nep-cna New Economics Papers
on China
Issue of 2023‒01‒23
eight papers chosen by
Zheng Fang
Ohio State University

  1. Tournament-Style Political Competition and Local Protectionism: Theory and Evidence from China By Hanming Fang; Ming Li; Zenan Wu
  2. The Morbidity Costs of Air Pollution through the Lens of Health Spending in China By Zhang, Xin; Zhang, Xun; Liu, Yuehua; Zhao, Xintong; Chen, Xi
  3. Structural Changes in Korea-China Trade and Policy Implications By Kim, Dongsoo; Cheon, Gahyeon
  4. Who Stands on the Shoulders of Chinese (Scientific) Giants? Evidence from Chemistry By Shumin Qiu; Claudia Steinwender; Pierre Azoulay
  5. Supply Shocks in Supply Chains: Evidence from the Early Lockdown in China By Raphael Lafrogne-Joussier; Julien Martin; Isabelle Mejean
  6. State-to-state Trust in Post-leadership Change: Case Study of China-Japan Relations, 2009-2019 By Kong, NGUYEN To Hong
  7. Global Supply Chain Pressure Index: The China Factor By Ozge Akinci; Gianluca Benigno; Hunter L. Clark; William Cross-Bermingham; Ethan Nourbash
  8. Asia's push for monetary alternatives By Noland, Marcus

