nep-cna New Economics Papers
on China
Issue of 2022‒12‒19
nine papers chosen by
Zheng Fang
Ohio State University

  1. China's diaspora policy under Xi Jinping: Content, limits and challenges By Schäfer, Carsten
  2. What Happens in China Does Not Stay in China By William Barcelona; Danilo Cascaldi-Garcia; Jasper Hoek; Eva Van Leemput
  3. Does "Made in China 2025" Work for China? Evidence from Chinese Listed Firms By Lee G. Branstetter; Guangwei Li
  4. Trains of Thought: High-Speed Rail and Innovation in China By Georgios TSIACHTSIRAS; Deyun YIN; Ernest MIGUELEZ; Rosina MORENO
  5. Modeling semiconductor export restrictions and the US-China trade conflict By Funke, Michael; Wende, Adrian
  6. China's aid exports to Africa and the COVID-19 pandemic: How much? Where? What? By Fuchs, Andreas; Kaplan, Lennart; Kis-Katos, Krisztina; Schmidt, Sebastian S.; Turbanisch, Felix; Wang, Feicheng
  7. Will China's three-child policy defuse the demographic time bomb? By Kuhn, Britta; Neusius, Thomas
  8. Exploiting Complementarity of Carbon Pricing Instruments for Low-Carbon Development in the People’s Republic of China By Wu, Jie; Fan, Ying; Timilsina, Govinda; Xia, Yan
  9. Consumption Loan Augmented Divisia Monetary Index and China Monetary Aggregation By William Barnett; Kun He; Jingtong He

  1. By: Schäfer, Carsten
    Abstract: China estimates the number of people of Chinese origin outside the People's Republic to be 60 million. Beijing considers them all to be nationals of China, regardless of their citizenship. Xi Jinping views overseas Chinese as playing an 'irreplaceable role' in China's rise as a world power. Beijing is working hard to harness overseas Chinese resources for its own goals in the fields of economics, science and technology, as well as diplomacy and soft power. Beijing also expects people of Chinese origin in Germany to deepen rela­tions between China and Germany. But not only that: As 'unofficial ambassadors', they are also expected to spread China's narratives to the German public, defend China's 'core interests', and help with the trans­fer of knowledge and technology to China. Nevertheless, there are limits to China's diaspora policy: Chinese migrants' reactions to China's ambitions are heterogeneous. They range from wil­lingness to cooperate to disinterest or open rejection. German actors should develop a comprehensive understanding of Chinese diaspora policy and the goals and practices associated with it. Just as in Beijing, diaspora policy should be perceived as an important component of Chinese foreign policy.Only on this basis can answers to China's ambitions be found wherever German interests, legal principles, or social values are affected - without at the same time exposing people of Chinese origin to general suspicion. German actors should also expand their engagement in communities of people with a Chinese migration background instead of leaving this field to Chinese authorities.
    Keywords: China,diaspora,overseas Chinese,Xi Jinping,China-Germany relations,Overseas Chinese Affairs Office of the State Council (OCAO),Communist Party of China (CPC)
    Date: 2022
  2. By: William Barcelona; Danilo Cascaldi-Garcia; Jasper Hoek; Eva Van Leemput
    Abstract: Spillovers from China to global financial markets have been found to be small owing to China's limited integration in the global financial system. In this paper, however, we provide evidence that China constitutes an important driver of the global financial cycle. We argue that because of China's importance for global consumption, stronger Chinese growth raises global growth prospects, inducing an increase in global risk sentiment and an expansion in global asset prices and global credit. Two contributions are key to this finding: (1) We construct a measure of China's credit impulse to identify Chinese policy-induced demand shocks. Our approach takes advantage of the fact that a primary tool of China's stabilization policy-encompassing monetary, fiscal, and regulatory policies-is controlling the amount of credit in the economy. Without China's credit impulse, it is difficult to discern global financial spillovers; (2) We estimate an alternative measure of Chinese GDP growth that captures its business cycle given data concerns about the smoothness of official GDP data. Without China's alternative GDP measure, it is difficult to attribute any global cycle movements to economic developments in China.
