nep-cna New Economics Papers
on China
Issue of 2024‒01‒29
nine papers chosen by
Zheng Fang, Ohio State University

  1. How do Multinational Firms Impact China’s Technology? The Role of Quid Pro Quo Policy and Technology Spillovers By Ma, Xiao; Zhang, Yiran
  2. Drivers of portfolio flows into Chinese debt securities amidst China's bond market development By McCully, Tuuli
  3. Education expansion and income inequality: Empirical evidence from China By Hu, Xiaoshan; Wan, Guanghua; Zuo, Congmin
  4. Impact of Global Value Chains’ Participation on Manufacturing Employment in China By Ping Hua
  5. Culture and Economic Development in Late Comers: Comparing China and India By Thomas Barbiero; Haiwen Zhou
  6. Entrepreneurs’ Networking Styles and Normative Underpinnings during Institutional Transition By Chenjian Zhang; Tao Wang; David Ahlstrom
  7. Managing Demographic Transitions: A Comprehensive Analysis of China's Path to Economic Sustainability By Yuxin Hu
  8. Geoeconomics of a New Eurasia during the Fourth Industrial Revolution: The Role of China’s Innovation System, BRI and Sanctions from the Global North By Khan, Haider
  9. Dedollarization: The Role of Expanded BRICS and the Global South By Khan, Haider

  1. By: Ma, Xiao; Zhang, Yiran
    Abstract: Multinationals play a crucial role in international knowledge diffusion. Given the recent concern that multinationals are departing China, understanding the importance of multinationals for China's technology is also particularly policy-relevant. Using comprehensive patent data from China, we document: (1) multinational affiliates and their foreign parent firms comprise a significant portion of patents filed with China’s patent office; and (2) there are subsequent transfers and spillovers of these technologies to domestic firms. Guided by the empirical findings, we develop a quantitative framework of multinational activities featuring cross-country technology flows, transfers, and spillovers. Quantitatively, we find that without multinational production and knowledge spillovers, China's total technology capital would drop by 36%. Furthermore, due to the externalities of multinationals’ technology investments, subsidizing multinationals in China will be socially beneficial, and reduced knowledge transfers/spillovers largely amplify the negative effects of multinationals' departing China on both China's GDP and technology.
    Keywords: multinational activities; technology transfers; knowledge spillovers
    JEL: F23 O33
    Date: 2023–12–05
  2. By: McCully, Tuuli
    Abstract: The paper focuses on China's onshore bond market and the drivers of non-resident net portfolio flows into Chinese debt securities. Building on a theoretical model of push and pull factors as a foundation for the empirical analysis on drivers of bond flows into China, static and time-varying models are estimated to explain the importance of various push and pull factors in the context of China's bond market development. While China-specific pull factors, such as domestic economic growth prospects and asset returns, are important drivers of bond flows, the results reveal that global push factors, such as US interest rates and investor risk aversion, have recently gained significance as drivers of flows into China. This shift goes hand in hand with China's gradual bond market liberalization measures. The findings confirm China's continued bond market deepening and integration with the rest of the world.
    Keywords: capital flows, portfolio flows, push factors, pull factors, financial openness
    JEL: F32 F34 F36 F41 G11 G28
    Date: 2023
  3. By: Hu, Xiaoshan; Wan, Guanghua; Zuo, Congmin
    Abstract: Education has long been perceived as a great equalizer, but even with universal rises in schooling years, income distribution worsened world-wide. We propose a method for decomposing the contribution of a variable to the change in inequality into mean, dispersion, and price components. The proposed method is then used to investigate the roles of the education variable in driving down China's wage inequality between 2010 and 2018. We find that (1) education accounted for over 30% of total wage inequality in 2010 and 2018; (2) 70% of the overall decline in wage inequality from 2010 to 2018 can be attributed to education expansion, and (3) the 70% inequality-reducing effect was made up of 95% benign dispersion and price components and 25% malign mean component. The benign components are attributable to an improvement in educational equity and a decrease in the college premium.
