nep-cna New Economics Papers
on China
Issue of 2023‒04‒10
twelve papers chosen by
Zheng Fang
Ohio State University

  1. A Bamboo Curtain: The Grim Australian Consequences of China Conflict By Rod Tyers; Yixiao Zhou
  2. China at the technological frontier By Antonin Bergeaud; Cyril Verluise
  3. Consumed in China: Rebalancing China's demand and Chinese imports By Simola, Heli
  4. The Foreign Exchange Policy of China – Is the Country a “Currency Manipulator”? By Zhelev, Paskal
  5. The Impact of University Patent Ownership on Innovation and Commercialization By Jun Wang; Yi Qian
  6. The Implementation of Central Bank Policy in China: The Roles of Commercial Bank Ownership and CEO Faction Membership By Michel Antoine Habib; Yushi Peng; Yanjie Wang; Zexi Wang
  7. The Internationalization of China’s Equity Markets By Mr. Maria Soledad Martinez Peria; Mr. Sergio L. Schmukler; Jasmine Xiao; Juan J. Cortina
  8. How does the exchange-rate regime affect dual-listed share price parity? Evidence from China’s A- and H-share markets By Joseph K.W. Fung; Eric Girardin; Jian Hua
  9. Counting missing women: A reconciliation of the "flow measure" and the "stock measure" By Ebert, Cara; Klasen, Stephan; Vollmer, Sebastian
  10. Regulation of petrol and diesel prices and their effects on GDP growth: evidence from China By Brueckner, Marcus; Hong, Haidi; Vespignani, Joaquin
  11. Resolving financial distress where property rights are not clearly defined: The case of China By Franks, Julian R.; Miao, Meng; Sussman, Oren
  12. Technical Founders, Digital Transformation and Corporate Technological Innovation: Empirical Evidence from Listed Companies in China’s STAR Market By Zhi-Guang Li; Yanrui Wu; Yao-Kuang Li

  1. By: Rod Tyers (Business School, University of Western Australia and Centre for Applied Macroeconomic Analysis (CAMA), Australian National University); Yixiao Zhou (Crawford School of Public Policy, Centre for Applied Macroeconomic Analysis (CAMA), Australian National University)
    Abstract: The Australian economy has benefited from several decades of extraordinary Chinese expansion. Slowing growth has diminished these gains and geopolitics between China and the Western democracies has seen restricted commerce between China and Australia. We use a global economic model to assess the consequences were these tensions to restrict all inter-state commerce. Bilaterally, effects on Australia are large and proportionally larger than those on China. A “bamboo curtain”, restricting all commerce between Western democracies and other regions, would see Australia’s welfare per capita impaired most and the US least because of differences in trade dependence.
    Keywords: Trade and financial blockade, general equilibrium analysis, China, Australia
    JEL: D33 E52 J11 O33
    Date: 2022
  2. By: Antonin Bergeaud; Cyril Verluise
    Abstract: The technology frontier that was dominated by the United States, Europe and Japan in the early 2000s is now much more polarised between the American and Chinese patent offices. Antonin Bergeaud and Cyril Verluise show that the gap in the quality of patents is also closing - and highlight potential barriers to continued technological innovation.
    Keywords: Technological change, innovation, China, USA, America
    Date: 2023–02–21
  3. By: Simola, Heli
    Abstract: The share of private consumption has long been small in the Chinese GDP. The share started to increase in the past decade, but the trend reversed with the covid-19 pandemic. Now as the Chinese economy reopens and recovers from covid restrictions, the share of consumption could return to a growing trend. This resumption of a longer-term trend could have important implications for global trade. Our simulations, which are based on recent international input-output data, suggest that the current shift in China's demand structure is likely to increase import demand for sectors such as the food industry, agriculture, textiles, and travel services. Sectors facing a demand slowdown include base metals, non-metallic minerals, and machinery and equipment.
    Keywords: China, imports, rebalancing, input-output
    Date: 2023
  4. By: Zhelev, Paskal
    Abstract: China’s exchange rate policy has been one of the most contentious economic issues in present times. The large open economy with a state-led development model has been often accused of deliberately keeping its currency undervalued, thereby conferring unfair competitive advantages to its exporters, and fuelling global imbalances. The experts’ opinions on that however are greatly divided. The paper’s main goal is to evaluate whether China has been manipulating the exchange rate of the RMB through its exchange rate policy over the last decade. Based on various indicators, the results show that there is no evidence of China engaging in currency manipulation to the detriment of its trading partners.
