nep-cna New Economics Papers
on China
Issue of 2022‒08‒22
twelve papers chosen by
Zheng Fang
Ohio State University

  1. Chinese Aid and Democratic Values in Latin America By Andreas Freytag; Miriam Kautz
  2. A Comprehensive Package of Macroeconomic Policy Measures for Implementing China’s Climate Mitigation Strategy By Ms. Wenjie Chen; Karlygash Zhunussova; Jean Chateau; Ms. Florence Jaumotte
  3. Job Prospects and Labour Mobility in China By Huaxin Wang-Lu; Octasiano Miguel Valerio Mendoza
  4. Lithuania, China and EU lawfare to counter economic coercion By Blockmans, Steven
  5. Acceptance of inequality between children: Large-Scale Experimental Evidence from China and Norway By Cappelen, Alexander W.; Falch, Ranveig; Huang, Zhongjing; Tungodden, Bertil
  6. The 14th Five-year Plan in the New Era of China’s Reform Asian Integration, Belt and Road Initiative and Safeguarding Multilateralism By Michel Aglietta; Guo Bai; Camille Macaire
  7. The Roads One Must Walk Down: Commute and Depression for Beijing's Residents By Xize Wang; Tao Liu
  8. The Impact of High-Speed Rail on Labor Spatial Misallocation– Based on Spatial Difference-in-Differences Analysis By Linnan Yan; Menger Tu, Andre Luis Squarize Chagas, Lufeng Tai
  9. Creative Destruction and Stock Price Informativeness in Emerging Economies By Dai, Shangze; Fan, Fei; Zhang, Keke
  10. The economic benefits of international co-operation to improve air quality in Northeast Asia: A focus on Japan, Korea and China By Elisa Lanzi; Enrico Botta; Grace Alexander; Daniel Ostalé Valriberas; Zbigniew Klimont; Gregor Kiesewetter; Chris Heyes; Rita Van Dingenen
  11. Green energy depends on critical minerals. Who controls the supply chains? By Luc Leruth; Adnan Mazarei; Pierre Régibeau; Luc Renneboog
  12. Import Shocks and Gendered Labor Market Responses: Evidence from Mexico By Pia Heckl

  1. By: Andreas Freytag; Miriam Kautz
    Abstract: International economic engagement has been increasingly framed in terms of liberal democratic values. Specifically, Chinese aid has been at the center of this debate. Since Chinese aid comes with “no strings attached,” a popular narrative is that Chinese aid poses a challenge to conditional aid, thus weakening democracy promotion. This study aims to deepen our understanding of how democratic values are shaped by international economic engagement. Drawing on the Latinobarómetro Household Survey, we use an instrumental variable approach to test the effect of Chinese aid on attitudes toward democracy in 18 Latin American countries on the national and regional level. We find that Chinese aid has a non-negative effect on support for democracy. We also find that individuals who have a positive attitude towards China are more likely to value democracy. In contrast, positive attitudes towards the USA have no robust impact on support for democracy.
    Keywords: China, Latin America, foreign aid, public opinion, support for democracy, values
    JEL: F35 F61 F69 O54 P33
    Date: 2022
  2. By: Ms. Wenjie Chen; Karlygash Zhunussova; Jean Chateau; Ms. Florence Jaumotte
    Abstract: This paper presents ways for China to achieve its climate goals while also attain high-quality growth—growth that is balanced, inclusive, and green. Using a dynamic computable general equilibrium model that is calibrated to China, multiple scenarios are considered that incorporate a sequence of layered policies: (i) frontloading mitigation with an earlier emissions peak, (ii) power market reforms, and (iii) economic rebalancing. The results highlight that these policies can significantly contribute to the success of the climate strategy overall, including by lowering the shadow price of carbon as well as the associated mitigation costs. Distribution analysis offers proposals to lessen the impact on vulnerable households.
    Keywords: Chinese economy; climate policy; carbon neutrality; rebalancing; Computable General Equilibrium model
    Date: 2022–07–15
  3. By: Huaxin Wang-Lu; Octasiano Miguel Valerio Mendoza
    Abstract: China's structural changes have brought new challenges to its regional employment structure, entailing spatial redistribution of workforce. However, Chinese research on migration decisions involving future outcomes and on city-level bilateral longitudinal determinants is almost non-existent. This paper sheds light on the effects of sector-based job prospects on individual migration decisions across prefecture boundaries. To this end, we created a proxy variable for job prospects, compiled a unique quasi-panel of 66,427 individuals from 283 cities during 1997--2017, expanded the random utility maximisation model of migration by introducing the reference-dependence, derived empirical specifications with theoretical micro-foundations and applied various monadic and dyadic fixed effects to address multilateral resistance to migration. Multilevel logit models and two-step system GMM estimation were adopted for the robustness check. Our primary findings are that a 10% increase in the ratio of sector-based job prospects in cities of destination to cities of origin raises the probability of migration by 1.281--2.185 percentage points, and the effects tend to be stronger when the scale of the ratio is larger. Having a family migration network causes an increase of approximately 6 percentage points in migratory probabilities. Further, labour migrants are more likely to be male, unmarried, younger, or more educated. Our results suggest that the ongoing industrial reform in China influences labour mobility between prefecture-level cities, providing important insights for regional policymakers to prevent brain drain and to attract relevant talent.
