nep-cna New Economics Papers
on China
Issue of 2024‒04‒01
sixteen papers chosen by
Zheng Fang, Ohio State University

  1. Relocation from China (with Chinese Characteristics) By Jason Garred; Song Yuan
  2. How China's "Later, Longer, Fewer" Campaign Extends Life Expectancy: A Study of Intergenerational Support for Elderly Parents By Bansak, Cynthia; Dziadula, Eva; Wang, Sophie Xuefei
  3. The Anatomy of Chinese Innovation: Insights on Patent Quality and Ownership By Philipp Boeing; Loren Brandt; Ruochen Dai; Kevin Lim; Bettina Peters
  4. China's Productivity Challenge By Xiaodong Zhu
  5. New forms of employment and labour protection in China By Du, Wei,; Wang, Xueyu,
  6. What Gets Measured Gets Managed: Investment and the Cost of Capital By He, Zhiguo; Liao, Guanmin; Wang, Baolian
  7. Comparison of sectoral structures between China and Japan: A network perspective By Tao Wang; Shiying Xiao; Jun Yan
  8. The impact of communist party membership on wealth distribution and accumulation in urban China By Targa, Matteo; Yang, Li
  9. Globalization and Growth in a Bipolar World By Barry Eichengreen
  10. Air pollution and firm-level human capital, knowledge and innovation By Tiago Cavalcanti; Kamiar Mohaddes; Hongyu Nian; Haitao Yin
  11. Social media sentiment and house prices: Evidence from 35 Chinese cities. By Martin Berka,; Yiran Mao
  12. Volatility-based strategy on Chinese equity index ETF options By Peng Yifeng
  13. Uncovering the Sino-US dynamic risk spillovers effects: Evidence from agricultural futures markets By Han-Yu Zhu; Peng-Fei Dai; Wei-Xing Zhou
  14. The global position of the EU in complex technologies By Di Girolamo, Valentina; Mitra, Alessio; Ravet, Julien; Peiffer-Smadja, Océane; Balland, Pierre-Alexandre
  15. The incremental impact of China’s carbon trading pilots By Mei Lu; Michael G. Pollitt; Ke Wang; Yi-Ming Wei
  16. Neoclassical Growth in an Interdependent World By Benny Kleinman; Ernest Liu; Stephen J. Redding; Motohiro Yogo

  1. By: Jason Garred (Department of Economics, University of Ottawa, Ottawa, ON); Song Yuan (School of Economics, Zhejiang University)
    Abstract: The share of Chinese goods in US imports has fallen sharply since 2018, as production for the US market has shifted from China to other countries. Does this trend represent US-China ‘decoupling’, or are other US trade partners playing growing roles as intermediaries in ongoing US-China economic relations? Using firm-level and product-level data, we find that Chinese manufacturing investment and Chinese-produced parts have increasingly flowed to third-country ‘winners’ who have simultaneously increased their US market share. We present evidence that our findings capture expanding indirect relationships linking China and the US rather than broader economic trends within the ‘winners’ themselves.
    Keywords: Trade, China, FDI, global supply chains, relocation, decoupling.
    JEL: F14 F21 F23
    Date: 2024
  2. By: Bansak, Cynthia; Dziadula, Eva; Wang, Sophie Xuefei
    Abstract: This study documents increased intergenerational support for elderly parents in China among adults who were exposed to the "Later, Longer, Fewer" (LLF) family planning campaign in the 1970s. Using the China Health and Retirement Longitudinal Study, we identify adults of childbearing age whose fertility was reduced. We find LLF exposure increases the likelihood of wife's parents residing in the same household. As expected in a patrilineal society, the increase in support is realized by the husband's parents through more visits and financial transfers. Supporting our findings of stronger social networks, LLF exposure significantly increases the elderly parent's age at death.
