nep-cna New Economics Papers
on China
Issue of 2024‒04‒08
eleven papers chosen by
Zheng Fang, Ohio State University

  1. Relocation from China (with Chinese Characteristics) By Garred, Jason; Yuan, Song
  2. The Long-Term Effect of Western Customs Institution on Firm Innovation in China By Gan Jin; Günther G. Schulze
  3. Chinese Macroeconomic Surprises and the Global Financial Cycle By Camila Gutierrez; Javier Turen; Alejandro Vicondoa
  4. Domestic savings-driven growth: unveiling internal economic dynamics in China, 1980-2010 By Deng, Kent; Du, Jane
  5. Wedded to Prosperity? Informal Influence and Regional Favoritism By Pietro Bomprezzi; Axel Dreher; Andreas Fuchs; Teresa Hailer; Andreas Kammerlander; Lennart Kaplan; Silvia Marchesi; Tania Masi; Charlotte Robert; Kerstin Unfried
  6. Measuring the effects of power system reform in Jiangsu province, China from the perspective of social cost benefit analysis By Tianyu Li; Ciwei Gao; Michael G. Pollitt; Tao Chen; Hao Ming
  7. Early Life Circumstance and Adult Psychological Well-being By Kerui Geng
  8. An Inquiry into the North-South Management Gap in China By Yong Soo Keong; Partha Sen; Cao Jing
  9. Anti-dumping and product quality By Mauro Caselli; Jiuli Huang; Chiara Tomasi; Min Zhu
  10. Tariffs on Input Trade Margins under Vertical Oligopoly:Theory and Evidence By Tomohiro Ara
  11. What if Trump is re-elected? Trade policy implications By Obst, Thomas; Matthes, Jürgen; Sultan, Samina

  1. By: Garred, Jason (University of Ottawa); Yuan, Song (Zhejiang University; CAGE, University of Warwick)
    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 Classification: F14, F21, F23
    Date: 2024
  2. By: Gan Jin; Günther G. Schulze
    Abstract: Can historical institutions affect today’s firm innovation? We analyze a historical experiment in 1902, when the foreign-run Chinese Maritime Customs Service (CMC), known for its efficient and transparent governance, took over some of the notoriously corrupt Chinese Native Custom stations and improved their governance. Using a large data set of contemporary industrial firms in China, we show that firms in locations historically affected by the CMC rules exhibit higher innovation intensities today, which can be attributed to the persisting norms of honesty and lawfulness embedded in the CMC institution. They reduce local corruption and stimulate firms’ investment in R&D and training to this day. We identify a causal effect by comparing firms in locations affected by the takeover with firms in similar but unaffected regions nearby. We also use an IV strategy that exploits the takeover criterion, which stipulated that Native Customs stations within a 25 km radius of a CMC customs station could be taken over by the Western powers.
    Keywords: innovation, persistence, institutions, corruption, China
    JEL: N75 N45 D73 Z10 O31
    Date: 2024
  3. By: Camila Gutierrez; Javier Turen; Alejandro Vicondoa
    Abstract: We study the international spillover effects of a macroeconomic surprise in China. Using high-frequency data, we show that the surprise component of the release of macro data in China brings a sizeable and significant effect on asset prices and global risk, across different economies. We document that the dynamic effect of Chinese Macro surprises is both significant and persistent for a broad range of financial variables worldwide. When assessing the relative importance of Chinese surprises relative to other known drivers of the Global Financial Cycle, we show that while the Monetary Policy in the US still accounts for most of the reaction, our measure is equally relevant to account for the reaction of commodities and the EMBI.
    Keywords: Spillovers, Global Financial Cycle, China, High-frequency
    JEL: E44 F21 F40 G15
    Date: 2024
  4. By: Deng, Kent; Du, Jane
    Abstract: It has been commonly believed that economic reforms in the post-Mao Era since 1980 have changed China from autarky to an export-oriented developmental path, accompanied by inward and cheap FDI with advanced foreign technology. This paper challenges this view with quantitative evidence and shows that China’s recent growth has depended heavily on a domestic source of capital coming from newly available household sayings, stemming from (1) state mandatory price control over food as a wage good on the one hand and (2) a fast-growing wage level due to arising labour productivity on the other.