    Keywords: Renminbi (RMB), undervalued exchange rate, currency manipulation, foreign exchange reform.
    JEL: F31 F33 F50
    Date: 2022–09–20
  5. By: Jun Wang; Yi Qian
    Abstract: This paper contributes to the literature on innovation policies and institutional theory on conditions for effective institutional changes. The "three rights" reform of 26 universities and the mixed ownership reform of Southwest Jiaotong University are important explorations made by China in recent years to promote innovations and the commercialization of patents in universities. The two reforms have adopted different models in the allocation of university patent ownership. The former completely allocated the patent ownership to universities, while the latter allocated 70% of the patent ownership to the inventors. Based on Chinese patent data and university statistical data, we empirically test the effects of these two university-patent ownership allocation models on innovations and the commercialization of patents. We find that the institutional environment caused unexpected effects in both reform models. The "three rights" reform has a significant impact on patent-licensing in 26 universities. The mixed ownership reform has significantly increased the number of patent transfers and patent applications of Southwest Jiaotong University, yet has tilted R&D toward experimental research with relatively low creativity. The findings yield broader implications for organization and innovation.
    JEL: K11 O30 O32 O38
    Date: 2023–03
  6. By: Michel Antoine Habib (University of Zurich; Centre for Economic Policy Research (CEPR)); Yushi Peng (London School of Economics and Political Science); Yanjie Wang (University of Zurich); Zexi Wang (Lancaster University Management School)
    Abstract: We examine the roles of bank ownership and CEO political faction membership in facilitating or hindering the implementation of central bank policy in China. Specifically, we examine the response of China’s commercial banks to People’s Bank of China (PBC) guidelines intended to decrease mortgage lending and to slow down the rise in residential property prices. We find that both bank ownership and faction membership matter. Central government-owned banks whose CEOs are members of the specialist finance faction within the Chinese Communist Party (CCP) respond most strongly to PBC guidance, whereas provincial or city government-owned banks whose CEOs are members of a generalist faction respond least strongly. The implementation of PBC policy has real effects: in those cities where central government-owned banks with specialist CEOs constitute a larger percentage of total bank branches, house prices grew more slowly, as did the number of residential real estate transactions and the number of new listings.Where in contrast provincial and city government-owned banks with generalist CEOs dominate, the number of transactions grew faster; the rate of house price appreciation and the number of listings were however unaffected. We conclude that China’s different levels of government and the CCP’s different factions enjoy some discretion in responding to PBC guidance and that they exploit the discretion they are afforded to vary the strength of their response.
    Keywords: Government bank ownership, CEO political faction membership, Central bank policy, Window guidance, Mortgage lending, Real estate markets
    JEL: E58 G21 R30
    Date: 2023–02
  7. By: Mr. Maria Soledad Martinez Peria; Mr. Sergio L. Schmukler; Jasmine Xiao; Juan J. Cortina
    Abstract: China’s equity markets internationalization process started in the early 2000s but accelerated after 2012, when Chinese firms’ shares listed in Shanghai and Shenzhen gradually became available to international investors. This paper studies the effects of the post-2012 internationalization events by comparing the evolution of equity financing and investment activities for: (i) domestic listed firms relative to firms that already had access to international investors and (ii) domestic listed firms that were directly connected to international markets relative to those that were not. The paper finds large increases in financial and investment activities for domestic listed and for connected firms, with significant aggregate effects. The evidence also suggests the rise in firms’ equity issuances was primarily and initially financed by domestic investors. International investors’ portfolio holdings in Chinese equity markets and ownership in firms increased markedly only once Chinese firms’ locally issued shares became part of the MSCI Emerging Markets Index.
    Keywords: equity financing; equity market liberalization; firm investment; foreign investors; international investors; issuance activity; Stock Connect; portfolio holding; internationalization process; unconnected firm; China's equity markets; Stock markets; Stocks; Foreign corporations; Emerging and frontier financial markets; Market capitalization; Global
    Date: 2023–02–10
  8. By: Joseph K.W. Fung (Hong Kong Metropolitan University); Eric Girardin (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Jian Hua (AMU - Aix Marseille Université)
    Abstract: This paper examines the impact of exchange-rate regime change on the price disparity of China's dual-listed stocks. We use four years of synchronous intraday data of 26 pairs of dual-listed RMB-denominated A-shares and their corresponding HKD-denominated H-shares. The sample period covers the 2005 and 2008 changes in the exchange rate regime. During that time, the Chinese authorities strictly prohibited short selling of stocks and tightly regulated capital flows. In contrast to the existing general findings, we find that the law of one price can be strengthened for dual-listed stocks (DLSs) in segmented capital markets under a flexible exchange rate regime; the disparity between the DLSs is reduced under the managed float compared to the pegged regime. Moreover, we find that the magnitude of the H-share discount is positively related to the expected RMB appreciation under managed float; however, under the pegged regime the relationship is negative.