    Date: 2022–07
  4. By: Blockmans, Steven
    Abstract: Without any formal notification, China recently declined customs clearances for shipments from Lithuanian firms in the pharmaceutical, electronics, and food sectors, and warned multinationals of secondary sanctions if they did not sever their ties with Lithuania. These covert actions were taken in response to Lithuania’s invitation to Taiwan, which the People’s Republic of China (PRC) claims as its own territory, to open a ‘representative office’ in Vilnius. No other country has ever found itself at the receiving end of such intense and politically motivated Chinese economic pressure. These actions on the part of the PRC are politically explosive because it raises serious questions about the international conduct of the Chinese Communist Party (CCP). If it can simply wipe a country off its trade book, a state belonging to the EU’s customs territory no less, then what does it mean to be a member of the WTO, or a signatory to any other number of international agreements? And, given the lamentable state the WTO is in: could the European Commission’s newly proposed anti-coercion instrument bring any solace to Lithuania and the EU?
    Date: 2021–12
  5. By: Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Falch, Ranveig (Dept. of Economics, Norwegian School of Economics and Business Administration); Huang, Zhongjing (East China Normal University); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: In a novel experimental design with nearly 10,000 adults and children, we study how adults in two societies characterized by very different levels of income inequality, Shanghai (China) and Norway, make real distributive choices involving children. We document a large cross-societal difference in the acceptance of inequality between children: adults in Shanghai implement twice as much inequality between children as do adults in Norway. This finding is robust to varying the age of the children and key features of the economic environment. Finally, we show that the willingness to accept inequality between children is predictive of attitudes to child policies.
    Keywords: Childhood inequality; fairness; social preferences; moral development
    JEL: D63
    Date: 2022–07–05
  6. By: Michel Aglietta; Guo Bai; Camille Macaire
    Abstract: China’s 14th Five-Year Plan aims to inaugurate a structural change from intensive accumulation to innovation-driven growth, with two basic objectives: developing the domestic consumer market for an enlarged middle class, on the one hand; on the other, promoting the Belt and Road Initiative (BRI). This is the “dual circulation” towards the 2035 long-run objective of achieving a socialist market economy, embedded into an “Eco civilization”. Concerning the domestic part of the strategy, China is pledging innovations combining political ecology and digital economy to handle climate change in pursuing an upgraded commitment to the Paris Agreement. For this ultimate goal, R&D spending is being strategically reinforced. The international part aims at restructuring globalization towards a new geopolitical order. It is structured in three hierarchically intertwined steps. The first is the economic integration of Asia within the Regional Comprehensive Economic Partnership (RCEP), the largest trade agreement worldwide. The second level is the diversified network of infrastructures linking Asia, Africa and Europe along and around the old Silk Roads. The third part is the transcontinental network linking the Atlantic and the Pacific oceans through the Artic Road and the Central and Latin America networks. To succeed, this monumental project needs multilateral cooperation to overcome the huge financial leverage it is generating. Trust will be of the essence in attracting private capital. A tentative advance in Sino-European cooperation has been occurring within an agreement to expand mutual investment opportunities. All in all, China is looking for a strategic repositioning into the global multilateral framework so that the Middle Empire returns to the center of the world.
    Keywords: Dual circulation;Belt and Road initiative;Go West;Central bank Digital Currency
    JEL: N55 N75 O53 P41
    Date: 2021–05
  7. By: Xize Wang (National University of Singapore); Tao Liu (Peking University)
    Abstract: As a vital aspect of individual's quality of life, mental health has been included as an important component of the U.N. Sustainable Development Goals. This study focuses on a specific aspect of mental health: depression, and examines its relationship with commute patterns. Using survey data from 1,528 residents in Beijing, China, we find that every 10 additional minutes of commute time is associated with 1.1% higher likelihood of depression. We test for the mechanisms of the commute-depression link and find that commute is associated with depression as a direct stressor rather than triggering higher work stress. When decomposing commute time into mode-specific time, we found that time on mopeds/motorcycles has the strongest association with depression. Moreover, the commute-depression associations are stronger for older workers and blue-collar workers. Hence, policies that could reduce commute time, encourage work from home, improve job-housing balance or increase motorcyclists' safety would help promote mental health.
    Date: 2022–07
  8. By: Linnan Yan; Menger Tu, Andre Luis Squarize Chagas, Lufeng Tai
    Abstract: Existing studies neglected to assess the resource allocation effect of high-speed railway (HSR). This paper examines the impact of HSR on labor spatial misallocation in China by applying a modifified spatial difference-in-differences approach, which identify local treatment effect, spillover effect on treated and untreated regions. The study fifinds: (1) Opening HSR alleviates not only the local labor misallocation but also the misallocation in surrounding areas to a greater extent, including cities with HSR (treatment group) and without HSR (control group), which contributes to the overall productivity increase. The spillover effect of HSR is larger than the direct effect. (2) The largest spillover effect occurs in adjacent areas near 350 km apart, while the spillover effect disappears beyond 500 km. (3) The direction and magnitude of HSR effect depend on the urban scale. For large-scale cities, the impact of opening HSR is greater versus small-scale ones.
