nep-cna New Economics Papers
on China
Issue of 2022‒10‒03
eight papers chosen by
Zheng Fang
Ohio State University

  1. Anti-Corruption Campaign and the Resurgence of the SOEs in China:Evidence from the Real Estate Sector By Hanming Fang; Jing Wu; Rongjie Zhang; Li-An Zhou
  2. Tracking Chinese aid through China customs: Darlings and orphans after the COVID-19 outbreak By Fuchs, Andreas; Kaplan, Lennart; Kis-Katos, Krisztina; Schmidt, Sebastian S.; Turbanisch, Felix; Wang, Feicheng
  3. Catching the Political Leader's Signals: Economic policy uncertainty and firm investment in China By ITO Asei; LIM Jaehwan; ZHANG Hongyong
  4. The Rise and Fall of Paper Money in Yuan China, 1260-1368 By Hanhui Guan; Nuno Palma; Meng Wu
  5. Foreign Competition, Skill Premium, and Product Quality: Impact of Chinese Competition on Mexican Plants By Thi Hang Bahn; Mauro Caselli
  6. Housing Wealth and Online Consumer Behavior:Evidence from Xiong'an New Area in China By Hanming Fang; Long Wang; Yang Yang
  7. Information Exposure and Corporate Citizenship By Liu, Lisa Yao; Lu, Shirley
  8. A new geopolitics of supply chains: The rise of friend-shoring By Maihold, Günther