    Keywords: China; Growth; Credit Impulse; Global Financial Cycle; Global Business Cycle; Global Risk Sentiment; Commodity Prices
    JEL: C52 E50 F44
    Date: 2022–11–25
  3. By: Lee G. Branstetter; Guangwei Li
    Abstract: Rising concern over the impact of Chinese industrial policy has led to severe trade tensions between China and some of its major trading partners. In recent years, foreign criticism has increasingly focused on the so-called "Made in China 2025" initiative. In this paper, we use information extracted from Chinese listed firms' financial reports and a difference-in-differences approach to examine how the "Made in China 2025" policy initiative has impacted firms' receipt of subsidies, R&D expenditure, patenting, productivity, and profitability. We find that while more innovation promotion subsidies seem to flow into the listed firms targeted by the policy, we see little statistical evidence of productivity improvement or increases in R&D expenditure, patenting and profitability. This paper suggests that the “Made in China 2025” initiative may have not yet achieved its target goals.
    JEL: O25 O32
    Date: 2022–11
  4. By: Georgios TSIACHTSIRAS; Deyun YIN; Ernest MIGUELEZ; Rosina MORENO
    Abstract: This paper explores the effect of the High Speed Rail (HSR) network expansion on local innovation in China during the period 2008-2016. Using exogenous variation arising from a novel instrument - courier’s stations during the Ming dynasty, we find solid evidence that the opening of a HSR station increases cities’ innovation activity. We also explore the role of inter-city technology diffusion as being behind the surge of local innovation. To do it, we compute least-cost paths between city-pairs, over time, based on the opening and speed of each HSR line, and obtain that an increase in a city’s connectivity to other cities specialized in a specific technological field, through the HSR network, increases the probability for the city to specialize in that same technological field. We interpret it as evidence of knowledge diffusion.
    Keywords: high speed rail, innovation, technology diffusion, patents, specialization
    JEL: R40 O18 O30 O33
    Date: 2022
  5. By: Funke, Michael; Wende, Adrian
    Abstract: The semiconductor industry stands at the center of the intensifying Sino-American trade conflict. Employing a multi-country, multi-sector general equilibrium modeling framework with imperfect competition and heterogeneous firms, we perform qualitative and quantitative analyses of protectionist semiconductor measures. The paper offers two innovations in assessing the macroeconomic impact of current trade restrictions in the semiconductor industry model. First, our model of the semiconductor industry takes into account semiconductor varieties at different technological levels with different substitutability. Second, we model trade restrictions using a novel approach to export bans on semiconductor varieties that is consistent with US policy. Our simulation results suggest that the trade restrictions imposed by the US and its allies consistently lead to a decline in Chinese GDP and welfare. The US also loses, but to a lesser extent. The effect of trade diversion favors the rest of the world. Our simulations further confirm that the US semiconductor industry is likely to be harmed by the restrictions, while China's could be strengthened.
    Keywords: International trade,firm heterogeneity,semiconductors,United States,China
    JEL: F12 F13 F41
    Date: 2022
  6. By: Fuchs, Andreas; Kaplan, Lennart; Kis-Katos, Krisztina; Schmidt, Sebastian S.; Turbanisch, Felix; Wang, Feicheng
    Abstract: China's aid to Africa receives significant attention from policymakers, development practitioners, and observers worldwide. This is even more the case since the outbreak of the coronavirus pandemic, given China's importance as a donor of vaccines, ventilators, face masks, disinfectants, and other medical supplies. This PEGNet Policy Brief describes the general patterns of Beijing's so-called 'mask diplomacy' and 'vaccine diplomacy' compared to China's pre-pandemic aid exports. First, we find that China's average monthly aid exports to Africa did not increase after the pandemic outbreak (in contrast to those to the rest of the world). Second, we observe a shift towards medical aid at the expense of other aid goods after the pandemic outbreak. Chinese non-medical aid to Africa was 26.6% below its prepandemic (2017-2019) level. Third, we find significant shifts in the cross-country distribution of Chinese aid exports, creating both so-called aid darlings (e.g., Ethiopia) and aid orphans (e.g., Côte d'Ivoire) across the African continent.