    Keywords: Fertility, China, "Later, Longer, Fewer" campaign, Family planning, Co-residency, Intergenerational transfers, Aging population
    JEL: H31 I31 J13
    Date: 2024
  3. By: Philipp Boeing; Loren Brandt; Ruochen Dai; Kevin Lim; Bettina Peters
    Abstract: We study the evolution of patenting in China from 1985-2019. We use a Large Language Model to measure patent importance based on patent abstracts and classify patent ownership using a comprehensive business registry. We highlight four insights. First, average patent importance declined from 2000-2010 but has increased more recently. Second, private Chinese firms account for most of patenting growth whereas overseas patentees have played a diminishing role. Third, patentees have greatly reduced their dependence on foreign knowledge. Finally, Chinese and foreign patenting have become more similar in technological composition, but differences persist within technology classes as revealed by abstract similarities.
    Keywords: Innovation Patents Technology China
    JEL: O3
    Date: 2024–03–08
  4. By: Xiaodong Zhu
    Abstract: Total factor productivity (TFP) growth has been the primary driver of China's GDP growth. From 1978 to 2007, China experienced an average TFP growth rate of over 4% per year, thanks to economic reforms and decentralization that led to consistent policy and institutional changes initiated from local levels. However, since 2007, the Chinese government has shifted towards a top-down approach, prioritizing policy design at the national level and resource mobilization. While this approach yielded some short-term benefits, such as temporary growth recovery in 2010 following the global financial crisis and the rapid expansion of infrastructure projects, it came at a significant cost to economic efficiency. Without comprehensive bottom-up policy reforms, China's TFP growth rate between 2007 and 2022 averaged only 1% per year, significantly lower than the 4% achieved prior to 2007. The key challenge facing China now is whether it will revert to a decentralized decision-making process.
    Keywords: China, Bottom-up Institutional Change, TFP, Growth, Centralization, Growth Slowdown
    JEL: O1 O4 O5
    Date: 2024–03–13
  5. By: Du, Wei,; Wang, Xueyu,
    Abstract: In recent years, China's labour market has seen a significant rise of the new forms of employment, which differs in scale, type, and function compared to the developed economies. This study focuses on four emerging forms of the new employment patterns in China, including app-based gig work, micro-task crowdsourcing, prosumer work, and platform outsourcing to individuals, particularly examining their diversity, scale, development, and the status quo of the labour protection. Additionally, the paper summarises the challenges faced by the labour law and policy in the digitalisation era in China, as well as the government and social partners' innovative measures to address them.
    Keywords: digital labour platforms, employment security
    Date: 2024
  6. By: He, Zhiguo (U of Chicago); Liao, Guanmin (Renmin U of China); Wang, Baolian (U of Florida)
    Abstract: We study the impact of government-led incentive systems by examining a staggered reform in the Chinese state-owned enterprise (SOE) performance evaluation policy. To improve capital allocative efficiency, regulators switched from using return on equity (ROE) to economic value added (EVA). However, this EVA policy takes a one-size-fits-all approach by stipulating a fixed cost of capital for virtually all SOEs, neglecting the potential heterogeneity of firm-specific costs of capital. We show that SOEs responded to the evaluation reform by altering their investment decisions, particularly when the actual borrowing rate deviated further from the stipulated rate. Besides providing an estimate of the cost of capital's impact on investment, our paper offers causal evidence that incentive schemes affect real investment and sheds new light on economic reform challenges in China.
    JEL: G31 G34 M12 M52 P31
    Date: 2023–08
  7. By: Tao Wang; Shiying Xiao; Jun Yan
    Abstract: Economic structure comparisons between China and Japan have long captivated development economists. To delve deeper into their sectoral differences from 1995 to 2018, we used the annual input-output tables (IOTs) of both nations to construct weighted and directed input-output networks (IONs). This facilitated deeper network analyses. Strength distributions underscored variations in inter-sector economic interactions. Weighted, directed assortativity coefficients encapsulated the homophily among connecting sectors' features. By adjusting emphasis in PageRank centrality, key sectors were identified. Community detection revealed their clustering tendencies among the sectors. As anticipated, the analysis pinpointed manufacturing as China's central sector, while Japan favored services. Yet, at a finer level of the specific sectors, both nations exhibited varied structural evolutions. Contrastingly, sectoral communities in both China and Japan demonstrated commendable stability over the examined duration.
