nep-cna New Economics Papers
on China
Issue of 2023‒02‒27
ten papers chosen by
Zheng Fang
Ohio State University

  1. Financing Innovation with Innovation By Zhiyuan Chen; Minjie Deng; Min Fang
  2. Too cynical: why the stock market in China dimissed initial anticorruption signals By Wang, Xiaonan; Wang, Yan
  3. Place-based Land Policy and Spatial Misallocation: Theory and Evidence from China By Min Fang; Libin Han; Zibin Huang; Ming Lu; Li Zhang
  4. Politicization of the 5G Rollout: Litigation Way for Huawei? By Bogdanova, Iryna
  5. Is There Hope after Despair? An Analysis of Trust among China's Cultural Revolution Survivors By Tani, Massimiliano; Cheng, Zhiming; Torgler, Benno
  6. The Value of a Green Card in the U.S. Marriage Market: A Tale of Chain Migration? By Bansak, Cynthia; Dziadula, Eva; Zavodny, Madeline
  7. A Study of Supply Chains of Korean Firms in China Based on Business Survey Data By Kim, Dongsoo; Park, Jaegon; Sakong, Mok; Cho, Eun Kyo; Park, Kayoung; Park, Sohee; Han, Jung Min
  8. Who Stands on the Shoulders of Chinese (Scientific) Giants? Evidence from Chemistry By Shumin Qiu; Claudia Steinwender; Pierre Azoulay
  9. China's Digital Twin City and its Implications By Park, Kayoung
  10. Seasonality of flights in China: Spatial heterogeneity and its determinants By Jiaoe Wang; Fan Xiao; Frédéric Dobruszkes; Wei Wang