    Date: 2022
  7. By: Kuhn, Britta; Neusius, Thomas
    Abstract: China is undergoing a particularly fast demographic transition. Accelerated through decades of political restrictions on family planning, the median age is rising and there is a growing share of retirees, while labour force potential is declining. Faced with dire consequences for both economic growth and wealth distribution, the government has gradually relaxed its one-child policy. Will this policy shift succeed? Our study simulates China's old-age dependency ratio and total dependency ratio until the end of the century, assuming total fertility rates between 1.0 and 2.0 with constant and increasing life expectancy. It shows that both ratios would substantially increase even in the best case. Therefore, China urgently needs reforms beyond family policy.
    Keywords: Three-child policy,total fertility rate,demographic dividend,old-age dependency ratio,total dependency ratio,pension reform
    Date: 2022
  8. By: Wu, Jie (Asian Development Bank Institute); Fan, Ying (Asian Development Bank Institute); Timilsina, Govinda (Asian Development Bank Institute); Xia, Yan (Asian Development Bank Institute)
    Abstract: There is an urgent need to mitigate global warming for all countries around the world. The People’s Republic of China (PRC) has announced a series of energy and climate policy targets in contributing its efforts toward meeting the ambitious goals in the Paris Agreement and the newly pledged carbon-neutral target. While carbon pricing has been considered the first-best policy worldwide to combat climate change, it may not be sufficient for meeting the multiple goals in the PRC, unless it is combined with complementary policies. In an attempt to explore whether this is the case, we investigate whether a single cost-effective instrument is adequate for developing a low-carbon economy in the PRC or whether a policy portfolio would be more effective. We compare the potential impacts of an emissions trading scheme (ETS), a carbon tax (CT), and a combination of an ETS and a CT. In addition, we further evaluate the economic impacts of two different policy portfolios by combining these approaches with subsidies for energy-efficient vehicles. Our results show that, while a nationwide ETS certainly has advantages over a CT regarding GDP losses, it also performs better in promoting the transfer of labor and capital from the eastern regions to central and western regions. However, a single ETS is less effective in regard to industrial structure adjustments and emission reductions in sectors that are not included in the ETS, such as the transportation sector. The results also show that a policy portfolio could achieve the same emissions reduction target with more moderate impacts. Therefore, it is suggested that implementation of a CT for sectors that are excluded from the ETS or a subsidy for energy-efficient vehicles could be considered as supplementary policies for the ETS in the PRC.
    Keywords: carbon pricing; carbon tax; emissions trading scheme; computable general equilibrium model
    JEL: C68 O13 Q56
    Date: 2022–07
  9. By: William Barnett (Department of Economics, University of Kansas and Center for Financial Stability, New York City); Kun He (Department of Economics, University of Kansas); Jingtong He (School of Economics, Nankai University, Tianjin, China)
    Abstract: Simple sum monetary aggregates are based on accounting conventions and have no aggregation theoretic foundations in economic theory. In contrast, Divisia monetary aggregates are directly derived from aggregation and index number theory. Credit card services cannot be included in simple sum monetary aggregates, since accounting conventions cannot aggregate over assets and liabilities. But microeconomic aggregation theory aggregates over service flows not stocks, regardless of whether from assets or liabilities. As a result, it has recently been shown that Divisia monetary aggregates can be augmented to include credit card services and are available from the Center for Financial Stability in New York City. Other sources of consumer credit cannot be included in Divisia monetary aggregates for the United States, since other sources of consumer credit in the United States are linked to specific groups of consumer goods and hence violate the weak separability condition for existence of an aggregator function. However, China produces a unique opportunity to broaden the Divisia monetary aggregates, since sources of consumer credit, not limited to credit cards, are applicable to all consumption purchase and hence do not violate the existence condition for an aggregator function. We report initial results with a broader Chinese Divisia monetary aggregate including not only credit card services but also other broadly acceptable consumer loan services.
    Keywords: Divisia Monetary Aggregates, Consumption Loans, Chinese Monetary Aggregates.
    JEL: C32 C53 E31 E47 E51
    Date: 2022–11

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