  1. By: Hanming Fang; Ming Li; Zenan Wu
    Abstract: We argue that inter-jurisdictional competition in a regionally decentralized authoritarian regime distorts local politicians’ incentives in resource allocation among firms from their own city and a competing city. We develop a tournament model of project selection that captures the driving forces of local protectionism. The model robustly predicts that the joint presence of regional spillover and the incentive for political competition leads to biased resource allocations against the competing regions. Combining several unique data sets, we test our model predictions in the context of government procurement allocation and firms' equity investment across Chinese cities. We find that, first, when local politicians are in more intensive political competition, they allocate less government procurement contracts to firms in the competing city; second, local firms, especially local SOEs, internalize the local politicians’ career concerns and invest less in the competing cities. Our paper provides a political economy explanation for inefficient local protectionism in an autocracy incentivized by tournament-style political competition.
    JEL: H11 H70 P30
    Date: 2022–12
  2. By: Zhang, Xin (Beijing Normal University); Zhang, Xun (Beijing Normal University); Liu, Yuehua (Tsinghua University); Zhao, Xintong (Renmin University of China); Chen, Xi (Yale University)
    Abstract: This study is one of the first investigating the causal evidence of the morbidity costs of fine particulates (PM2.5) for all age cohorts in a developing country, using individual-level health spending data from a basic medical insurance program in Wuhan, China. Our instrumental variable (IV) approach uses thermal inversion to address potential endogeneity in PM2.5 concentrations and shows that PM2.5 imposes a significant impact on healthcare expenditures. The 2SLS estimates suggest that a 10 μg/m3 reduction in monthly average PM2.5 leads to a 2.36% decrease in the value of health spending and a 0.79% decline in the number of transactions in pharmacies and healthcare facilities. Also, this effect, largely driven by the increased spending in pharmacies, is more salient for males and children, as well as middle-aged and older adults. Moreover, our estimates may provide a lower bound to individuals' willingness to pay, amounting to CNY 43.87 (or USD 7.09) per capita per year for a 10 μg/m3 reduction in PM2.5.
    Keywords: air quality, health spending, willingness to pay, China
    JEL: Q51 Q53 I11 I31
    Date: 2022–12
  3. By: Kim, Dongsoo (Korea Institute for Industrial Economics and Trade); Cheon, Gahyeon (Korea Institute for Industrial Economics and Trade)
    Abstract: Korea and China established formal relations 30 years ago. Vibrant bilateral trade has significantly contributed to the economic growth of both nations. However, a remarkable turning point has occurred recently: Bilateral trade seemed to balance out due to China’s lockdown policy and Korea’s stronger corporate competitiveness, but Korea has posted a trade deficit with China since last year for all goods except semiconductors. Such a deficit could signal the beginning of structural change, though the figure over the last four months might be a temporary phenomenon. Over the last 30 years, high-tech industries have played an increasingly important role in bilateral trade in both exports and imports. In exports, semiconductors, petrochemicals, and displays have leading positions but in imports, Korean manufacturing is highly dependent on China, which is expanding into other industries. That means Korea is increasingly reliant on components or raw materials from China, leading to greater risk factors. To effectively respond to the short-term deficit and mid- to long-term structural changes in trade with China, Korea must diversify its import partners, even if doing so is likely to incur high costs in the short term. In the mid-term, the country should develop overseas resources and change its strategic approach to the global market, which should be framed as economic blocs, rather than as a single entity. Over the long term, Korea must strengthen its industrial competitiveness and foster high-tech human resources to secure key technologies to maintain its comparative advantage over China. For the first time in its modern trade with China, Korea recorded a trade deficit for four consecutive months, representing reversal major reversal of roles: Korea had in the past recorded enormous trade surpluses in the tens of billions of USD. Thus looking at the trade deficit with China provides an opportunity to consider changes in the bilateral trade balance, the reasons for these changes, and potential responses to them.
    Keywords: Bilateral Trade; Trade Deficit with China; China’s Lockdown Policy
    JEL: F13 O53
    Date: 2022–09–29
  4. By: Shumin Qiu; Claudia Steinwender; Pierre Azoulay
    Abstract: In recent decades, Chinese researchers have become preeminent contributors to the scientific enterprise, as reflected by the number of publications originating from Chinese research institutions. China's rise in science has the potential to push forward the global frontier, but mere production of knowledge does not guarantee that others are able to build on it. In this manuscript, we study how fertile Chinese research is, as measured by citations. Using publication and citation data for elite Chemistry researchers, we show that Chinese authored articles receive only half the citations from the US compared to articles from other countries. We show that even after carefully controlling for the "quality" of Chinese research, Chinese PIs' articles receive 28% fewer citations from US researchers. Our results imply that US researchers do not build as readily on the work of Chinese researchers, relative to the work of other foreign scientists, even in a setting where Chinese scientists have long excelled.
    JEL: I23 O30 O53
    Date: 2022–12
  5. By: Raphael Lafrogne-Joussier (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Julien Martin (UQAM - Université du Québec à Montréal = University of Québec in Montréal, CEPR - Center for Economic Policy Research - CEPR); Isabelle Mejean (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: How do firms in global value chains react to input shortages? We examine micro-level adjustments to supply chain shocks, building on the Covid-19 pandemic as a case study. French firms sourcing inputs from China just before the early lockdown in the country experienced a relative drop in imports that increases from February to April 2020. This shock on input purchases transmits to the rest of the supply chain through exposed firm's domestic and export sales. Between February and June, firms exposed to the Chinese early lockdown experienced a 5.5% drop in domestic sales and a 5% drop in exports, in relative terms with respect to comparable non-exposed firms. The drop in foreign sales is entirely attributable to a lower volume of exports driven by a temporary withdrawal from occasional markets. We then dig into the heterogeneity of the transmission across treated firms. Whereas the ex-ante geographic diversification of inputs does not seem to mitigate the impact of the shock, firms with relatively high inventories have been able to absorb the supply shock better.
    Keywords: Covid-19 pandemic, Supply chain disruptions, Transmission of shocks, Global value chains
    Date: 2022–03–22
  6. By: Kong, NGUYEN To Hong
    Abstract: The concept of trust underlies an important part of various theories in International Relations, but is yet to take roots in the mainstream research. To fill this gap in the literature, this study first reviews the dominant theories on trust in sociology and psychology, and then identifies the three main approaches to trust in world politics. In order to find the factors affecting state-to-state trust, the study tests the effects of leadership turnovers on the formation of trust or mistrust between two states. In particular, the empirical research focuses on the relations between China and Japan under different leaderships from 2009 and 2019. It uses an original dataset of high-level Sino-Japanese diplomatic activities and talk content from 2009 to 2019, as extracted from the Chinese newspaper People’s Daily as well as the websites of the ministries of foreign affairs of both China and Japan. The findings highlight how interstate mistrust is likely to endure different leadership changes whereas interstate trust is unlikely to be inherited so easily between leaderships. Trust between China and Japan is found to be highly contextual and dependent on the core state interests and the political actors involved. Mutual trust, if established, can move the relationship beyond the commercial realm and into more strategic area. The study contributes not just empirical evidences on the role of trust in interstate interactions but also a systematic method to assessing such interactions.
    Date: 2021–02–09
  7. By: Ozge Akinci; Gianluca Benigno; Hunter L. Clark; William Cross-Bermingham; Ethan Nourbash
    Abstract: In a January 2022 post, we first presented the Global Supply Chain Pressure Index (GSCPI), a parsimonious global measure designed to capture supply chain disruptions using a range of indicators. In this post, we review GSCPI readings through December 2022, and then briefly discuss the drivers of recent moves in the index. While supply chain disruptions have significantly diminished over the course of 2022, the reversion of the index toward a normal historical range has paused over the past three months. Our analysis attributes the recent pause largely to the pandemic in China amid an easing of “Zero COVID” policies.
    Keywords: Global Supply Chain Pressure Index (GSCPI); COVID-19; COVID-19 pandemic; China; imbalances
    JEL: E31 F0
    Date: 2023–01–06
  8. By: Noland, Marcus
    Abstract: For the last quarter century, Asia has been seeking greater autonomy within the existing international monetary system. While the region has had the resources to go its own way, intraregional rivalries, and a reluctance to damage ties to the US and the International Monetary Fund, have put a damper on regional initiatives. Now the ascendency of China offers a path toward greater regional autonomy in monetary affairs. Asia, led by China, has been playing a two-track strategy pushing for greater influence within the existing global institutions, while developing its own parallel institutions such as the Chiang Mai Initiative Multilateralization, the Belt and Road Initiative, and the Asian Infrastructure Investment Bank. Use of the Chinese renminbi will likely grow as a trade invoicing currency but expanded use of the renminbi as a reserve currency is more uncertain. It is possible that the dollar-centered international financial system could evolve into a multipolar system with multiple currencies playing key roles.
    Keywords: international monetary system; Asia; China; renminbi
    JEL: F33 F53 N25
    Date: 2022–12–01

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