging goal to be reached within just four decades, there is a real urgency of shaping the low-carbon agenda in its 14 th Five-Year Plan and to ratchet up ambition on climate policy in the near term to peak emissions early. This paper argues that China will have to change the way of development by take a sustainable pathway to growth. And this new approach does not mean sacrificing economic growth; quite the opposite, it can boost growth by providing great opportunities in terms of jobs, efficiency, demand, and many other aspects, while reducing carbon emissions and enabling great benefits with regards to pollution, ecological restoration, biodiversity and well-beings. The COVID-19 pandemic has provided a window of opportunity for China and other countries to cooperate to link the post-pandemic economic recovery with the fight against climate change.
    Keywords: 14 Five-Year Plan; Carbon neutrality; China’s new growth story; low-carbon transition; T&F deal
    JEL: N0 R14 J01
    Date: 2022–05–10
  4. By: Naveen Kumar; Vinitha Varghese
    Abstract: This paper documents the state of elementary education in India and China since the 1960s, key lessons for India from China's shift in focus from 'quantity' to 'quality', and evidence-based guidelines for effective implementation of India's New Education Policy 2020 (NEP 2020). The divergent policy focus has led to differential trajectories for elementary education in the two emerging economies, with China being decades ahead in improving literacy rates.
    Keywords: Education, Schooling, Education quality, India, China, Education policy
    Date: 2022
  5. By: Orazio Attanasio; Costas Meghir; Corina Mommaerts; Yu Zheng
    Abstract: We consider risk sharing in rural China during its rapid economic transformation from the late 1980s through the late 2000s. We document an erosion of consumption insurance against both household-level idiosyncratic and village-level aggregate income shocks, and show that this decline is related to observable economic changes: the shift from agriculture to wage employment, the decline of publicly owned Township-and-Village Enterprises, and increased migrant work. Further evidence suggests that as these changes took place at the village level, higher levels of government failed to offset these effects through the tax-and-transfer system, leaving households more exposed to both idiosyncratic and village-aggregate risk.
    JEL: D12 E21 O12 P25
    Date: 2022–06
  6. By: David Steinberg (Johns Hopkins University); Yeling Tan (Peterson Institute for International Economics)
    Abstract: America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
    Keywords: International Trade; International Political Economy; China; Public Opinion
    JEL: F13 F42 F50 F68
    Date: 2022–06
  7. By: Alisher UMIRDINOV
    Abstract: The main goal of this paper is to analyze the novelties and limitations of the European Union (EU)–China Comprehensive Agreement on Investment (CAI) and examine its policy implications for investment rulemaking in the Asia-Pacific region. As rightly put by the EU side, the CAI is the most ambitious investment liberalization agreement that China has ever concluded with a third party. The CAI aims to improve market access to China’s manufacturing and services sectors, introduces a definition of state-owned enterprise that is even broader than the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), tightens subsidy regulations, ensures equal participation in standard-setting, prohibits compulsory technology transfers, and requires transparency in the operation of competition law. That being the case, the paper argues that by subjecting China to these groundbreaking obligations, the CAI could be a litmus test for China’s bid for membership in the CPTPP. From the perspective of sustainable development, China committed to making sustained efforts to ratify the fundamental Conventions of the International Labour Organization (ILO). In this regard, effective implementation and ratification of ILO Conventions may show whether China is honest in making labor protection commitments in the wake of its membership bid to the CPTPP. Finally, the CAI does not cover investor–state dispute settlement since the parties decided to continue negotiations on investment protection on a separate track while aiming to complete negotiations within 2 years of the signature of the CAI. If China supports it, then a Multilateral Investment Court based on the approach developed by the EU may increase its influence globally. Although the ratification of the CAI has been frozen indefinitely due to bilateral sanctions, it is still too early to be certain that the CAI has been completely shelved.
    Date: 2022–06
  8. By: Bai, Yihang; Cao, Mengqiu; Wang, Ruoyu; Liu, Yuqi; Wang, Seunghyeon
    Abstract: Introduction: Active travel is currently gaining popularity worldwide as a sustainable form of travel. However, very few studies have examined how the built environment affects active travel behaviour on university campuses, particularly in China. It is a key feature of Chinese university campuses that they are generally gated communities, which are spatially organised in a very different way from campuses in other countries, and they often also provide for students’ daily needs, meaning that students tend to travel off-campus less frequently. Aims: This research aims to explore the link between street greenery and the active travel behaviour of students on closed university campuses in China. Methods: The study combined sensor data from Guangzhou Higher Education Mega Centre (HEMC), China, with individual cross-sectional survey data from university students and applied a multilevel logistic regression model to conduct the analysis. Street-view images were analysed using a deep learning approach, which represents an emerging method for assessing urban green space. Results: The results demonstrated that street greenery on campuses is positively associated with active travel among university students. Modes of travel also influenced active travel, with university students who owned bicycles tending to participate in active travel more; however, those who travelled by electric bikes were less likely to participate in active travel. Conclusions: This study suggests that policymakers and transport planners should focus more on greening urban areas and improving walking and cycling environments to achieve green transport goals through urban planning.
