nep-cna New Economics Papers
on China
Issue of 2025–05–19
twenty-two papers chosen by
Zheng Fang, Ohio State University


  1. China's Overseas Lending in Global Finance Cycle By Zhengyang Jiang
  2. Beyond Tariffs: How Did China’s State–Owned Enterprises Shape the US–China Trade War? By Felipe Benguria; Felipe Saffie
  3. The Direct and Indirect Effects of the Belt and Road Initiative on Exports to China By Haonan LI; Yasuyuki TODO
  4. Building a Potemkin Village in Occupied China: Japan's Wartime System of Linked Trade, 1939-43 By Takagi, Shinji
  5. The effect of information communication technology on entrepreneurship: Evidence from rural China By Komatsu, Sho; Nguyen-Phung, Hang Thu
  6. The US-China Trade War Creates Jobs (Elsewhere) By Tiago Cavalcanti; Pedro Molina Ogeda; Emanuel Ornelas
  7. AI-tocracy By Beraja, Martin; Kao, Andrew; Yang, David Y.; Yuchtman, Noam
  8. From “super app” to “super VC”: the value-added effect of China's digital platforms By Wang, Jiancheng; Li, Xiaoye
  9. How is Geopolitical Fragmentation Reshaping U.S. Foreign Direct Investment? By Cody Kallen
  10. Understanding the uniqueness of emerging markets and their firms: institutional voids-based dynamic capabilities in the Chinese automotive sector By Cote, Christine; Hu, Helen
  11. A Comprehensive GIS Database for China's Surface Transport Network with Implications for Transport and Socioeconomics Research By Steven J. Davis; Meijun Qian; Wen Zeng
  12. Securing the supply of graphite for batteries By Karan Bhuwalka; Hari Ramachandran; Swati Narasimhan; Adrian Yao; Julia Frohmann; Leopold Peiseler; William Chueh; Adam Boies; Steven J. Davis; Sally Benson
  13. Will high carbon prices reduce fossil fuel use in China? Evidence from price elasticity estimates using firm data By Mei Lu; Michael G Pollitt
  14. Firm and labour adjustments to FDI liberalization By Ming-Jen Lin; Yi-Ting Wang; Sung-Ju Wu
  15. State versus Market: China's Infrastructure Investment By Shuoge Qian; Hong Ru; Wei Xiong
  16. An exploration of air pollution patterns in Japan, South Korea, and China By Dominguez, Alvaro
  17. Gains from targeting? Government subsidies and firm performance in China By Jiuli Huang; Yabin Wang; Min Zhu
  18. Taming Cycles: China’s Growth Targets and Macroeconomic Management By Jeffery (Jinfan) Chang; Yuheng Wang; Wei Xiong
  19. Eco-efficiency as a Catalyst for Citizen Co-production: Evidence from Chinese Cities By Ruiyu Zhang; Lin Nie; Ce Zhao; Xin Zhao
  20. Sino-Peruvian Cooperation in Maritime exports: Analyzing Mega port of Chancay By Jimenez Lopez, Grace Annette
  21. The Impact of Intergenerational Transfers on the Distribution of Wealth: An International Comparison By Horioka, Charles Yuji
  22. Beyond the AI Divide : A Simple Approach to Identifying Global and Local Overperformers in AI Preparedness By Pierre Jean-Claude Mandon

  1. By: Zhengyang Jiang
    Abstract: China’s rising presence in international finance, which has long lagged behind its prominence in international trade, is now reshaping global financial dynamics. Using a large sample of developing countries, this paper documents that countries more reliant on China’s lending are less exposed to the global financial cycle in exchange rates, equity prices, bond yields, and capital flows. These countries were not less exposed before China became a major lender, and trade linkages to China do not explain these results. Since China lends primarily in dollar, the exposure reduction is not through the traditional channel of mitigating currency mismatch. These findings suggest that international lending plays a unique role in insulating developing countries from global shocks, and through this channel U.S. and Chinese policies interact to shape global financial outcomes.