    Date: 2024–02
  8. By: Targa, Matteo; Yang, Li
    Abstract: This paper provides the first in-depth investigation into the evolution of the wealth gap between CCP and non-CCP households in urban China from 1995 to 2017. We apply unconditional quantile regression (UQR) to analyze the variations in the premiums of party membership across the wealth distribution. Our results show that although the average wealth gap between CCP and non-CCP households remained substantial and consistent throughout the period, there have been significant shifts in the returns structure of party membership over time. Prior to the housing reform in the 1990s, the highest wealth premiums of CCP households were primarily concentrated in the middle of the distribution, but now they are concentrated at the bottom of the distribution. This is mainly attributed to the fact that CCP households at the lower end of the net wealth distribution are more inclined to possess real estate assets, which tend to have higher value compared to those owned by non-CCP households. These effects fade out in the top half of the net wealth distribution, where the differences between CCP and non-CCP households become less apparent. Furthermore, by utilizing a balanced household panel from 2013 to 2017, we were able to track wealth accumulation at the household level. Our findings indicate that CCP households accumulate wealth faster than non-CCP households due to larger capital gains, and the differences between the two groups increase along the net wealth distribution
    Keywords: Wealth Accumulation, Wealth Distribution, Political Capital, CCP membership
    JEL: G51 D31 P35
    Date: 2023
  9. By: Barry Eichengreen (NCAER and University of California, Berkeley)
    Abstract: Globalization is not over, but it is being reconfigured by events. Internationally, there are economic and political tensions between the United States and China. Both countries have responded with import tariffs, export controls, and foreign investment restrictions that have led to a decline in the relative importance of bilateral trade and the collapse of bilateral foreign direct investment. The paper concludes that globalization remains deeply entrenched despite the Global Financial Crisis, COVID, Russia’s invasion of Ukraine, and U.S.-China tensions. At the same time, the landscape of globalization has been changing in response to these events and specifically in response to U.S.-China rivalry.
    Keywords: Globalisation;Economic Growth
    Date: 2024–02–01
  10. By: Tiago Cavalcanti; Kamiar Mohaddes; Hongyu Nian; Haitao Yin
    Keywords: Pollution, human capital, knowledge, innovation, China
    JEL: O15 O30 O44 Q51 Q56
    Date: 2023–01
  11. By: Martin Berka, (School of Economics and Finance, Massey University, Palmerston North); Yiran Mao (School of Economics and Finance, Massey University, Palmerston North, New Zealand)
    Abstract: We develop a new social media sentiment index by quantifying the tone of posts about housing on Weibo between 2010 and 2020 in 35 largest cities in China. We find that the social media sentiment index significantly predicts house price changes for up to six quarters ahead, after controlling for the economic fundamentals. A 1% increase in an accumulated social media sentiment index results in an 0.81% increase in the house price inflation the following quarter, ceteris paribus. Our results cannot be explained by changes to policy, unobserved fundamentals, or censorship bias, and survive a battery of robustness checks. We show they support theories where disperse information has direct economic effects by facilitating social learning as in Burnside et al. (2016); Bailey et al. (2018); Bayer et al. (2021)
    Keywords: Sentiment, social learning, house prices, China
    Date: 2023
  12. By: Peng Yifeng
    Abstract: In recent years, there has been quick developments of derivative markets in China and standardized derivative trading have reached considerable volumes. In this research, we collect all the daily data of ETF options traded at Shanghai Stock Exchange and start with a simple short-volatility strategy. The strategy delivers nice performance before 2018, providing significant excess return over the buy and hold benchmark. However, after 2018, this strategy starts to deteriorate and no obvious risk-adjusted return is shown. Based on the discussion of relationship between the strategy's performance and market's volatility, we improve the model by adjusting positions and exposure according to volatility forecasts using methods such as volatility momentum and GARCH. The new models have improved performance in different ways, where larger upside capture and smaller drawbacks can be achieved in market fluctuation. This research has shown potentials of volatility-based trading on Chinese equity index options, and with further improvement and implementation considerations, real-world practical trading strategies can be formed.
