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on China |
| By: | Lorenzo Rotunno; Michele Ruta |
| Abstract: | Available data show a marked increase in subsidy utilization in China and in other major economies between 2009 and 2022. In this paper, we investigate the effects that China's subsidies have on international trade flows at the product level over this period. The results indicate that the subsidies promoted Chinese exports and limited imports. These effects have been magnified by supply-chain linkages: subsidies given to upstream industries expand significantly the exports of downstream industries. Additional analysis of the price and quantity effects at the product level shows that China's subsidies lowered export prices and boosted export quantities in certain sectors such as metal products, furniture and autos, but not in others such as electrical machinery where the evidence is more consistent with quality upgrading. |
| Keywords: | China; Domestic subsidies; International trade; Spillovers; Overcapacity |
| Date: | 2024–08–23 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/180 |
| By: | Chuantao Cui (Bay Area International Business School, Beijing Normal University); Leona Shao-Zhi Li (University of Macau) |
| Abstract: | This study explores how local leaders’ career incentives influence entrepreneurial activity in China. We identify a positive relationship between high-incentive leaders and the entry rate of new manufacturing firms, facilitated by access to capital and land and the implementation of place-based policies. However, firms that enter the market under high-incentive leaders tend to experience lower productivity growth and lower survivability, highlighting a quantity–quality trade-off. This quality deficit is linked to a mismatch between the types of new entrants and local economic fundamentals. Additionally, the responsiveness of manufacturing exit rates, productivity growth of existing manufacturers, and service firm dynamics to leader incentives appears minimal. Overall, by illuminating both the advantages and limitations of second-best institutions through the lens of firm entry, our study provides new insights into the institutions–growth nexus and offers a cohesive framework for understanding the growth and slowdown of the Chinese economy. |
| Keywords: | Informal institution; career incentives; economic growth; firm dynamics; entrepreneurship |
| JEL: | H70 L26 O43 P35 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:boa:wpaper:202417 |
| By: | Jamel Saadaoui (University of Paris 8) |
| Abstract: | This note explores the impact of geopolitical relationships between the US and China on the oil price. Using time-varying local projections, my analysis reveals that these dynamic effects are unstable over time. Indeed, these effects have been more observable since the global financial crisis, with China being increasingly perceived as a threat in the U.S. Instability is detected around the onset of the COVID-19 pandemic. During this period, geopolitical risks and political tensions influence oil price at different time horizons. |
| Keywords: | Time-Varying Local Projections, China, Oil Price, Political Relations, Geopolitical Risks, Global Financial Crisis, COVID-19 pandemic |
| JEL: | Q |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:inf:wpaper:2024.13 |
| By: | International Monetary Fund |
| Abstract: | After four decades of high growth and remarkable socioeconomic achievements, China’s growth has decelerated in recent years, reflecting the pandemic, a large but needed property market correction, and structural headwinds such as weakening productivity and labor force growth. The transition to lower growth is consistent with the authorities’ goal to pursue high-quality growth and reduce the imbalances and vulnerabilities that have emerged, most notably with the significant build-up of debt. The authorities have taken incremental policy steps to achieve these objectives, but a comprehensive and balanced policy approach is needed to manage the challenges facing the economy. |
| Date: | 2024–08–02 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfscr:2024/258 |
| By: | Mazzocco, Ilaria |
| Abstract: | Chinese firms are leading players in the production of clean energy technologies and appear set to expand further. This paper analyzes trends in Chinese clean tech manufacturing including internationalization, and the outlook for manufacturing facilities outside of China in the clean energy technology industry, including EVs, batteries, and wind turbines. Among the main findings: Chinese clean energy technology companies have been relatively quick to expand their foreign market share but production outside of China is still lagging. Europe is likely to be the preferred destination for Chinese battery, EV, and wind companies but current investments are limited to the battery industry. The production of different technologies is subject to different sets of incentives including cost and political considerations that will determine how quickly companies will internationalize production. Overall, the diversification of production would bolster the resilience of supply chains and economic development but is likely to proceed more quickly for batteries and more slowly for other technologies. |
| Keywords: | Social and Behavioral Sciences, China, renewable energy, technology, industrial policy, manufacturing |
| Date: | 2023–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:globco:qt19d8w4xm |
| By: | Miao Guo (Hunan University); Yang Li (University of Nottingham Ningbo China); Minghao Wu (China Life Insurance Company Ltd.); Terence C. Cheng (Harvard T.H. Chan School of Public Health & Monash University) |
| Abstract: | This study analyzes the effects of China’s long-term care insurance (LTCI) benefit design on household consumption and intergenerational support. The program provides two benefit options: in-kind benefits (or services) and cash allowances. We introduce a conceptual framework to analyze economic decision making under the two types of LTCI benefits. Using an empirical framework that exploits variations in LTCI benefit designs across China’s pilot cities, we find that both types of LTCI benefits increase household consumption and reduce medical expenditure. Specifically, ‘mixed’ benefits households – those with a choice between in-kind and cash benefits – significantly increase spending on food and housing, while households receiving services spend more on housing, transport, and clothing. Additionally, in-kind benefit recipients report receiving lower informal care from their children, implying a substitution with formal care. Households with mixed benefits experience a decline in financial support from children, suggesting a crowding-out of intergenerational transfers. Finally, we estimate income and sub-stitution effects that are implicit in recipients’ behavior to analyze welfare implications under China’s LTCI. |
| Keywords: | Long-term Care Insurance, Benefit Design, In-kind Benefits, Cash Benefits, Household Consumption |
| JEL: | I11 I13 I18 D10 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:mhe:chemon:2024-13 |
| By: | Huang, Jiayi (Cardiff Business School); Zhou, Peng (Cardiff Business School) |