    Keywords: high-speed railway; spatial difference-in-differences; labor spatial
    JEL: C23 R15 R40
    Date: 2022–08–04
  9. By: Dai, Shangze; Fan, Fei; Zhang, Keke
    Abstract: It is generally accepted that creative destruction can increase stock price informativeness, for innovative companies tend to behave more surprisingly. However, we believe the rising of stock price informativeness by enterprise innovation in emerging or developing markets is, in some sense, the result of executive ownership and insider trading. To investigate our proposition, we build a rational expectation framework model and define stock price informativeness (SPI) as the Kolmogorov-Smirnov distance between expected distribution and actual distribution of stock prices. Then we use Chinese listed company data to perform benchmark and mediation effects regressions, along with instrumental variable regression in the empirical sector. After that, we use Thailand and Indonesia listed company data for robustness tests. Finally, we divide Chinese listed companies into developed-economy funded and others to do grouping regression. The main conclusion is: Creative destruction can raise stock price informativeness, while executive ownership plays a partial mediating effect in the path of such influence. However, that mechanism is not significant when we use developed-country-funded enterprises listed in China as the sample for regression. Thus, the effects of creative destruction on stock price informativeness are uneven across countries, and executive ownership plays a vital role in that impact in emerging economies.
    Keywords: Stock price synchronicity; Enterprise innovation; Inside information; Executive ownership; Rational expectation
    JEL: G2 G3 G32
    Date: 2022–07–05
  10. By: Elisa Lanzi (OECD); Enrico Botta (OECD); Grace Alexander (OECD); Daniel Ostalé Valriberas (OECD); Zbigniew Klimont (International Institute for Applied Systems Analysis); Gregor Kiesewetter (International Institute for Applied Systems Analysis); Chris Heyes (International Institute for Applied Systems Analysis); Rita Van Dingenen (Joint Research Centre - European Commission)
    Abstract: Air pollution is a global challenge to people’s health and has severe economic consequences. The region of Northeast Asia is no exception. Across most regions in Japan, and in the entire territories of Korea and China, annual average concentrations of fine particulate matter are above the guideline levels indicated by the World Health Organisation, indicating a risk to health. Policy action to tackle air pollution across the three countries, could prevent air pollution related illnesses and deaths, without affecting economic growth.This report presents projections for the impact of air pollution polices until 2050, with differing levels of regional coordination. Projections for current policies are compared with unilateral policy action, whereby each of the three countries introduce more stringent policies to tackle air pollution; alongside regionally coordinated policy action by all three countries; and policy action on a global level. The report presents the health, agricultural and economic impacts, and identifies considerable benefits from further coordination on air pollution policies, such as with regional and global policy action.
    Keywords: air pollution, air quality, best available techniques, computable general equilibrium models
    JEL: C68 Q53 Q52
    Date: 2022–07–29
  11. By: Luc Leruth (Tbilisi University); Adnan Mazarei (Peterson Institute for International Economics); Pierre Régibeau (European Commission); Luc Renneboog (Tilburg University)
    Abstract: In light of the transition away from fossil fuel-based energy, this paper highlights the importance of understanding who controls vital parts of the global supply chains of critical minerals and rare earth elements (REEs). Analysis of direct ownership does not reveal the real sources of control over the decisions of the company. To identify those sources, we use an index that measures the degree to which important shareholders can affect voting decisions. This analysis is not straightforward, because companies along the supply chain are not necessarily incorporated in the countries in which mining and production activities take place, and shareholders can exert influence through multiple layers of subsidiaries. Our analysis reveals that China's control over the global value chains involving critical minerals and REEs extends beyond what is commonly assumed. It also sheds light on environmental, social, and governance issues in the countries in which mining and/or production take place. The paper advocates increasing transparency regarding the sources of control to better assess and manage economic and geopolitical risks; enhancing recycling, to reduce dependency on foreign supply; avoiding protectionist and trade-reducing reactions; and encouraging research and development in order to speed up the adoption of technologies of substitution.
    Keywords: Ownership, voting power, corporate social responsibility, ESG, supply chain, recycling, rare earth elements, critical minerals, geopolitics
    JEL: G3 L1 L7 Q3 Q5
    Date: 2022–08
  12. By: Pia Heckl (Department of Economics, Vienna University of Economics and Business)
    Abstract: This paper studies gender differences in the labor market reallocation of workers in Mexico as a response to trade liberalization with China. To measure exposure to import competition, I exploit variation in the initial industry structure of Mexican local labor markets. I show that aggregate outcomes mask heterogeneous responses based on gender. Although the employment rate drops for both men and women, the former enter into unemployment while the latter leave the labor force. The results suggest that the drop in the female labor force participation rate is driven by their exit out of formal and especially informal work.
    Keywords: Trade, Gender Inequality, Labor Market, Informal Work, Mexico
    JEL: F16 J16 J21 J46
    Date: 2022–07

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