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on China |
| By: | Hinh T. Dinh |
| Abstract: | President Biden's announcement of new tariffs on China, though not economically significant on its own, symbolizes the deepening decoupling of the U.S. and Chinese economies. These tariffs, supported by both major political parties, represent the latest step in a broader strategy that favors policy interventions over traditional free-market principles and aims to protect domestic workers, maintain technological leadership, and prioritize economic security. This policy brief discusses the factors behind this shift in U.S. economic policy, including the experiences from the first and second China shocks. This shift, along with China's subsequent export policy reactions, will have important implications for the trade policies of developing countries. |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rtrade:pb_28_24 |
| By: | Huachen Li; James M. Nason |
| Abstract: | This paper assesses the debate about the demise of the Chinese silver standard in the mid 1930s. One side argues the U.S. Silver Purchase Act of June 1934 drained China of silver, which caused deflation and economic crises. A related claim is the Chinese silver standard was intrinsically unstable. These hypotheses are evaluated by estimating Bayesian structural VARs with drifting parameters on China-U.K. and China-U.S. samples from April 1912 to September 1934. We find instability in the Chinese silver standard peaked during the recession of the early 1920s and the Great Depression. Hence, neither the U.S. Silver Purchase Act of June 1934 nor a design flaw led to the end of the Chinese silver standard. |
| Keywords: | China, silver standard, exchange rate, parity deviation, Bayesian structural VAR |
| JEL: | E42 F31 F33 N25 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2024-64 |
| By: | Rodolfo G. Campos (BANCO DE ESPAÑA); Ana-Simona Manu (EUROPEAN CENTRAL BANK); Luis Molina (BANCO DE ESPAÑA); Marta Suárez-Varela (BANCO DE ESPAÑA) |
| Abstract: | This paper analyzes the financial spillovers of shocks originating in China to emerging markets. Using a high-frequency identification strategy based on sign and narrative restrictions, we find that equity markets react strongly and persistently to Chinese macroeconomic shocks, while monetary policy shocks have limited or no spillovers. The impact is particularly strong in Latin American equity markets, with the likely channel being the effect of shocks in China on international commodity prices. These effects extend to various financial variables, such as sovereign and corporate spreads and exchange rates, suggesting that macroeconomic shocks in China may have implications for economic cycles and financial stability in emerging markets. |
| Keywords: | China, emerging markets, financial spillovers |
| JEL: | F31 F37 F62 F65 G15 N26 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2435 |
| By: | Zhang, Zheyuan (Capital University of Economics and Business, Beijing); Xu, Hui (Beijing Normal University); Liu, Ruilin (Capital University of Economics and Business, Beijing); Zhao, Zhong (Renmin University of China) |
| Abstract: | This paper estimates the impact of the Free Education Policy, a major education reform implemented in rural China in 2006, as a natural experiment on the intergenerational transmission of cognitive skills. The identification strategy relies on a difference-in-differences approach and exploits the fact that the reform was implemented gradually at different times across different provinces. By utilizing nationally representative data from the China Family Panel Studies, we find that an additional semester of exposure to the Free Education Policy reduces the intergenerational transmission of parent and child cognitive scores by an approximately 1% standard deviation in rural China, indicating a reduction of 3.5% in intergenerational cognitive persistence. The improvement in cognitive mobility across generations might be attributed to enhanced school attainment, the relaxation of budget constraints, and increased social contact for children whose parents are less advantaged in terms of cognitive skills. |
| Keywords: | free education policy, intergenerational transmission, cognitive skills |
| JEL: | H52 I24 J24 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17314 |
| By: | Aghion, Philippe; Bergeaud, Antonin; Lequien, Matthieu; Melitz, Marc J.; Zuber, Thomas |
| Abstract: | We decompose the “China shock” into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm level, we show that the output shock is detrimental to firms’ sales, employment, and innovation. Moreover, this negative impact is concentrated in low-productivity firms. On the other hand, the impact of the input supply shock is reversed. |
| JEL: | F3 G3 J1 |
| Date: | 2024–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123934 |
| By: | TAKEDA Shiro; HIGASHIDA Keisaku; YOMOGIDA Morihiro |