    Keywords: developmental state; gradualism; saving-led growth; price overshoot; wage goods; economic transition
    JEL: O11 P21 P51 Q18
    Date: 2024–03–01
  5. By: Pietro Bomprezzi; Axel Dreher; Andreas Fuchs; Teresa Hailer; Andreas Kammerlander; Lennart Kaplan; Silvia Marchesi; Tania Masi; Charlotte Robert; Kerstin Unfried
    Abstract: We investigate the informal influence of political leaders’ spouses on the subnational allocation of foreign aid. Building new worldwide datasets on personal characteristics of political leaders and their spouses as well as on geocoded development aid projects (including new data on 19 Western donors), we examine whether those regions within recipient countries that include the birthplace of leaders’ spouses attract more aid during their partners’ time in office. Our findings for the 1990–2020 period suggest that regions including the birthplaces of political leaders’ spouses receive substantially more aid from European donors, the United States, and China. We find that more aid goes to spousal regions prior to elections and that developmental outcomes deteriorate rather than improve as a consequence. For Western aid but not for China, these results stand in some contrast to those for leader regions themselves. This suggests that aid from Western donors is directed from serving obvious political motives to promoting more hidden ones.
    Keywords: informal influence, ODA, favouritism, birth regions, development, political economy
    JEL: D72 F35 O19 O47 P33 R11
    Date: 2024
  6. By: Tianyu Li; Ciwei Gao; Michael G. Pollitt; Tao Chen; Hao Ming
    Keywords: Power system reform (PSR), social cost benefit analysis (SCBA), electricity market, industrial and commercial electricity price
    JEL: L94
    Date: 2022–09
  7. By: Kerui Geng (Tulane University)
    Abstract: The disparity in psychological well-being during adulthood can be traced back to early-life circumstances. While existing literature has highlighted the significant influence of contemporaneous factors on psychological well-being, little is known about its long-term determinants. I study the impact of early life circumstances on adult psychological well-being using the property reform in China as a positive and policy-driven change in economic resources in early life. Exploiting the staggered adoption of the reform, I find that exposure to property reform during the in-utero period and early childhood leads to higher adult life satisfaction, higher adult happiness, and better adult mental health. Larger effects are found among males and those whose parents are less educated. Birth weight, parental investment, adult health, and subjective assessments of one's circumstances are likely operative channels of effect. These findings shed light on the long-lasting consequences of early-life circumstances on psychological well-being in adulthood.
    Keywords: land reform, early-life circumstances, adult psychological well-being, life satisfaction, mental health
    JEL: I15 O15
    Date: 2024–03
  8. By: Yong Soo Keong; Partha Sen; Cao Jing
    Abstract: We identify a puzzling management practice gap in China. In the South, a one standard deviation increase in firms’ management competency is associated with a 7.5 percent improvement in sales productivity and a 29.2 increase in profitability. But such associations are muted for firms located in the North. The southern firms outperformed the northern firms by 8.1 percent in management practices and in all aspects of administration. We conjecture this is partially related to the convenience of accessing a larger export market in the South. The gap persists even after controlling for known sources of heterogeneity such as firm characteristics and resources. After decomposition, a difference of 6.6 percent in management quality remains unexplained. Remarkably, Northern firms’ management is correlated with mitigating environmental externalities but not for Southern firms. Our study contributes to the understanding of management that is potentially due to regional differences in social norms and institutional factors.
    Keywords: management practices, productivity, export
    JEL: D22 M10 M20 Q40 Q50
    Date: 2024
  9. By: Mauro Caselli; Jiuli Huang; Chiara Tomasi; Min Zhu
    Abstract: We examine the export behavior of Chinese firms, in particular firms’ decision on product quality, in the face of product- and market-specific tariff shocks that arise when importers impose anti-dumping (AD) duties. Exploiting the time-varying trade policy changes from the Global Antidumping Database and transaction-level Chinese customs data between 2000 and 2015, we find that Chinese firms hit by AD duties tend to decrease not only the export flows but also the quality of the targeted products, while no significant effect is found for prices. We show that the results are robust to several sensitivity checks . The estimated impact of quality downgrading continues even after the measure is revoked and it is more pronounced for firms exporting to developing countries. Further results allow us to better understand the underlying mechanism. Specifically, firms exposed to AD duties respond by importing input varieties with lower prices, which contributes to reduce the quality of their products. Back-of-the-envelope calculations show that countries imposing AD measures experience a 5.4% loss in consumer surplus for the targeted products.