    Keywords: Education Expansion, Wage Inequality, Rate of Return to Education, China
    JEL: I24 I26 J31
    Date: 2023
  4. By: Ping Hua (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The literature on the employment impact of China's GVCs participation has focused on the substitution effects of Chinese inputs imported by developed countries, while few studies have been made on its domestic job creations. To complete this gap, this study proposes a GVCs augmented labor demand function, which is applied to panel data of 16 Chinese manufacturing industries over the 2005-2014 period using Arellano and Bond's GMM estimator for dynamic panel data model specifications to estimate employment effects of different GVCs participation modes. The obtained positive coefficients of backward linkages show that increasing labor intensity processing and assembly increased employment, while the negative coefficients of China's forward linkages and position mean that producing more capital intensity intermediate inputs to be embodied in third countries' exports and upgrading along to GVCs provided less job opportunities. Thus, the decrease of processing and assembly exports, the growth of intermediated inputs' exports and the position improvement during the studied period have all diminished the manufacturing employment. These results support the ‘mixed-blessing hypothesis' of GVC participation in the literature.
    Keywords: GVCs, Manufacturing employment, China
    Date: 2023–10–16
  5. By: Thomas Barbiero (Department of Economics, Toronto Metropolitan University, Toronto, Canada); Haiwen Zhou (Department of Economics, Old Dominion University, Norfolk, USA)
    Abstract: China and India are both late comers to industrialization. Both adopted similar economic development strategies after World War II, but the per capita GDP diverged significantly in the last 40 years. While economic growth and development have many components, we explain the difference in economic performance by emphasizing the difference in state capacity in the two economies. A country’s state capacity is affected by culture and history. China established a unified language and culture two thousand years ago that enabled it to develop strong state capacity. With a strong state capacity, China made crucial investments in infrastructure and in key heavy industries and developed technological capabilities to help start and sustain growth. India, on the other hand, is a country segmented by religion, caste, and language which has hindered the development of effective state capacity, and thus complementary state investments to spur economic growth. Moreover, India has up to now relied more heavily on expansion of its service sector compared to China, which has hindered its exports, a crucial element that helped China’s economy. India’s future industrialization crucially depends on national integration and concomitant strengthening of state capacity.
    Keywords: Economic development; state capacity; technological capabilities; political economy; economy of China
    JEL: O10 O53 O57 P52
    Date: 2024–01
  6. By: Chenjian Zhang; Tao Wang (EM - emlyon business school); David Ahlstrom
    Abstract: "Existing network research has mainly adopted functional and/or structural approaches to study the instrumental goals behind entrepreneurs' networking as well as the influence of personal position on access to resources and eventual performance. The variety of entrepreneurs' networking styles and their normative underpinnings have not been adequately explored. Contextualized in China, this study asks: How do entrepreneurs' understandings of social norms shape their networking styles? Through an inductive comparison of two entrepreneur generations in China, we identify three networking styles: guanxi-oriented networking, market-based networking, and mixed networking. We theorize that three types of norms shape these styles: market-inferred norms, dyadically formed norms, and identity-induced norms. This study provides new insights into the understanding of Chinese entrepreneurs' distinctive networking styles and their normative underpinnings. Further, it suggests implications both for the wider study of entrepreneurs' networking behaviors in transition economies, and for practitioners wishing to enhance their network building in China."
    Keywords: Chinese entrepreneurs, Networking, Norms, Guanxi, Institutional transition
    Date: 2022–01–07
  7. By: Yuxin Hu
    Abstract: This article presents an analysis of China's economic evolution amidst demographic changes from 1990 to 2050, offering valuable insights for academia and policymakers. It uniquely intertwines various economic theories with empirical data, examining the impact of an aging population, urbanization, and family dynamics on labor, demand, and productivity. The study's novelty lies in its integration of Classical, Neoclassical, and Endogenous Growth theories, alongside models like Barro and Sala-i-Martin, to contextualize China's economic trajectory. It provides a forward-looking perspective, utilizing econometric methods to predict future trends, and suggests practical policy implications. This comprehensive approach sheds light on managing demographic transitions in a global context, making it a significant contribution to the field of demographic economics.