| Abstract: | Using a simple static computable general equilibrium model, we quantitatively examine the impact of trade restrictions between China and Japan on gross domestic product (GDP) and welfare in both countries. Furthermore, we examine trade flows not only between these two countries, but also between Japan and its other trading partners. We examine export and import quotas’ long-run effect (large elasticity of substitution (EOS)) and short-run effect (small EOS) as trade restrictions. When trade restrictions are imposed on manufacturing sectors, we find that regardless of the type of restriction, trade restrictions in either country negatively affect its own GDP. However, because of improvement in terms of trade, the welfare of a country imposing the restriction may increase. We also examine the short-run and long-run impacts of unilateral export restrictions on the ELE (computer, electronic, and optical products) sector, which includes semiconductors. Japan benefits less from its own export restrictions against China than China does from its export restriction against Japan. China can increase its GDP by imposing export restrictions on Japan, whereas Japan cannot. In response to China’s export restrictions on Japan, the country increases imports from both major and minor trading partners. This suggests Japan should broaden its import sources to include minor trade partners. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:24072 |
| By: | Mr. Philippe Wingender; Jiaxiong Yao; Robert Zymek; Benjamin Carton; Mr. Diego A. Cerdeiro; Miss Anke Weber |
| Abstract: | European countries have set ambitious goals to reduce their carbon emissions. These goals include a transition to electric vehicles (EVs)—a sector that China increasingly dominates globally—which could reduce the demand for Europe’s large and interconnected auto sector. This paper aims to size up the tradeoffs between Europe’s shift towards EVs and key macroeconomic outcomes, and analyze which policies may sharpen or ease them. Using state-of-the-art macroeconomic and trade models we analyze a scenario in which the share of Chinese cars in EU purchases rises by 15 percent over 5 years as a result of both a positive productivity shock for car production in China and a demand shock that shifts consumer preferences towards Chinese cars (given China’s dominance in the EV sector). We find that for the EU as a whole, the GDP cost of this shift is small in the short term, in the range of 0.2-0.3 percent of GDP, and close to zero over the long term. Adverse short-run effects are more significant for smaller economies heavily reliant on the car sector, mainly in Central Europe. Protectionist policies, such as tariffs on Chinese EVs, would raise the GDP cost of the EV transition. A further increase in Chinese FDI inflows that results in a significant share of Chinese EVs being produced in Central European economies, on the other hand, would offset losses in these economies by supporting their shift from supplying the internal combustion engine (ICE) production chain to that of EVs. |
| Keywords: | Electric vehicles; green transition; trade; tariffs; global value chains. |
| Date: | 2024–10–11 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/218 |
| By: | Otaviano Canuto |
| Abstract: | The global economic environment has changed as the U.S.—and to a less confrontational degree, the European Union—have clearly established a context of technological rivalry with China. Hindering China’s progress in the sophistication of semiconductor production has become a centerpiece of current U.S. foreign policy. While the U.S. is clearly winning the semiconductor war, the picture is different when it comes to clean-energy technology. Both technology wars overlap with access to and refinement of critical raw materials (CRM), which are key upstream components of the corresponding value chains, encompassing mineral-rich emerging markets and developing economies. The way in which the U.S. and the European Union approach the goal of self-sufficiency, as well as access to and refinement of CRMs, will make a big difference to their stakes in the technology wars. |
| Date: | 2023–11 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rtrade:pb_41-23 |
| By: | Zhenyu Su; Paloma Taltavull de La Paz |
| Abstract: | This research aims to conduct a spatial analysis of Chinese city-level housing prices in response to macroeconomic fluctuations. By employing advanced spatial analysis techniques, we will examine how macroeconomic indicators, such as GDP growth, inflation, interest rates, and employment levels, correlate with spatial patterns of housing prices across different cities in China. Through the utilization of geospatial data and econometric modeling, we seek to identify spatial clusters, hotspots, and coldspots of housing price changes in relation to macroeconomic shifts. Additionally, the study will explore the spatial heterogeneity of the housing market responses to macroeconomic changes, shedding light on regional disparities and variations in housing price dynamics. The findings of this research will provide valuable insights into the spatial relationships between macroeconomic conditions and housing prices in Chinese cities, offering implications for policymakers, real estate developers, and investors seeking to understand the nuanced dynamics of the housing market in response to macroeconomic shifts. |
| Keywords: | China; Housing Prices; macroeconomic indicators; spatial analysis |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-108 |
| By: | Meng, Meng (Swedish Institute for Social Research) |