    Date: 2023
  10. By: Tomohiro Ara
    Abstract: What is the effect of tariffs on the input trade margins when vertically related markets are oligopolistic? To address the question, this paper develops a vertical oligopoly model in which one country specializes in producing a final good while another country specializes in producing an intermediate good by taking into account strategic interactions among firms. We find that, for constant-elasticity demand, a tariff reduction increases the number of trading firms (extensive margin) and average trade value per firm (intensive margin) in the vertically related sectors, raising the intensive margin relative to the extensive margin. To assess the empirical relevance of our theoretical results, we focus on China's WTO accession which was a large policy change to Chinese firms. We find that a tariff reduction significantcantly increases both margins in the post-WTO period, though the effect on the extensive margin is much smaller than that on the intensive margin.
    Date: 2024–02
  11. By: Obst, Thomas; Matthes, Jürgen; Sultan, Samina
    Abstract: A possible re-election of Donald Trump as US president in November 2024 could entail a significant upheaval for the world trading order, if he fulfills his announcements to raise tariffs, mainly in order to reduce the US trade deficit. Such steps would not only have a negative effect on the world economy - and this at a time of significant global strains. They would also deal a further blow to the WTO, as the envisaged tariff increases would clearly violate international trade rules. Transatlantic relations with the EU are also likely to suffer. First, old trade disputes that were largely settled with the Biden administration could flare up again, e.g. regarding steel and aluminum. Second, Trump could abolish co-operative measures by the Biden administration that mitigate the protectionist elements of the US Inflation Reduction Act for EU exporters. Third, the future of the EU-US Trade and Technology Council (TTC) might be jeopardised. This report simulates the impact of two scenarios. Scenario 1 entails an increase of US tariffs to 10 per cent on all US imports and to 60 per cent on US imports from China in 2025. These threats have been publicly envisaged by Donald Trump and his former trade advisers. In scenario 2, in reaction to scenario 1, China would retaliate with a tariff increase of 40 percentage points on imports from the US.
    Abstract: Eine mögliche Wiederwahl von Donald Trump zum US-Präsidenten im November 2024 könnte der Welthandelsordnung erheblich schaden, falls Trump wie angekündigt die US-Zölle anheben würde, um vor allem das Handelsdefizit der USA zu verringern. Ein solches Szenario würde sich nicht nur negativ auf die Weltwirtschaft auswirken - in einer Zeit erheblicher globaler Spannungen. Auch die Welthandelsorganisation (WTO) würde einen weiteren Schlag erleiden, da die von Trump vage angekündigten Zollerhöhungen klar gegen die internationalen Handelsregeln verstoßen. Auch die transatlantischen Beziehungen zur Europäischen Union (EU) dürften darunter leiden. Erstens könnten alte Handelsstreitigkeiten wieder aufflammen, die mit der BidenAdministration weitgehend beigelegt wurden, zum Beispiel in Bezug auf Stahl und Aluminium. Zweitens könnte Trump die kooperativen Maßnahmen der Biden-Regierung aufheben, die die protektionistischen Elemente des US Inflation Reduction Act (IRA) für EU-Exporteure abschwächen. Drittens wäre die Zukunft des EU-US-Handels- und Technologierats (Trade and Technology Council TTC) womöglich gefährdet. In diesem Report werden die Auswirkungen von zwei Szenarien simuliert, die per Annahme Anfang 2025 umgesetzt werden könnten. Szenario 1 beinhaltet eine Erhöhung der US-Zölle auf 10 Prozent auf alle USEinfuhren und auf 60 Prozent auf US-Einfuhren aus China, was einer Zollerhöhung um 40 Prozentpunkte entspricht. Diese Drohungen wurden von Donald Trump und seinen früheren Handelsberatern öffentlich in Aussicht gestellt. In Szenario 2 würde China als Reaktion auf Szenario 1 mit einer Zollerhöhung um 40 Prozentpunkte auf seine Einfuhren aus den USA antworten. Diese beiden Szenarien werden mit dem Global Economic Model von Oxford Economics für die vier Jahre einer möglichen zweiten Amtszeit Trumps von 2025 bis 2028 simuliert und ergeben folgende Ergebnisse.
    JEL: E17 F14 F17 F52 F68
    Date: 2024

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