    JEL: F34 F42 G15
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:nbr:nberwo:33519
  2. By: Felipe Benguria; Felipe Saffie
    Abstract: We study the role played by Chinese state–owned firms during the US–China trade war. Based on measures constructed from Chinese firm–level customs microdata, we show that the presence of state–owned enterprises (SOEs) in Chinese imports led to a large negative impact on US exports in addition to the effect of tariffs. Abstracting from general equilibrium effects, while tariffs account for an 8% decline in US exports to China, the SOE effect accounts for a 4% decline. This SOE effect was concentrated toward the end of 2018 and start of 2019, point at which a vast majority of products had already been targeted by tariffs. Further, the SOE effect was concentrated among agricultural goods and industrial supplies, as well as among industries located in US regions with a high share of Republican votes. We also find that US exports were rerouted to the rest of the world in response to Chinese tariffs, but not in response to reduced imports by Chinese SOEs.
    JEL: F1
    Date: 2025–03
    URL: https://d.repec.org/n?u=RePEc:nbr:nberwo:33599
  3. By: Haonan LI; Yasuyuki TODO
    Abstract: This study investigates the direct effect of a country's participation in China’s Belt and Road Initiative (BRI) on its exports to China, as well as its indirect effect on other countries' exports to China. Using an event study approach, staggered difference-in-differences methodology, and spatial econometric models, we find that participation in the BRI significantly increases member countries’ exports to China, partly because of improvements in infrastructure. We also find evidence showing that countries without strong pre-existing political ties with China are more likely to experience greater export gains after joining the BRI. Furthermore, employing the Spatial Durbin Model, we find that the BRI has a significantly negative indirect effect on exports of countries with a manufacturing share similar to those of BRI members. This result likely reflects heightened competitive pressures, as the BRI increases exports to China from members. However, when using a spatial weight matrix constructed based on geographic distance, we find no significant indirect effect, suggesting that the positive effect of the BRI does not spill over to geographic neighbor countries through infrastructure development.
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:eti:dpaper:25038
  4. By: Takagi, Shinji
    Abstract: The paper discusses the little-known exchange rate system of Japanese- occupied North China during the Second Sino-Japanese War, whereby exporters were given the right to import in the form of a piece of yellow paper, which could be sold in the secondary market. In an environment of rapid inflation where North China's yuan was pegged to the Japanese yen and devaluation was not politically feasible, the system incentivized exports by allowing the exporters to offset their losses with the profits from selling goods imported, or the right to import goods, at the overvalued exchange rate. Following the start of the Pacific War, the system evolved to become a major scheme of facilitating trade between North and Central China under Japanese occupation. The paper, utilizing archived classified documents, reconstructs analytically how the system operated. Further, our analysis based on monthly average data confirms that the secondary market pricing of yellow paper broadly mimicked the operation of a flexible exchange rate. The system died a natural death when exploding inflation in Central China eliminated the export disincentive in North China.
    Keywords: linked trade, Japanese-occupied China, yen bloc, special yen, Second Sino Japanese War
    JEL: F31 F33 E42 N25
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:agi:wpaper:02000206
  5. By: Komatsu, Sho; Nguyen-Phung, Hang Thu
    Abstract: As entrepreneurial dynamism is widely recognized as a driver of innovation and economic growth, it is important to understand the determinants of entrepreneurship. However, there is little literature examining the role of ICT and its potential mechanisms of individual entrepreneurship in rural China. This study investigates the effect of ICT utilization on entrepreneurship and its potential mechanisms by using China Family Panel Studies (CFPS) data from 2014 to 2020. We identify Internet use via computers, Internet use via mobile devices, and Internet use by computer or mobile devices as proxy variables for ICT utilization. Our empirical results indicate that ICT utilization has a significant and positive effect on entrepreneurship in rural China. The results remain robust after a series of robustness tests. This study also finds that the effect is heterogeneous by gender, generation, educational background, and regions. Furthermore, mechanism analysis shows that the Internet can promote entrepreneurship by facilitating access to information and the formation of social capital. The above finding in rural China will have important implications for economic development and poverty reduction in other developing countries.