| Abstract: | This paper examines cross-country heterogeneities and over-time changes of the role of social media marketing (SMM) in the luxury fashion industry. A comprehensive literature review is conducted on customer value, purchase intention, and engagement motivation to understand the causes and effects of SMM. Based on the survey data in China and the UK, probit and oprobit regressions are employed to estimate the models of SMM. Results show that affectional and cognitive motives are the two primary drivers of SMM engagement in both countries. Chinese customers are more susceptible to SMM than British counterparts, suggesting significant potential benefits of developing SMM strategies in China. Over time, SMM has become an irreversible trend of luxury brand management after the COVID pandemic. Identified heterogeneities and changes call for differentiated international marketing strategies in different countries at different times. |
| Keywords: | Social Media; Brand Interaction; Luxury Fashion Marketing. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2024/16 |
| By: | Yao Lu; Gordon M. Phillips; Jia Yang |
| Abstract: | We examine the rise of cloud computing and AI in China and their impacts on industry dynamics after the shock to the cost of Internet-based computing power and services. We find that cloud computing is associated with an increase in firm entry, exit and the likelihood of M&A in industries that depend more on cloud infrastructure. Conversely, AI adoption has no impact on entry but reduces the likelihood of exit and M&A. Firm size plays a crucial role in these dynamics: cloud computing increases exit rates across all firms, while larger firms benefit from AI, experiencing reduced exit rates. Cloud computing decreases industry concentration but AI increases concentration. On the financing side, firms exposed to cloud computing increase equity and venture capital financing, while only large firms increase equity financing when exposed to AI. |
| JEL: | D25 G3 G34 L20 L23 L25 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32811 |
| By: | Leona Shao-Zhi Li (University of Macau); Yize Liu (University of Macau); Jia Yuan (University of Macau) |
| Abstract: | Exploiting tariff variations during the U.S.–China trade war, we find that the U.S. tariff escalation is associated with a relative increase in corporate expenditure on research and development by listed Chinese manufacturing companies. Through a novel approach that infers the degree of competitive pressure from textual analyses of company annual reports, we identify an induced competition mechanism and offer evidence that is consistent with escape-competition motives. The marginal treatment effect is more pronounced for firms initially in neck-to-neck competition industries. Our findings are robust to various sensitivity tests and we consider different approaches of addressing the potential endogeneity concern. This is among the pioneering studies to examine the impact of adverse foreign trade shock on innovation responses in the source country, thus contributing with scholarly and policy implications in the face of rising protectionism. |
| Keywords: | U.S.–China trade war; tariff shocks; corporate innovation; escape-competition; textual analysis |
| JEL: | F13 F14 L60 O31 O32 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:boa:wpaper:202418 |
| By: | Mr. Daniel Garcia-Macia; Alexandre Sollaci |
| Abstract: | When and how should governments use industrial policy to direct innovation to specific sectors? This paper develops a framework to analyze the costs and benefits of industrial policies for innovation. The framework is based on a model of endogenous innovation with a sectoral network of knowledge spillovers (Liu and Ma 2023), extended to capture implementation frictions and alternative policy goals. Simulations show that implementing sector-specific fiscal support is only preferable to sector-neutral support under restrictive conditions—when externalities are well measured (e.g., greenhouse gas emissions), domestic knowledge spillovers of targeted sectors are high (typically in larger economies), and administrative capacity is strong (including to avoid misallocation to politically connected sectors). If any of these conditions are not fully met, welfare impacts of industrial policy quickly become negative. The optimal allocation of support entails greater subsidies to greener sectors, but other factors such as cross-sector knowledge spillovers matter. For a sample of technologically advanced economies, existing industrial policies seem to be directing innovation to broadly the right sectors, but to an excessive degree in most economies, including China and the United States. |
| Keywords: | Industrial policy; innovation; knowledge spillovers; climate policy; AI |
| Date: | 2024–08–16 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/176 |
| By: | Le-rong, YU; Jia-ming, GU |
| Abstract: | In the era of digital economy, it has become an important part of the digital transformation of the agricultural industry to promote the sound development of agricultural e-commerce. Based on sample data covering five provinces one municipality directly under the central government of China, the paper empirically analyzes the internal and external factors affecting online retail of agricultural products. The results show that park policies, business environment, market and other external factors significantly affect the online retail performance of agricultural products under the condition of controlling the characteristics of individual operators and products. However, the brand of agricultural products is still the key factor determining online retail performance. In addition, the mediating effects of new media communication on the relationship between external factors and online sales of agricultural products was significant. The research results can provide reference for further exploring the roles of government, market and new media technologies in boosting the development of agricultural e-commerce. |
| Keywords: | Agribusiness |
| Date: | 2024–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344310 |
| By: | Huang, Kaixing; You, Yaxuan |
| Abstract: | This study evaluates the impact of China's fourth round of poverty alleviation program, which targeted 14 contiguous destitute areas containing 680 counties and a population of 240 million. From 2012 to 2019, China allocated a total of 813.6 billion yuan (US$126.1 billion), primarily to economic development programs within these 14 areas. Using county-level data from 2006 to 2019, our difference-in-differences and difference-in-discontinuities estimates suggest that the program increased GDP per capita in the 14 areas by over 45% from 2012 to 2019, with substantial gains observed in both the agricultural and non-agricultural sectors. Our preferred estimates suggest a rate of return to the program ranged from 155.8% to 165.8%. By using data from over 14, 500 rural households from 2006 to 2015, we find that the program significantly elevated rural income and reduced rural poverty. While the income growth of extremely poor households was propelled more by agricultural income growth, the income growth of relatively poor households primarily resulted from non-agricultural sources. |
| Keywords: | Food Security and Poverty, International Development, Public Economics |
| Date: | 2024–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344251 |