| Abstract: | I describe the gender wealth gap in China and explore the reasons behind its expansion in recent decades. The analysis suggests that a combination of China’s 2011 Marriage Law reform and soaring housing prices contribute to this widening gap. The reform shifts the division of housing property upon divorce from an equal (50-50) distribution to one contingent upon the names registered on the housing deed, thereby conferring a wealth advantage to husbands usually registered on the housing deed. Descriptive analysis reveals that men hold more ownership of housing and wealth than women. Specifically, I demonstrate that, post-reform, husbands possess 22% more housing property share than their wives, resulting in an increased housing wealth advantage of 44, 884 CNY (equivalent to 7.9 times the annual income of wives in 2010). A dynamic difference-in-differences (DID) analysis indicates that although husbands’ share of property ownership initially surged and then declined post-reform, their proportion of housing wealth continued to increase and stabilize, primarily due to the rapid rise of housing prices. Furthermore, heterogeneity analysis shows a greater property share gap among rural couples but a more pronounced wealth gap among urban couples, attributed to rising housing prices in urban areas. The study concludes with a discussion of how seemingly gender-neutral policies can have gendered economic effects by interacting with traditionally gendered societal norms. |
| Keywords: | gender gap in property; gender wealth gap; property division |
| JEL: | J16 J18 |
| Date: | 2024–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:sofile:2024_003 |
| By: | Panle Jia Barwick; Myrto Kalouptsidi; Nahim B. Zahur |
| Abstract: | Industrial policy has been used throughout history in some form or other by most countries. Yet, it remains one of the most contentious issues among policymakers and economists alike. In part, this is because the empirical evidence on whether and how it should be implemented remains slim. Scant data on government subsidies, conflicting theoretical arguments, and the need to account for governments’ short and long-run objectives, render research particularly challenging. In this article, we outline a theory-based empirical methodology that relies on estimating an industry equilibrium model to measure hidden subsidies, assess their welfare consequences for the domestic and global economy, as well as evaluate the effectiveness of different policy designs. We illustrate this approach using the global shipbuilding industry as a prototypical example of an industry targeted by industrial policy, especially in periods of heavy industrialization. Just in the past century, Europe, followed by Japan, then South Korea, and more recently China, developed national shipbuilding programs to propel their firms to global leaders. Success has been mixed across programs, certainly by welfare metrics, and sometimes even by growth metrics. We use our methodology on China to dissect the impact of such programs, what made them more or less successful, and how we can justify why governments have chosen shipbuilding as a target. |
| JEL: | L50 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33043 |
| By: | Vahid Saadi |
| Abstract: | This paper shows that the rise in import competition from China forced U.S. banks to rebalance their credit portfolios away from business loans and towards mortgage lending during the period from 1999 to 2006. I show that while aggregate mortgage lending declines in exposed counties, banks that are more exposed to the rise in import competition increase their mortgage origination significantly in non-exposed areas, and expand their geographical reach into new counties. Mortgages originated by such banks in new counties are more likely to be high-interest loans issued to low-FICO score, high-LTV (loan-to-value) borrowers that would have otherwise been credit rationed. Overall, the findings show that banks that are more exposed experience a rebalancing of their loan portfolio towards residential loans during the sample period. These results highlight the role of increased import competition from China for the rapid increase in size and riskiness of the U.S. mortgage market prior to the 2007-09 mortgage crisis. |
| Keywords: | Bank portfolio reallocation; Financial Crisis; Import competition; Mortgage lending |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-043 |
| By: | Christopher J. Neely |
| Abstract: | This article examines the likely economic effects of a Chinese invasion or blockade of Taiwan for the U.S. and the world by considering historical precedents. Such a conflict would likely produce a flight-to-safety in the asset market, huge disruptions in international trade, banking problems, and would greatly exacerbate existing fiscal pressures. The authorities of the People’s Republic of China would probably try to sell U.S. and other western securities prior to a conflict to avoid sanctions on those assets. Such sales would be temporarily disruptive but would likely have only marginal effects on yields in the longer term. Long-term effects would include disrupted trade, higher price levels, higher levels of nominal debt and higher taxes. |
| Keywords: | war; Taiwan; foreign exchange reserves; asset prices; flight-to-safety; international trade; sanctions |
| JEL: | H56 F40 O24 G14 G15 G12 |
| Date: | 2024–09–27 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98963 |