  1. By: Hanming Fang (University of Pennsylvania and the NBER); Jing Wu (Tsinghua University); Rongjie Zhang (Tsinghua University); Li-An Zhou (Peking University)
    Abstract: We advance a novel hypothesis that China’s recent anti-corruption campaign may have contributed to the resurgence of the state-owned enterprises (SOEs) in China as an unintended consequence. Weexplore the nexus between the anti-corruption campaign and the SOE resurgence by presenting supporting evidence from the Chinese real estate sector, which is notorious for pervasive rentseeking and corruption. We use a unique data set of land parcel transactions merged with firm-level registration information and a difference-in-differences empirical design to show that, relative to the industrial land parcels which serve as the control, the fraction of residential land parcels purchased by SOEs increased significantly relative to that purchased by private developers after the anticorruption campaign. This finding is robust to a set of alternative specifications. We interpret the findings through the lens of a model where we show, since selling land to private developers carries the stereotype that the city official may have received bribes, even the “clean” local officials will become more willing to award land to SOEs despite the presence of more efficient competing private developers. We find evidence consistent with the model predictions.
    Keywords: Anti-Corruption Campaign; Land Market; State-Owned Enterprises; State Capitalism
    JEL: D73 R31
    Date: 2022–08–05
  2. By: Fuchs, Andreas; Kaplan, Lennart; Kis-Katos, Krisztina; Schmidt, Sebastian S.; Turbanisch, Felix; Wang, Feicheng
    Abstract: Since the outbreak of the COVID-19 pandemic, China's mask and vaccine diplomacy have been widely discussed, but the debate relies on a few stylized data points. This article introduces a systematic way to measure China's foreign aid in almost real-time through official customs records of exported aid goods. Our results show significant shifts in China's aid after the outbreak of the COVID-19 pandemic. First, medical aid skyrocketed after the outbreak. It was initially dominated by face masks and other protective equipment and later by vaccines. This came at the expense of non-medical aid, which was 16.3 percent below its pre-pandemic level. Second, China's aid became global, clearly extending beyond the Global South. Third, in the aftermath of the initial outbreak in March 2020, China's aid became less responsive to both recipient need and political friendship, which can be mainly attributed to the rise of aid through non-government sources. However, in the vaccine diplomacy period of 2021, economic needs and political factors have regained their original importance.
    Keywords: official development assistance,aid exports,China,COVID-19,mask diplomacy,vaccine diplomacy,Health Silk Road
    JEL: F35 F59 H12 H84 I15 I18 P33
    Date: 2022
  3. By: ITO Asei; LIM Jaehwan; ZHANG Hongyong
    Abstract: This study uses a text dataset of the Chinese President’s speeches and reports from November 2012 to December 2021 to construct an original economic policy uncertainty (EPU) index: President Xi Jinping’s EPU (XiEPU). XiEPU moderately correlates with a previous study’s representative EPU, showing notably different peaks. Our index spiked in April 2016 after a sharp decline in the Chinese stock market index and late 2020, reflecting the global COVID-19 pandemic. Using firm-level panel data, we find that a higher value of XiEPU is associated with a lower investment rate at the quarterly level and has a larger and longer-lasting effect than the existing China EPUs. Moreover, there are noteworthy heterogeneous effects among firms and periods. Specifically, we find a stronger effect of XiEPU on manufacturing sectors, a weaker effect on state-owned enterprises, and a stronger effect in the second term of Xi Jinping’s presidential tenure after November 2017.
    Date: 2022–08
  4. By: Hanhui Guan; Nuno Palma; Meng Wu
    Abstract: Following the Mongol invasion of China, the Yuan (1260–1368) dynasty was the first political regime in history able to deploy paper money as the sole legal tender. Drawing on a new dataset on money issues, imperial grants, and prices, we show that a silver standard initially consolidated the Chinese currency market. However, persistent fiscal pressures eventually compelled rulers to ease the monetary standard, and a fiat standard was adopted, leading to inflation levels which doubled the price level in less than a decade. We show that military pressure generated fiscal demands which led to over-issuance, and we reject the role of excessive imperial grants in triggering the over-issue of money.
    Keywords: Paper money; silver standard; fiat money; Yuan China
    JEL: E42 N15 N45
    Date: 2022–09
  5. By: Thi Hang Bahn; Mauro Caselli
    Abstract: This paper analyses the effect of rising competition from Chinese exports on the skill premium of Mexican plants. Using detailed product-plant-level production data from Mexico and bilateral product-level trade data for 1994-2007, we provide evidence that Mexican plants reduce their skill premium in response to increasing competition from Chinese exports, and the effect is more pronounced among non-exporting plants. Thus, we develop a model linking competition and wage inequality between skilled and unskilled workers by introducing these two types of labour to a model with heterogeneous firms and quality differentiation. Our model predicts that tougher competition leads plants to downgrade quality, which induces a decline in the wage difference between skilled and unskilled workers. We investigate this hypothesis empirically by analysing the effect of Chinese competition on the product quality of Mexican plants. Consistent with the fall in the skill premium, we document a downgrading impact of China’s rise on Mexican plants’ product quality and this quality downgrading is less intense for products sold in the foreign market. These findings provide empirical support for the predictions of our model.
    Date: 2022
  6. By: Hanming Fang (University of Pennsylvania and the NBER); Long Wang (Fudan University); Yang Yang (The Chinese University of Hong Kong)
    Abstract: We provide new evidence on the causal effects of housing wealth on consumer behavior.To overcome the empirical challenge of non-random housing wealth changes, we exploit the unexpected announcement of China's newest national-level new area - Xiong'an New Area - on April 1, 2017 as an exogenous shock to housing prices. We use a proprietary dataset of individual-level online consumption from the largest e-commerce company in China to measure various aspects of consumer behavior, such as consumption patterns, purchase hesitation, tolerance to unsatisfied products, and shirking (proxied by making online purchases during work hours). We explore the underlying mechanisms through which the housing shock a effects consumer behavior; in particular, we attempt to disentangle the realizable and unrealizable housing wealth effects.
    Keywords: Housing price, wealth effects, consumer behavior, online consumption
    JEL: D1 R3 L81
    Date: 2022–09–07
  7. By: Liu, Lisa Yao; Lu, Shirley
    Abstract: We explore how information exposure, specifically information transmission within organizations, facilitates companies' roles as corporate citizens. We study whether US firms' business networks with China and Italy become their information advantage, and examine whether firms use relevant information to mitigate the negative shocks of COVID-19. We start by validating our measurement of information exposure. Next, we find that a higher number of work-from-home ("WFH") policies, as evidenced by a higher stay-at-home ratio, are implemented in areas with more information-exposure companies, even before local governments impose a lockdown. To further demonstrate corporate citizenship, we document firms' positive social impact-lower COVID-19 growth and an influence on other firms' WFH policies-and show suggestive evidence on firms' social motives.
    Keywords: Information exposure,information transmission,business networks,COVID,corporate citizenship
    JEL: D83 D85 G3 M14
    Date: 2021
  8. By: Maihold, Günther
    Abstract: A succession of disruptions to world trade have put the reorganisation of inter­national supply chains high on the political agenda. The difficulties began with the trade war between the United States and China, deepened with the Covid-19 pan­demic and culminated in the sanctions and export controls imposed by Western countries after Russia's invasion of Ukraine. The increased risk of interruption of supplies forces businesses today to price in political factors and respond to political demands. However, realistic timeframes for reconfiguring supply chains are largely incompatible with the rapid responses expected by political decision-makers, especially where chains are long and complex. A process needs to be developed for dealing more effectively with political supply chains risks. It should be transparent for all involved.
    Date: 2022

This nep-cna issue is ©2022 by Zheng Fang. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.