    Keywords: H-share discount, Dual-listed stocks, Market segmentation, Quasi arbitrage, Alternate exchange rate regime
    Date: 2022–12
  9. By: Ebert, Cara; Klasen, Stephan; Vollmer, Sebastian
    Abstract: Stock estimates' of missing women suggest that the problem is concentrated in South and East Asia and among young children. In contrast, `flow estimates' suggest that gender bias in mortality is much larger, is as severe among adults as it is among children in India and China, and is larger in Sub-Saharan Africa than in India and China. We show that the different stock and flow measure results rely on the choice of the reference standard for mortality and an incomplete correction for different disease environments in the flow measure. Alternative reference standards reconcile the results of the two measures.
    Keywords: Missing women, gender bias, mortality, disease, age, Sub-Saharan Africa, China, India
    JEL: J16 D63 I14 I15 O15
    Date: 2022
  10. By: Brueckner, Marcus (Research School of Economics, Australian National University, Australia); Hong, Haidi (Independent Competition and Regulatory Commission, Australia); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: This paper presents estimates of the effects that government regulation of diesel and petrol prices has on GDP growth. Theory suggests that when supply curves are convex, a decrease in the regulatory price has a larger effect on output than a tantamount increase in the regulatory price. Motivated by this theoretical insight, we specify VAR models with asymmetric effects of positive and negative changes in the regulatory prices of diesel and petrol. We estimate the VAR models on quarterly data from China’s national accounts statistics during the period Q1 1998 to Q4 2018. Our main findings are that: (i) negative growth rates of regulatory diesel and petrol prices significantly reduce GDP growth; (ii) positive growth rates of regulatory diesel and petrol prices have a positive, but quantitatively small and statistically insignificant effect on GDP growth.
    Keywords: GDP growth, energy price regulation
    Date: 2023
  11. By: Franks, Julian R.; Miao, Meng; Sussman, Oren
    Abstract: We use data on financially distressed Chinese companies in order to study a debt market where property rights are crudely defined and poorly enforced. To help with identification we use an event where a business-friendly province published new guidelines regarding the administration and enforcement of assets pledged as collateral. Although by no means a comprehensive reform of bankruptcy law or property rights, by instructing courts to enforce existing, albeit rudimentary, contractual rights the new guidelines virtually eliminated creditors runs and produced a sharp increase in the survival rate of financially-distressed companies. These changes illustrate how piecemeal reforms of property rights and their enforcement may have a significant impact on economic outcomes. Our analysis and results challenge the view that a fully fledged system of private property is a precondition for economic development.
    Keywords: Finance and development, property rights, financial distress, creditors runs
    JEL: G21 G23 G33 N25 O43
    Date: 2022
  12. By: Zhi-Guang Li (School of Management, Hefei University of Technology, Hefei, China); Yanrui Wu (Business School, The University of Western Australia); Yao-Kuang Li (School of Management, Hefei University of Technology, Hefei, China)
    Abstract: Technology entrepreneurship and corporate innovation are important for the development of indigenous innovation. In the digital age, founders are subject to fundamental changes in their strategy choices, which in turn affect corporate innovation performance. This paper aims to explore the strategic choices adopted by technical founders of listed companies in China’s STAR market to reap the rewards of innovation in a digital context. Based on the annual reports of 124 listed companies in China’s STAR Market, this paper applies machine learning methods to quantify digital transformation of enterprises, and empirically analyzes the relationship between technical founders and innovation performance by constructing a moderated mediating model. Our results show that companies with technical founders are more likely to adopt digital transformation and thus show better innovation performance. In terms of heterogeneity, the empirical results demonstrate that firms with technical founders show better performance in digital transformation, followed in turn by those with business founders and academic founders. Both the positive relationship between enterprise digital transformation and innovation performance and the mediating effect of digital transformation are positively moderated by venture capital or private equity support. The findings reveal the microscopic mechanism of the role of technology-based founders on corporate innovation performance and hence have practical implications for promoting corporate digital transformation and enhancing firm technological innovation.
    Keywords: Technical founder; Technological Innovation; Technology entrepreneurship; Digital transformation; Innovation performance; STAR Market
    Date: 2023

This nep-cna issue is ©2023 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.