nep-cna New Economics Papers
on China
Issue of 2023‒11‒20
eleven papers chosen by
Zheng Fang, Ohio State University

  1. China Spillovers: Aggregate and Firm-Level Evidence By Alexander Copestake; Melih Firat; Davide Furceri; Chris Redl
  2. Can China Catch Up with Greece? By Hunter L. Clark; Matthew Higgins
  3. Non-Meritocrats or Conformist Meritocrats? A Redistribution Experiment in China and France By Belguise, Margot; Huang, Yuchen; Mo, Zhexun
  4. Social Insurance and Migration: Evidence from a Nation-Wide Institutional Reform in China By Fanghua Li; Chenyang Ji; Moshe Buchinsky
  5. Occupational Differences in the Effects of Retirement on Hospitalizations for Mental Illness among Female Workers: Evidence from Administrative Data in China By Wang, Tianyu; Sun, Ruochen; Sindelar, Jody L.; Chen, Xi
  6. Shock Infections through Global Value Chains By Kuusi, Tero; Ali-Yrkkö, Jyrki
  7. Long-Term Effects of Environmental Policies on Educational Performance: Evidence from China By Siwar Khelifa; Jie He
  8. How Does China's Household Portfolio Selection Vary with Financial Inclusion? By Yong Bian; Xiqian Wang; Qin Zhang
  9. China’s Nationwide CO2 Emissions Trading System: A General Equilibrium Assessment By Lawrence H. Goulder; Xianling Long; Chenfei Qu; Da Zhang
  10. International trade in the wake of multiple shocks: OECD global trade monitor By OECD
  11. Missing females: how many, where, when, causes and consequences By Enrique Llopis Agelan

  1. By: Alexander Copestake; Melih Firat; Davide Furceri; Chris Redl
    Abstract: We estimate the impact of distinct types of slowdowns in China on countries and firms globally. First, we combine a structural vector autoregression framework with a broad-based measure of domestic economic activity in China to distinguish supply versus demand components of Chinese growth. We then use local projection models to assess the responses to such shocks of GDP growth (revenue) in other countries (firms). We find that: (i) both supply and demand slowdowns are associated with substantial declines in partner GDP and firm revenue; (ii) negative spillovers are larger in countries and firms with stronger trade links with China; and (iii) spillovers from Chinese supply shocks are stronger than spillovers from demand shocks, both at the aggregate- and firm-level.
    Keywords: Supply-Demand Decomposition; China Spillovers
    Date: 2023–10–17
  2. By: Hunter L. Clark; Matthew Higgins
    Abstract: China’s leader Xi Jinping recently laid out the goal of reaching the per capita income of “a mid-level developed country by 2035.” Is this goal likely to be achieved? Not in our view. Continued rapid growth faces mounting headwinds from population aging and from diminishing returns to China’s investment-centered growth model. Additional impediments to growth appear to be building, including a turn toward increased state management of the economy, the crystallization of legacy credit issues in real estate and other sectors, and limits on access to key foreign technologies. Even given generous assumptions concerning future growth fundamentals, China appears likely to close only a fraction of the gap with high-income countries in the years ahead.
    Keywords: China; demographics; growth
    JEL: F00 J1
    Date: 2023–10–19
  3. By: Belguise, Margot (Department of Economics, Warwick University); Huang, Yuchen (Paris School of Economics); Mo, Zhexun (Paris School of Economics & the World Inequality Lab)
    Abstract: Recent empirical evidence contends that meritocratic ideals are mainly a Western phenomenon. Intriguingly, the Chinese people appear to not differentiate between merit- and luck-based inequalities, despite their rich historical legacy of meritocratic institutions. We propose that this phenomenon might be due to the Chinese public’s greater adherence towards the status quo. In order to test this hypothesis, we run an incentivized redistribution experiment with elite university students in China and France, by varying the initial split of payoffs between two real-life workers to redistribute from. We show that Chinese respondents consistently and significantly choose more non-redistribution (playing the status quo) across both highly unequal and relatively equal status quo scenarios than our French respondents. Additionally, we also show that the Chinese sample does differentiate between merit- and luck-based inequalities, and does not redistribute less than the French absent status quo conformity. Ultimately, we contend that such a phenomenon is indicative of low political agency rather than apathy, inattention, or libertarian beliefs among the Chinese. Notably, our findings show that Chinese individuals’ conformity to the status quo is particularly pronounced among those from families of working-class and farming backgrounds, while it is conspicuously absent among individuals whose families have closer ties to the private sector. JEL Codes: D31 ; D63 ; D73 ; D83 ; H23 ; H24 ; P26
    Date: 2023
  4. By: Fanghua Li; Chenyang Ji; Moshe Buchinsky
    Abstract: In this paper we examine the causal relationship between formal social insurance and individuals’ migration decisions. We exploit a quasi experimental design in rural China, under which county officials were assigned to a group of villages (i.e., treated villages) to serve as village supervisors (VSs) for the local leaders. We show that this led to reduced favoritism in welfare allocation by the local leaders, thereby increasing the efficacy in the formal social insurance in the treated villages. We use detailed geo-referenced administrative household-level data suited for a spatial regression discontinuity design (RDD) to obtain an average treatment effect (LATE) of the improved social insurance on migration. The apparent variation in the implementation of the reform across treated villages and heterogeneous impacts on different family clans make it possible to directly link changes in the efficacy of the insurance to migration choices. We find a large positive migration effect, of about 19%, for the young males and females. In turn, this led to a large boost in the average household’s income in just two years.