| By: | FUJII Daisuke |
| Abstract: | Recent events of the Russian invasion of Ukraine and the US-China decoupling have shown that key trade policies today are shaped by geopolitical risks and economic security concerns. In Japan, economic security in increasingly complex global supply chains is also being discussed as an important policy theme, though quantitative evidence remains scarce. This paper aims to quantify the impact of trade disruptions with China on the Japanese economy. To do so, I develop a general equilibrium model of production networks with international trade, which incorporates non-unitary elasticity of substitution across intermediate inputs. The model is calibrated using large-scale firm-level network data from Japan. The aggregate impact of trade disruption is substantial in the short run but becomes milder in the long run. If both exports and imports with China decline by 90%, real GDP is projected to drop by 7% within a year. Additionally, import disruptions cause more severe damage than export disruptions. There is significant sectoral heterogeneity in the negative impact of trade disruptions, depending on sectoral exposure to trade, the share of intermediate inputs, and position within production networks. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:24073 |
| By: | Zhang, Kesen; Pan, Zhen; Zhang, Keming; Ji, Feng |
| Abstract: | Background: The goal of “peak carbon and carbon neutrality” has pointed out the direction for the digital transformation (DIT) of enterprises. Companies need to pay a price when they seek green development or fulfill environmental responsibility. Out of self-interest, enterprises may exaggerate their environmental performance (EP) and then greenwashing behavior appears. Whether DIT can curb greenwashing behavior is a topic worth discussing. Objective: This paper proposes a theoretical framework for the influence of DIT on greenwashing and further discusses how government subsidies, resource slack, and external pressure affect them. The data of China’s listed A - share companies are used to test this theoretical framework. Methods: In this paper, multiple linear regression method is used to test the theoretical mechanism, and Hausman test and instrumental variable method are used to test the correctness of the conclusions. Results: (1) DIT has an inhibitory effect on greenwashing. (2) Government subsidies, resource slack, and public pressure positively moderate the relationship. (3) The effect of DIT does inhibit symbolic behavior, but the impact on substantive behavior is not obvious. The moderating effects of various variables are also different. Discussion: It is suggested that the government take the lead in building more digital public participation platforms to improve the online monitoring and early warning ability of enterprises’ greenwashing behavior, tourge enterprises to configure more intelligent and digital cleaner production equipment and facilities, and to improve their environmental performance. Local governments are encouraged to seize the trend of enterprises’ digital green transformation, introduce more government subsidy policies for DIT, improve digital infrastructure and digital intellectual property protection, and escort enterprises’ green DIT. The government and the banks should cooperate to give more green preferential loans, tax relief, and other measures to enterprises undergoing green DIT. |
| Keywords: | digitisation; digitization; environmental responsibility; greenwashing; legitimacy theory; resources slack |
| JEL: | R14 J01 |
| Date: | 2023–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125707 |
| By: | Qinyue Luo (ROCKWOOL Foudation Berlin); Huihua Xie (Zhejiang University) |
| Abstract: | This study investigates the impact of teachers’ stereotyping of non-local students in terms of both academic performance and noncognitive outcomes using a random assignment of Chinese middle school students to teachers. We find that biased beliefs against non-local students, particularly among Chinese teachers, negatively affect non-local students by decreasing academic performance and increasing behavioral problems, with no significant effects on local students. Mechanism analysis suggests that these negative outcomes result from reduced teacher engagement with non-local parents, weaker classroom integration, and diminished self-confidence among non-local students. The negative effects are especially pronounced for non-local boys while non-local girls show resilience by increasing their efforts. These results highlight the critical role of teachers’ stereotyping in shaping disparities in human capital development between local and non-local students. |
| Keywords: | Teachers’ Stereotypes, Non-Local Students, Test Scores, Mental Stress, BehaviourProblems Index |
| JEL: | I24 J15 J24 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2420 |
| By: | Ludovic Panon (BANK OF ITALY); Laura Lebastard (EUROPEAN CENTRAL BANK); Michele Mancini (BANK OF ITALY); Alessandro Borin (BANK OF ITALY); Peonare Caka (BANK OF SLOVENIA); Gianmarco Cariola (BANK OF ITALY); Dennis Essers (NATIONAL BANK OF BELGIUM); Elena Gentili (BANK OF ITALY); Andrea Linarello (BANK OF ITALY); Tullia Padellini (BANK OF ITALY); Francisco Requena (UNIVERSITY OF VALENCIA); Jacopo Timini (BANCO DE ESPAÑA) |
