nep-cna New Economics Papers
on China
Issue of 2023‒10‒02
seven papers chosen by
Zheng Fang, Ohio State University

  1. Dual Effects of the US-China Trade War and COVID-19 on United States Imports: Transfer of China's industrial chain? By Wei Luo; Siyuan Kang; Sheng Hu; Lixian Su; Rui Dai
  2. Premature deindustrialization or reindustrialization: The case of China’s latecomer provinces By Lar, Ni; Taguchi, Hiroyuki
  3. The Gold of Industry and the Core of the Military: China's Rare Earths Strategy and its Implications for Korea By Park, Sohee
  4. Introduction. China’s 20-Year Engagement with the WTO: Opportunities, Challenges, and Responses By Raess, Damian
  5. A Study of Business Transition Directions Based on Patent Data: Focusing on the Display and Automotive Industries By Nam, Sanguk; Oh, Seunghwan
  6. Small and Medium Enterprises Amidst the Pandemic and Reopening: Digital Edge and Transformation By Lin William Cong; Xiaohan Yang; Xiaobo Zhang
  7. Internal Migration, Remittances and Economic Development By Xiameng Pan; Chang Sun

  1. By: Wei Luo; Siyuan Kang; Sheng Hu; Lixian Su; Rui Dai
    Abstract: The trade tension between the U.S. and China since 2018 has caused a steady decoupling of the world's two largest economies. The pandemic outbreak in 2020 complicated this process and had numerous unanticipated repercussions. This paper investigates how U.S. importers reacted to the trade war and worldwide lockdowns due to the COVID-19 pandemic. We examine the effects of the two incidents on U.S. imports separately and collectively, with various economic scopes. Our findings uncover intricate trading dynamics among the U.S., China, and Southeast Asia, through which businesses relocated portions of their global supply chain away from China to avoid high tariffs. Our analysis indicates that increased tariffs cause the U.S. to import less from China. Meanwhile, Southeast Asian exporters have integrated more into value chains centered on Chinese suppliers by participating more in assembling and completing products. However, the worldwide lockdowns over pandemic have reversed this trend as, over this period, the U.S. effectively imported more goods directly from China and indirectly through Southeast Asian exporters that imported from China.
    Date: 2023–09
  2. By: Lar, Ni; Taguchi, Hiroyuki
    Abstract: This study examines the occurrence of premature deindustrialization or reindustrialization in latecomer provinces in China, considering that China is a large country that produces manufactured products and has a series of related industrial policy practices. This study adopts the latecomer index to determine the occurrence of premature deindustrialization or reindustrialization, which is expressed by the downward or upward shift in the manufacturing–income relationship at a certain level of income. The results of our empirical analysis confirm the existence of premature deindustrialization in the Western economic zone of China. In the Eastern and Intermediate economic zones, the reindustrialization effect outperforms premature deindustrialization because of China’s globalization and well-intended regional development policies.
    Keywords: industry-income nexus, industrial polices, latecomer index, premature deindustrialization, reindustrialization
    JEL: L52 O14 O53
    Date: 2023–08
  3. By: Park, Sohee (Korea Institute for Industrial Economics and Trade)
    Abstract: The rare earth elements (REE) refer to 17 metallic elements, including 15 lanthanides and two non-lanthanides. REEs are classified into two broad categories based atomic weight: light rare earth elements (LREEs) and heavy rare earth elements (HREEs). There are seven LREEs, with low atomic numbers and small masses, and 10 HREEs, with high atomic numbers and large masses. Rare earths are strategic materials (core minerals) directly related to resource security, defense, and industrial security. They are used in various industries, including defense, aerospace, information and communications technologies (ICT), artificial intelligence (AI), medical care, new energy, energy conservation, and environmental protection. Deposits of rare earths are concentrated in a handful of countries and regions, and this arrangement has made securing a stable supply of rare earths a key component of national economic competitiveness in the era of economic security. Currently, China is the only country on Earth in which all 17 REEs can be found. Not only does it have the largest proven deposits of rare earths in the world, it is also the largest miner and consumer of rare earths globally. Over the past 60 years, the Chinese government has been pushing the development of the rare earths industry. Two sayings illustrate the importance the government assigns to rare earths: they are “gold of industry” and the “core of the military” (HREEs are used in high-tech weapons manufacturing). China has designated rare earths as national strategic resources and has emphasized the importance of rare earths security. At the same, China has leveraged its rare earths in dealings with major export destinations such as Japan and the United States. In this context, this study aims to understand the development status of the rare earths industry in China. It focuses on the Chinese government’s major rare earths policies, and the implications these measures carry for Korean policy.