    JEL: J01 O10
    Date: 2023–10
  5. By: Wang, Tianyu (Renmin University of China); Sun, Ruochen (University of Pennsylvania); Sindelar, Jody L. (Yale University); Chen, Xi (Yale University)
    Abstract: Retirement, a major transition in the life course, may affect many aspects of retirees' well-being, including health and health care utilization. Leveraging differential statutory retirement age (SRA) by occupation for China's urban female workers, we provide some of the first evidence on the causal effect of retirement on hospitalizations attributable to mental illness and its heterogeneity. To address endogeneity in retirement decisions, we take advantage of exogeneity of the differing SRA cut-offs for blue-collar (age 50) and white-collar (age 55) female urban employees. We apply a Fuzzy Regression Discontinuity Design (RDD) around the SRA cut-offs using nationally representative hospital inpatient claims data that cover these workers. We show that blue-collar females incur more hospitalizations for mental illness after retirement, while no similar change is found for white-collar females. Conditional on blue-collar females being hospitalized, probabilities of overall and ER admissions due to mental illness increase by 2.3 and 1.2 percentage points upon retirement, respectively. The effects are primarily driven by patients within the categories of schizophrenia, schizotypal and delusional disorders; and neurotic, stress-related and somatoform disorders. Moreover, the 'Donut' RDD estimates suggest that pent-up demand at retirement unlikely dominates our findings for blue-collar females. Rather, our results lend support to their worsening mental health at retirement. These findings suggest that occupational differences in mental illness and related health care utilization at retirement should be considered when optimizing retirement policy schemes.
    Keywords: mental illness, behavioral disorders, retirement, inpatient care, blue-collar females, white-collar females
    JEL: I11 J26 J14 I18 H55
    Date: 2023–10
  6. By: Kuusi, Tero; Ali-Yrkkö, Jyrki
    Abstract: Abstract We examine how the Covid-19 shock was transmitted from the foreign, upstream parts of value chains to domestic (downstream) production. After categorizing global value chains based on their home-producer industry and country, we quantify the multiplier effect of the transmitted shock on the entire value chain by considering changes in home production. The upstream shock was measured using world input-output data, and our analysis relies on the upstream dependence on the early shock in China during 1-4/2020, employing a differences-in-differences research setup. Our findings reveal that the impact was large: For every percentage point of dependence on the Chinese value chain, there was a 1.3 percent larger contraction in domestic production. In essence, the multiplier effect of the manufacturing contraction amplified the direct foreign shock by an order of magnitude. These effects varied across industries and regions, with the most substantial multiplier effects observed in highly digitalized, high-R&D industries, particularly in the EU and North America. Furthermore, we provide evidence on the dynamics of adjustment.
    Keywords: Global value chains, Shock, Infection, Covid-19, Transmission, Transmit, Linkage
    JEL: F21 F23 F13 F62 L24
    Date: 2023–11–06
  7. By: Siwar Khelifa; Jie He
    Abstract: This paper examines the overall long-term effects of the Two Control Zones policy, implemented by the Chinese government to reduce air pollution, on children’s human capital development. Estimates show that exposure to this policy, during the year of birth, is associated, 15 years later, with an increased probability to obtain better standardized test scores and thus to join a higher quality high school and an increased probability to join an academic high school. These results provide an additional evidence in favor of environmental policies as promising inputs for human capital formation. The beneficial effects are found to be accentuated among girls and children born to fathers with low education levels, suggesting that environmental regulations may help reducing some of the educational disparities, in a developing country context. Projecting forward, results also suggest better future higher education and labor market outcomes. The findings are robust to various alternative hypotheses and specifications.