  1. By: Zhiyuan Chen (School of Business, Renmin University of China); Minjie Deng (Department of Economics, Simon Fraser University); Min Fang (Department of Economics, University of Florida)
    Abstract: This paper documents that firms are increasingly financing innovation using their stock of innovation, measured as patents. We refer to this behavior as financing innovation with in- novation. Drawing on patent collateral data from both the US and China, we first show that (1) in both countries, the total number and share of patents pledged as collateral have been rising steadily, (2) Chinese firms employ patents as collateral on a smaller scale and with a lower intensity than US firms, (3) firms increase their borrowing and innovation after they start to use patent collateral. We then construct a heterogeneous firm general equilibrium model featuring idiosyncratic productivity risk, innovation capital investment, and borrow- ing constrained by patent collateral. The model emphasizes two barriers that hinder the use of patent collateral: high inspection costs and low liquidation values of patent assets. We parameterize the model to firm-level panel data in the US and China and find that both barriers are significantly more severe in China than in the US. Finally, counterfactual analyses show that the gains in innovation, output, and welfare from reducing the inspection costs in China to the US level are substantial, moreso than enhancing the liquidation value of patent assets.
    JEL: E22 G32 O31 O33
    Date: 2022–09
  2. By: Wang, Xiaonan; Wang, Yan
    Abstract: Political leaders in China regularly launch anti-corruption campaigns to win public support. But how are anti-corruption signals perceived? We use event study to examine the case of Xi Jinping’s anti-corruption campaign – an unprecedented effort in China to fight corruption. Contrary to expectations, we find that for the firms with connected officials later investigated, the initial anti-corruption signals – speeches from the top leadership and earlier crackdowns on other senior officials – did not decrease their stock prices. We argue that the perceived high costs of following through and repeated campaigns in the past paradoxically nurtured cynicism. We exploit the case of Zhou Yongkang and Ling Jihua – the two officials who were alleged to be involved in the power struggle and whose downfall had circulated widely since 2012. We find that when the targets of earlier crackdowns were connected to Zhou or Ling, the stock prices of the firms went down only if their connected and later investigated officials were in the same faction; the stock prices of the other firms, however, went up. We interpret the results as investors’ misperceptions of the campaign in the beginning. Our findings suggest that even real efforts in campaign-style enforcement can be dismissed.
    Keywords: anti-corruption campaign; campaign-style enforcement; event study; stock market
    JEL: F3 G3
    Date: 2022
  3. By: Min Fang (Department of Economics, University of Florida); Libin Han (Dongbei University of Finance and Economics); Zibin Huang (Shanghai University of Finance and Economics); Ming Lu (Shanghai Jiaotong University); Li Zhang (Sun Yat-Sen University)
    Abstract: Place-based land policies may create spatial misallocation. We investigate a major policy in China that aims to reduce regional development gaps by distributing more urban construction land quotas to underdeveloped inland regions. We first show causal evidence that this policy decreased firm-level TFP in more developed eastern regions relative to inland regions. We then build a spatial equilibrium model with migration, land constraints, and agglomeration. The model reveals that this policy led to substantial losses in national TFP and output. It shrinks regional output gap but lowers incomes of workers from underdeveloped regions by hindering their migration to developed regions.
    JEL: O18 R58 E24 J61 R52
    Date: 2022–08
  4. By: Bogdanova, Iryna
    Abstract: Abstract The great-power rivalry between the United States and China, the European Union’s policy of technological sovereignty, as well as the nature and economic implications of the fifth-generation wireless (5G) set the context for the politicization of said technology. This politicization is reflected in the growing resistance to the participation of the Chinese technology giant Huawei Technologies Co., Ltd. in the 5G projects. As numerous states shore up legislation and administrative actions geared toward eliminating Huawei’s participation in their 5G networks, China has maintained a proactive posture and redoubled efforts to export Chinese 5G infrastructure. In its turn, Huawei, as the company bearing financial and reputational costs deriving from the prohibitions on its participation in the 5G rollout, seized the opportunity of calling into question the legality of such restrictions. To achieve this, the company initiated administrative proceedings and disputes at the domestic and international levels.
    Date: 2023–01–31
  5. By: Tani, Massimiliano (University of New South Wales); Cheng, Zhiming (University of New South Wales); Torgler, Benno (Queensland University of Technology)
    Abstract: We study the long-term effects of the Cultural Revolution, characterised by widespread violence, summary executions and chaos, on a set of trust outcomes among people surveyed by the China Survey in 2008. We find that the revolution, identified by cohort-specific exposure to excess deaths at the county level, has a significant long-term impact on trust. However, the effects differ according to the relationship considered. Overall, trust emerges as a binder between an individual and his/her friends and relatives, but as a divisive force between the same person and those with whom one may compete with (e.g., co-workers) and unknown or less known others (e.g., those living in the same town). As the revolution occurred more than four decades prior to the China Survey, the results do not support viewing the sole passing of time as an effective cure to recover from a prolonged traumatic experience.
    Keywords: trust, Cultural Revolution, inside-outside groups
    JEL: D3
    Date: 2023–01
  6. By: Bansak, Cynthia; Dziadula, Eva; Zavodny, Madeline
    Abstract: This study examines the impact of having a clear path to lawful permanent resident status, or a "green card, " and naturalized citizenship on marital status and spousal characteristics among Chinese immigrants in the United States. A series of U.S. policy changes in the early 1990s made all mainland Chinese immigrants already present in the country eligible for a green card. We examine the effect of those policy changes on Chinese immigrants' marriage market outcomes relative to other East Asian immigrants. Using 1990 and 2000 U.S. Census data, we find that the share of Chinese immigrants who are married increased after they became automatically eligible for a green card. In particular, highly educated Chinese immigrants became relatively more likely to be married with a spouse living with them and relatively less likely to be married with a spouse living elsewhere. This pattern suggests that some Chinese spouses immigrated after their husband or wife received legal status, or spousal chain migration occurred. We also find that highly educated Chinese immigrants benefited in the marriage market in terms of spousal education and earnings, but less-educated Chinese immigrants did not. Meanwhile, less-educated Chinese-born women became relatively more likely to marry a U.S. native.
    Keywords: immigration, marriage markets, assortative matching, legal status, China
    JEL: J12 J15 K37
    Date: 2023
  7. By: Kim, Dongsoo (Korea Institute for Industrial Economics and Trade); Park, Jaegon (Korea Institute for Industrial Economics and Trade); Sakong, Mok (Korea Institute for Industrial Economics and Trade); Cho, Eun Kyo (Korea Institute for Industrial Economics and Trade); Park, Kayoung (Korea Institute for Industrial Economics and Trade); Park, Sohee (Korea Institute for Industrial Economics and Trade); Han, Jung Min (Korea Institute for Industrial Economics and Trade)
    Abstract: The purpose of this study is to determine the business conditions of Korean companies in China. For this, a business survey was conducted from October to November 2020 by the Korean Institute for Industrial Economics and Trade (KIET) and the Korean Chamber of Commerce in China. The scale of Korean direct investment in China as well as Korea-China trade has increased rapidly over 28 years since the normalization of Sino-Korean diplomatic relations, but it is necessary to gather basic statistics on Korean enterprises in China in the mid- to long-term. This survey on the business environment and actual conditions of Korean enterprises shall be regularly conducted to establish basic facts and future changes in the business environment. The behavior of Korean companies shall also be studied. The Korea Institute of Industrial Economics and Trade organized a survey on the business environment and actual conditions of Chinese enterprises; the Beijing office of the Korean Chamber of Commerce was in charge of the survey as co-organizer. KIET planned and conducted the survey together with the Korean Chamber of Commerce in China. The survey is divided into written surveys and in-depth telephone surveys.
    Keywords: business conditions; employment; China; Korea; business survey; business environment
    JEL: D22 L10 L25
    Date: 2021–04–01
  8. 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.
    Keywords: research and development, economics of science, innovation, international spillovers
    JEL: I23 O30 O35
    Date: 2023
  9. By: Park, Kayoung (Korea Institute for Industrial Economics and Trade)
    Abstract: The construction of new infrastructure by the Chinese government promotes the development of digital twin city. The digital twin city is an important component of the new infrastructure, and the construction of the new infrastructure accelerates the emergence of the digital twin city. New infrastructure is part of China’s new development strategy and is expected to help drive the new Chinese economy, especially in sectors like new consumption, new manufacturing and new services. Many local authorities have announced related policies, and some policies include provisions for digital twin city. Along with a set of policies, the technologies supporting digital twin city such as 5G, the Internet of Things (IoT), edge computing, cloud computing and AI are expected to mature. This paper explores the concept and current status of China’s digital twin city, which are rapidly developing in recent years, and describe the implications they carry.
    Keywords: China; digital twin; urban economics; urban infrastructure
    JEL: O21 O53 R11
    Date: 2021–06–01
  10. By: Jiaoe Wang; Fan Xiao; Frédéric Dobruszkes; Wei Wang
    Abstract: Seasonality is an essential issue for service industries but lacks the attention of most transport scholars. To close this gap, this study explored the spatial heterogeneity and determinants of flight seasonality from a supply-side perspective, using the monthly flights of 222 airports in China during 2018 as a sample. The following conclusions were drawn. First, domestic flights in China face seasonality due to the country's vast territory and diverse natural environment. Second, from an airport perspective, seasonality is high in small airports serving remote places and in cities that are tourism destinations. Third, from a route perspective, feeder routes in the air transport network of China face higher seasonality when compared to trunk routes. Finally, airport size and a mix of natural landscape factors shape domestic flight seasonality at the national level. At the local level, most factors (e.g. airport size and temperature) are more evident in the northwest region.
    Keywords: Air transport; Seasonality; Flight; Airport; Associating factors
    Date: 2023–01–01

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