    Date: 2023–12
  8. By: Khan, Haider
    Abstract: Abstract: At least since Halford Mackinder’s work, The Geographic Pivot of the History, geopolitical analysis has identified the Eurasian landmass as a key prize in geopolitics. Historically, the post-revolutionary work by the Russian emigres presented a conservative Russian perspective on Eurasia. Recent developments, however, are more complex and invite us to analyze the intimate connections between economics and geopolitics---particularly, energy, technology, innovation systems and transportation corridors among other sectors. Innovation system of China will perhaps play a critical role along with the Russian innovation system in building a New (East) Eurasia during the new cold war. We can subsume under the expression Geoeconomics this intersection of international economics and geopolitics. Geoeconomics is developing as a field of inquiry and policy guidance in Global Security Studies, Global Political Economy and International Politics. Geoeconomics requires us to think in terms of new and old transportation corridors, international trade and finance, economic development or maldevelopment in a complex unevenly developed world of political economy and great power rivalry. As an overall framework, I develop a new modified form of realism which we might call critical trans-neoclassical realism (CTNR). Consistent with this somewhat novel theory, in our complex, uneven world of international competition, technological innovation needs to be reconceptualized as a complex dynamic system with national systems facing imperatives of both competition and cooperation. There is thus a call for increased efficiency. But this might neglect urgent needs for equity and thus could lead to greater polarization and overlook the critical needs of large numbers of people. In order to combine efficiency with equity in building the New Eurasia, I present a nonlinear complex dynamic systems model of innovation for China---applicable to Russia and other Eurasian countries--- within which both efficiency and equity can be addressed. For specificity and for facilitating concrete analysis during the still unfolding fourth industrial revolution, digital technologies based on semiconductor material foundation and the development of Artificial Intelligence (AI) are analyzed for China. Our framework of combining efficiency and equity in specific ways used for such concrete applications can be called socially embedded capabilities enhancing national innovation system or SECENIS. The Chinese SECENIS that is being built for the 21st century has important regional and geoeconomic implications for the future. The Chinese path shows that innovation systems are critical in building a region such as the New Eurasia. Russia is also trying to follow such a path. Other (East) Eurasian countries will need to follow such a strategy if they are to benefit from the New Eurasian and expanded BRICS arrangements.
    Keywords: Eurasia, Efficiency and Equity , Geoeconomics, SECENIS, Polarization , China’s New Eurasia Strategy, Global Security Studies, Global Political Economy, International Politics and CTNR, China and the 4th industrial revolution, Innovation, AI, semiconductors, complex dynamic nonlinear systems model
    JEL: F38 F4 O3
    Date: 2024–01–01
  9. By: Khan, Haider
    Abstract: Abstract: Dedollarization is accelerating. Inter alia, the US-led western sanctions have accelerated the thinking about dedollarization and some tentative actions in the BRICS countries in particular. Further expansion of BRICS has strengthened these tendencies. With support from the other countries in the Global South, dedollarization will receive continuing impetus. It is one of the main theses of this paper that eventually the US will be forced to settle down to its substantial but reduced role in the Global Economy while a multipolar order replaces the brief ---in historical terms--- the dollar-based US hegemony during the cold war and dollar dominance during the unipolar two decades from 1991 to 2010. However, the pace of this evolution will depend on international politics and strategic foreign policy moves by the major powers and coalitions in both the Global North and the Global South. Thus a historical nodal point has arisen with the advent of the tragic war in Ukraine and the US hostilities towards China. The sanctions regimes of the US-led Global North have compounded the instabilities in the existing system. As the world system moves towards multipolarity, an opportunity exists for the Global South to construct through partial delinking from the post WW2 financial architecture under US hegemony. Construction of an expanded BRICS-led supra regional financial architecture along with regional financial architectures will be a strategic step forward. Within two decades dedollarization will become a reality. Finally, a new non-aligned movement and construction of genuinely pro-people development programs can also become a reality.
    Keywords: Dedollarization, Regional and Cross-Regional Financial Architectures, New Global Financial Architecture, CBDCs, Ukraine, multipolarity, BRICS, expanded BRICS or BRICS-plus, China, Russia, The Global South
    JEL: E58 F33 F50
    Date: 2023–12–21

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