    Keywords: active travel; health; equity; behavioural change; street greenery; urban planning
    JEL: C1
    Date: 2022–05–27
  9. By: Yihao Xue (School of Economics at Henan University, Kaifeng, Henan); Qiaoyu Liang (School of Economics at Henan University, Kaifeng, Henan); Bing Tong (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan)
    Abstract: Based on a New Keynesian model with a transient interest rate peg and energy inputs in production, we examine the impact of China`s interest rate liberalization on the transmission of energy supply shocks. Theoretical analysis shows that in the face of negative supply shocks, output decreases less or even increases while inflation rises more under a fixed interest rate compared with a flexible interest rate. We construct the Divisia energy index based on Chinese data to test the model predictions. We identify energy supply shocks following the strategy of Kilian (2009) and obtain impulse responses using the local projection method proposed by Jordà (2005). The empirical results are consistent with our model predictions.
    Keywords: Interest rate liberalization, Energy supply shocks, Divisia Index, New Keynesian model
    JEL: E31 E42 E43 E52 E58 Q43
    Date: 2022–01
  10. By: Lyu, Chenyan (Department of Economics, Copenhagen Business School); Scholtens, Bert (Department of Finance, University of Groningen)
    Abstract: Emission trading is gaining momentum with its increasing market size and constantly improving information transmission mechanisms. With carbon assets becoming prominent as an alternative asset in investment portfolios, the ETS model has engaged a broad range of market participants, including not only emissions-intensive energy corporations but also individual and institutional investors. As arbitrage opportunities arise, price fluctuations are likely to occur, which typically have a mutual spillover effect. This paper examines how market fluctuations (e.g., volatilities) in these markets interact with each other, among carbon prices across four jurisdictions – European Union, New Zealand, California, and Hubei (China) ETS. The data used in this paper consists of weekly return and volatility, constructed by the daily prices from four markets, covering the period 30th April 2014, through 1st December 2021. We focus theoretically on the time-varying parameter (TVP)-VAR methodology, and empirically the connectedness approach. Our empirical results show average return (volatility) spillover is 6.03% (8.25%), which means that the dynamics of each of the carbon market are mainly explained by themselves and not due to spillovers from other markets, indicating that the global carbon prices are largely (albeit not completely) dependent.
    Keywords: Carbon markets integration; Volatility connectedness; TVP-VAR; Market risk
    JEL: C32 E44 Q43 R11
    Date: 2022–05–23
  11. By: Lijing Zhu (China University of Petroleum); Jingzhou Wang (China University of Petroleum, IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School); Arash Farnoosh (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School); Xunzhang Pan (China University of Petroleum)
    Abstract: To reduce traffic congestion and protect the environment, license plate control (LPC) policy has been implemented in Beijing since 2011. In 2019, 100,000 vehicle license plates were distributed, including 60,000 for electric vehicles (EVs) and 40,000 for gasoline vehicle (GVs). However, whether the current license plate allocation is optimal from a social welfare maximization perspective remains unclear. This paper proposes a two-level Stackelberg game, which portrays the interaction between vehicle applicants and the government to quantify the optimal number of EV license plates under the LPC policy in Beijing. The equilibrium number of EV license plates derived from the Stackelberg model is 58,800, which could increase the social welfare by 0.38%. Sensitivity analysis is conducted to illustrate the impact of important influential factors — total license plate quota, vehicle rental fee, and energy price — on EV adoption. The LPC policy under COVID-19 is also studied through a scenario analysis. If the government additionally increases the total quota by 20,000, 24% could be allocated to GV and 76% to EV. One third reduction of the current vehicle rental fee could increase EV license plates by 10.5%. In terms of energy prices, when gasoline price is low, reducing electricity prices could contribute to EV adoption significantly, while that effect tapers off as gasoline prices increase.
    Keywords: Electric vehicle,License plate control (LPC) policy,Stackelberg game theory,License plate quota
    Date: 2022–04
  12. By: Leong, Kaiwen (Nanyang Technological University, Singapore); Li, Huailu (Fudan University, China); Pavanini, Nicola (Tilburg University); Walsh, Christoph (Tilburg University)
    Abstract: We estimate a structural model of borrowing and lending in the illegal money lending market using a unique panel survey of 1,090 borrowers taking out 11,032 loans from loan sharks. We use the model to evaluate the welfare effects of alternative law enforcement strategies. We find that a large enforcement crackdown that occurred during our sample period raised interest rates, lowered the volume of loans, increased the lenders' unit cost of harassment, decreased lender profits, and decreased borrower welfare. We compare this strategy to targeting borrowers and find that targeting medium-performing borrowers is the most effective at lowering lender profits.
    Keywords: illegal money lending, loan sharks, law enforcement, crime
    JEL: K42 G51
    Date: 2022–06

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