    Date: 2023–10
  8. By: Yong Bian; Xiqian Wang; Qin Zhang
    Abstract: Portfolio underdiversification is one of the most costly losses accumulated over a household's life cycle. We provide new evidence on the impact of financial inclusion services on households' portfolio choice and investment efficiency using 2015, 2017, and 2019 survey data for Chinese households. We hypothesize that higher financial inclusion penetration encourages households to participate in the financial market, leading to better portfolio diversification and investment efficiency. The results of the baseline model are consistent with our proposed hypothesis that higher accessibility to financial inclusion encourages households to invest in risky assets and increases investment efficiency. We further estimate a dynamic double machine learning model to quantitatively investigate the non-linear causal effects and track the dynamic change of those effects over time. We observe that the marginal effect increases over time, and those effects are more pronounced among low-asset, less-educated households and those located in non-rural areas, except for investment efficiency for high-asset households.
    Date: 2023–11
  9. By: Lawrence H. Goulder; Xianling Long; Chenfei Qu; Da Zhang
    Abstract: China’s recently launched CO2 emissions trading system, already the world’s largest, aims to contribute importantly toward global reductions in greenhouse gas emissions. The system, a tradable performance standard (TPS), differs importantly from cap and trade (C&T), the principal emissions trading approach used in other countries. This paper presents the structure and results from a multi-sector, multi-period equilibrium model tailored to evaluate China’s TPS. The model incorporates distinctive features of China’s economy, including state-owned enterprises and electricity market regulation. It distinguishes between the TPS and C&T and considers a wide range of potential future TPS designs. Key findings include the following. The TPS’s environmental benefits exceed its costs by a factor of five when only the climate-related benefits are considered and by a significantly higher factor when health benefits from improved air quality are included. The TPS’s interactions with China’s fiscal system substantially affect its costs relative to those of C&T. Employing a single benchmark (standard) for the electricity sector would lower costs by 34 percent relative to the four-benchmark system that is actually in place but increase the standard deviation of percentage income losses across provinces by more than 60 percent. Introducing an auction as a complementary source of allowance supply can lower economy-wide costs by at least 30 percent.
    JEL: D58 D61 H23 Q52 Q54 Q58
    Date: 2023–10
  10. By: OECD
    Abstract: In the midst of the recovery from the COVID-19 pandemic, trade and economic growth face new challenges as the Russian Federation’s large-scale war against Ukraine has increased uncertainty and tensions along supply chains and the People’s Republic of China’s trade performance has fallen short of expectations. Merchandise trade is recovering slowly and has been dampened by high and volatile commodity and energy prices, coupled with monetary tightening. Some durable goods, such as motor vehicles, have not regained their pre-pandemic share in global trade. Services trade has yet to recover losses incurred during the pandemic, with travel services in particular recovering slowly. Russia’s trade is adjusting as the war continues, with repercussions for commodities markets. This report uses detailed trade data to monitor recent developments in trade in goods and services and in commodity markets.
    Keywords: China, Economic recovery, Russia, Transport
    JEL: F13 F14 F51 Q02
    Date: 2023–11–06
  11. By: Enrique Llopis Agelan (Universidad Complutense de Madrid, Madrid, Spain)
    Abstract: The objective of this essay is to explore the present and future figures, geographic distribution, underlying causes, and consequences of the missing females phenomenon. Leveraging data on fertility and sex ratios of international organizations (the United Nations and the World Bank) and employing an analysis of secondary sources, this study draws the following key conclusions: 1) The global number of missing women equaled or exceeded 100 million by 1990 and has continued to rise since then, projected to reach 150 million by 2035; 2) China and India together account for more than 80% of the global missing females; 3) The prevalence of selective abortions of female fetuses surged in societies marked by rigid patrilineal and patrilocal traditions after a decline in fertility rates and the proliferation of ultrasound technology, thereby leading to a reduction in the number of postnatal sex-selective individuals; 4) Eastern Asia has experienced a demographic dividend, yet its economic growth has been hampered in the past decade due to the relative expansion of the dependent population; 5) Skewed sex ratios, that are anticipated to persist, have resulted in a masculinization of the adult population, with a lag of approximately one and a half decades, causing disruptions in the marriage market. This poses a significant threat to social stability in several countries, particularly in China.
    Keywords: China, India, fertility, female feticide, excess female mortality, demographic dividend
    JEL: N3 J1
    Date: 2023–11

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.