    Date: 2024–03
  13. By: Han-Yu Zhu; Peng-Fei Dai; Wei-Xing Zhou
    Abstract: Agricultural products play a critical role in human development. With economic globalization and the financialization of agricultural products continuing to advance, the interconnections between different agricultural futures have become closer. We utilize a TVP-VAR-DY model combined with the quantile method to measure the risk spillover between 11 agricultural futures on the futures exchanges of US and China from July 9, 2014, to December 31, 2022. This study yielded several significant findings. Firstly, CBOT corn, soybean, and wheat were identified as the primary risk transmitters, with DCE corn and soybean as the main risk receivers. Secondly, sudden events or increased economic uncertainty can increase the overall risk spillovers. Thirdly, there is an aggregation of risk spillovers amongst agricultural futures based on the dynamic directional spillover results. Lastly, the central agricultural futures under the conditional mean are CBOT corn and soybean, while CZCE hard wheat and long-grained rice are the two risk spillover centers in extreme cases, as per the results of the spillover network and minimum spanning tree. Based on these results, decision-makers are advised to safeguard against the price risk of agricultural futures under sudden economic events, and investors can utilize the results to construct a superior investment portfolio by taking different agricultural product futures as risk-leading indicators according to various situations.
    Date: 2024–03
  14. By: Di Girolamo, Valentina; Mitra, Alessio; Ravet, Julien; Peiffer-Smadja, Océane; Balland, Pierre-Alexandre
    Abstract: This paper studies the relationship between knowledge complexity and countries' technological dependency, with a focus on the EU's position vis-à-vis other major economies. Using patent data, we calculate the knowledge complexity index at technological level for a set of countries over the period 1990-2020 to assess the EU's technological capabilities. Our findings show that the EU's overall position has progressively worsened vis-à-vis the US, China, Japan, and South Korea over the last three decades, that the EU's technological base is more diversified than that of other major economies, but is disproportionally more specialised in less complex technologies than its counterparts. Finally, the EU is particularly dependent on just a few countries in most complex technologies.
    Keywords: Complex technologies, Technological dependencies, Strategic autonomy, Relatedness
    JEL: O11 O33
    Date: 2023
  15. By: Mei Lu; Michael G. Pollitt; Ke Wang; Yi-Ming Wei
    Keywords: Carbon emissions trading scheme, target responsibility system, policy evaluation, triple difference-in-differences
    JEL: Q54 L94
    Date: 2023–07
  16. By: Benny Kleinman (University of Chicago); Ernest Liu (Princeton University and NBER); Stephen J. Redding (Princeton University, NBER and CEPR); Motohiro Yogo (Princeton University and NBER)
    Abstract: We generalize the closed-economy neoclassical growth model (CNGM) to allow for costly goods trade and capital flows with imperfect substitutability between countries. We develop a tractable, multi-country, quantitative model that matches key features of the observed data (e.g., gravity equations for trade and capital holdings) and is well suited for analyzing counterfactual policies that affect both goods and capital market integration (e.g., U.S.-China decoupling). We show that goods and capital market integration interact in non-trivial ways to shape impulse responses to counterfactual changes in productivity and goods and capital market frictions and the speed of convergence to steady-state.
    Keywords: Economic Growth, International Trade, Capital Flow
    JEL: F10 F21 F60
    Date: 2023–12

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