    Keywords: rare earths; rare earths policy; rare earths industry; strategic resources; economic security; national security; resource security; weapons manufacturing; export controls; trade policy; economic nationalism; China; US; Korea
    JEL: F13 F51 F52 L72 L78 O13 Q34 Q37 Q38 Q56
    Date: 2023–08–30
  4. By: Raess, Damian
    Abstract: The introductory chapter outlines the key themes of the volume (China and the WTO: A Twenty-Year Assessment, edited by Henry Gao, Damian Raess, Ka Zeng, Cambridge University Press 2023) and provides an overview of the chapters and their findings. It further contributes useful synthesis on the various perspectives and highlights some of the common themes that emerge.
    Date: 2023–09–15
  5. By: Nam, Sanguk (Korea Institute for Industrial Economics and Trade); Oh, Seunghwan (Korea Institute for Industrial Economics and Trade)
    Abstract: When firms anticipate a major change in the business environment or some kind of crisis, they often pursue some kind of business transition in an effort to overcome the challenge and discover new growth momentum. Rapid changes to the industrial environment such as COVID-19, carbon neutrality, and the digital transformation have made business transformation increasingly urgent. However, Korean small medium-sized enterprises (SMEs) have not adequately prepared to meet this challenge. According to a survey by the Korea SMEs and Startups Agency (KOSME), 85.4 percent of SMEs reported that management felt a need to change the structure of the business. Yet only 26.9 percent of firms were found to be making active preparations to do so. The industrial environment of the display and automobile industries in particular is undergoing a rapid change. Display industry manufacturers are switching to organic light-emitting diode (OLED) displays as the competitiveness of liquid-crystal displays (LCD) declines due to increased competition from China, and the automobile industry is rapidly shifting from internal combustion engine (ICE) vehicles to electric vehicles (EVs) due to the promotion of carbon neutrality policies. Domestically, both industries possess world-class technologies thanks to long-term R&D and investment, but they are in danger of losing demand for these technologies due to changes in the industrial environment. It is against backdrop which this study is set. In it, we examine the direction of business transformation based on technological capacity through an analysis of patent data. The dataset in question consists of information on SMEs’ patents in the display and automotive industries.
    Keywords: business transition; restructuring; carbon neutrality; digital transformation; small and medium-sized enterprises; SMEs; SME growth; SME policy; display industry; automotive industry; industrial structure; SME technology; SME capacity; Korea
    JEL: D20 D23 D25 E22 L16 L21 L25 L29 L52 L62 L63 L68
    Date: 2023–08–30
  6. By: Lin William Cong (Cornell University Johnson Graduate School of Management); Xiaohan Yang (Peking University National School of Development); Xiaobo Zhang (Peking University Guanghua School of Management; International Food Policy Research Institute; Center for Global Development)
    Abstract: Using administrative universal firm registration data as well as primary offline and online surveys of small business owners in China, we examine (i) whether the digitization of business operations helps small and medium enterprises (SMEs) better cope with the pandemic shock, and (ii) if the pandemic has induced digital technology adoption. We identify significant economic benefits of digitization in increasing SMEs’ resilience against such a large shock, as seen through mitigated demand decline, sustainable cash flow, ability to quickly reopen, and positive outlook for growth. After the lockdown in January 2020, firm entries have exhibited a V-shaped pattern, with entries of e-commerce firms experiencing a less pronounced initial drop and a quicker rebound. The COVID-19 pandemic has also accelerated digital technology adoption of existing firms in various dimensions (captured by, e.g., the alteration of operation scope to include e-commerce activities, allowing remote work, and adoption of electronic information system), and the effect persists after one year of full reopening.
    Keywords: SMEs, COVID-19, Digital economy, E-commerce
    Date: 2021–12–10
  7. By: Xiameng Pan; Chang Sun
    Abstract: We develop a quantitative spatial equilibrium model with endogenous migration and remittance decisions within households to examine the joint effect of migration and remittances on economic development. We apply the model to internal migration in China. Counterfactual analysis of the calibrated model shows that the presence of remittances increases migration and welfare, reduces regional inequality and facilitates structural change. Compared to a conventional single-person migration model, our household model suggests a larger reduction in regional inequality and stronger reallocation of employment from agriculture to manufacturing and services in response to the decline in migration costs over the period of 2000 to 2010.
    Keywords: remittances, migration, structural change, spatial equilibrium
    JEL: O10 R10 R20
    Date: 2023

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