| Abstract: | We study how disruptions to the supply of foreign critical inputs (FCIs)—inputs primarily sourced from extra-EU countries with highly concentrated supply, advanced technology products or inputs which are key to the green transition —may affect value-added at different levels of aggregation. Using firm-level customs and balance sheet data for Belgium, France, Italy, Slovenia and Spain, our framework allows us to assess how geoeconomic fragmentation may affect European economies differently. Our baseline calibration suggests that a 50% reduction in imports of FCIs from China and other countries with a similar geopolitical orientation would result in sizable value-added losses with significant heterogeneity across firms, sectors, regions and countries, driven by the heterogeneous exposure of firms. Our findings show that the short-term costs of supply disruptions of FCIs can be substantial, especially if firms cannot easily switch away from these inputs. |
| Keywords: | geoeconomic fragmentation, global value chains, global sourcing, international trade, imported inputs |
| JEL: | F10 F14 F50 F60 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2436 |
| By: | Panle Jia Barwick; Siyu Chen; Chao Fu; Teng Li |
| Abstract: | Concerns over the excessive use of mobile phones, especially among youths and young adults, are growing. Leveraging administrative student data from a Chinese university merged with mobile phone records, random roommate assignments, and a policy shock that affects peers’ peers, we present, to our knowledge, the first estimates of both behavioral spillover and contextual peer effects, and the first estimates of medium-term impacts of mobile app usage on academic achievement, physical health, and labor market outcomes. App usage is contagious: a one s.d. increase in roommates’ in-college app usage raises own app usage by 4.4% on average, with substantial heterogeneity across students. App usage is detrimental to both academic performance and labor market outcomes. A one s.d. increase in own app usage reduces GPAs by 36.2% of a within-cohort-major s.d. and lowers wages by 2.3%. Roommates’ app usage exerts both direct effects (e.g., noise and disruptions) and indirect effects (via behavioral spillovers) on GPA and wage, resulting in a total negative impact of over half the size of the own usage effect. Extending China’s minors’ game restriction policy of 3 hours per week to college students would boost their initial wages by 0.7%. Using high-frequency GPS data, we identify one underlying mechanism: high app usage crowds out time in study halls and increases absences from and late arrivals at lectures. |
| JEL: | D12 D90 E24 I23 L82 L86 Z13 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33054 |
| By: | Sabrine Emran |
| Abstract: | In the face of oil production cuts by Saudi Arabia and some OPEC members, the energy supply is shrinking again. This is in response to fears of an impending recession, higher inventories in some key countries, and an attempt to keep prices at a certain level. Turning to renewables is now essential to reduce dependence and increase resilience to energy insecurity, while non-renewable energy sources continue to show signs of unpredictability and harmful dependence. Economic outlooks vary from country to country. However, the link between energy demand and economic forecasts is stronger than ever. In this policy brief, we look at recent crude oil supply cuts, recession concerns and the outlook for renewable energy markets. In response to the different economic outlooks, a clear distinction is made between developing and developed countries, resulting in an energy demand that is more likely to come from countries such as China and India than from the major developed countries. |
| Date: | 2023–05 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpcoen:pb_22-23 |
| By: | Ruochen Dai (†Central University of Finance and Economics); Dilip Mookherjee (Boston University); Kaivan Munshi (Yale University and Toulouse School of Economics); Xiaobo Zhang (Peking University and IFPRI) |
| Abstract: | This research examines the determinants of entrepreneurship in China’s transition from agriculture to domestic production in the 1990’s and the subsequent transition to exporting in the 2000’s. The model that we develop and test to describe these transitions incorporates a productivity enhancing role for community (birth county) networks, which emerge in response to market imperfections at early stages of economic development. Using administrative data covering the universe of registered firms over the 1994-2012 period and the universe of exporters over the 2002-2012 period, we provide causal evidence that these networks of firms were active and were effective at increasing the revenues of their members, both in domestic production and exporting. While this substantially increased the number of domestic producers in the first stage, the incumbent domestic networks created a disincentive to enter exporting in the second stage that dominated the positive effect of the export networks. Our analysis provides a novel characterization of the development process in which community-based networks emerge at each stage to facilitate the occupational mobility of their members, and pre-existing networks slow down the growth of the networks that follow. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2406 |