    Keywords: information communication technology, Internet use, entrepreneurship, rural China
    JEL: L26 O18 O33 R11
    Date: 2025–03
    URL: https://d.repec.org/n?u=RePEc:agi:wpaper:02000184
  6. By: Tiago Cavalcanti; Pedro Molina Ogeda; Emanuel Ornelas
    Abstract: We examine the indirect effects of the US-China trade war on Brazil’s labor market. Using industry-specific tariff changes and the sectoral employment distribution across local labor markets, we construct a measure of regional exposure to the trade conflict. Following higher exports to China, our findings reveal that regions more exposed to Chinese retaliatory tariffs on US exports experienced a relative increase in formal employment and wage bills. In contrast, American tariffs on Chinese exports had no significant impact on Brazilian labor markets. These results contribute to a better understanding of the intricate worldwide implications of bilateral trade wars.
    Keywords: trade war, trade diversion, local labor markets, Brazil.
    JEL: D31 F14 F16 F66 J23
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:ces:ceswps:_11839
  7. By: Beraja, Martin; Kao, Andrew; Yang, David Y.; Yuchtman, Noam
    Abstract: Recent scholarship has suggested that artificial intelligence (AI) technology and autocratic regimes may be mutually reinforcing. We test for a mutually reinforcing relationship in the context of facial-recognition AI in China. To do so, we gather comprehensive data on AI firms and government procurement contracts, as well as on social unrest across China since the early 2010s. We first show that autocrats benefit from AI: local unrest leads to greater government procurement of facial-recognition AI as a new technology of political control, and increased AI procurement indeed suppresses subsequent unrest. We show that AI innovation benefits from autocrats' suppression of unrest: the contracted AI firms innovate more both for the government and commercial markets and are more likely to export their products; noncontracted AI firms do not experience detectable negative spillovers. Taken together, these results suggest the possibility of sustained AI innovation under the Chinese regime: AI innovation entrenches the regime, and the regime's investment in AI for political control stimulates further frontier innovation.
    Keywords: artificial intelligence; autocracy; innovation; data; China; surveillance; political unrest
    JEL: E00 L63 O30 P00 L50 O40
    Date: 2023–08–01
    URL: https://d.repec.org/n?u=RePEc:ehl:lserod:118187
  8. By: Wang, Jiancheng; Li, Xiaoye
    Abstract: This paper studies China's big digital platforms’ value-added effect as venture capitalists, using a dataset of companies registered in China that eventually reach the initial public offering stage. We find that China's digital platforms’ investments positively affect their portfolio firms’ IPO performance, in terms of higher IPO valuation, lower underpricing, and shorter time to reach the IPO stage, which is inconsistent with the grandstanding hypothesis. The plausible underlying channels are the certification and monitoring roles played by China's digital platform. The results remain robust after addressing several concerns. Our study sheds new light on VCs’ characteristics and digital platforms’ activities.
    Keywords: digital platforms; IPO performance; new ventures; value adding; venture capital
    JEL: G23 G24 G32 L20
    Date: 2023–06–01
    URL: https://d.repec.org/n?u=RePEc:ehl:lserod:118665
  9. By: Cody Kallen
    Abstract: With the rise of geopolitical tensions, public commentary and new research have raised concerns about the reallocation of economic activities along geopolitical lines. Early evidence suggests that trade patterns, supply chains, and investment are shifting away from China and toward alternative countries.
    Date: 2025–04–10
    URL: https://d.repec.org/n?u=RePEc:fip:fedgfn:2025-04-10
  10. By: Cote, Christine; Hu, Helen
    Abstract: IB scholars are interested in understanding the uniqueness of emerging markets and their firms and argue that firms operating in environments characterized by institutional voids are likely to face higher costs due to reduced information flows and limited market intermediaries. We argue that institutional voids drive the dynamic capabilities of emerging market multinational enterprises. Taking the Chinese auto industry as an example, this article integrates institutional voids and dynamic capabilities to provide insight into how Chinese EMNEs have moved from technology followers to technology leaders to integrate, build, and reconfigure internal and external competencies and address a rapidly changing environment.
    Keywords: emerging markets; EMMNEs; dynamic capability; institutional voids; China Speed
    JEL: J50
    Date: 2025–02–24
    URL: https://d.repec.org/n?u=RePEc:ehl:lserod:127244
  11. By: Steven J. Davis; Meijun Qian; Wen Zeng
    Abstract: We build a granular GIS database that covers China’s national highways, modern motorways, traditional railways, high-speed railways, and waterways at an annual frequency from 1993 to 2020. Overall network length more than tripled after 1993, with half the increase accounted for by modern motorways and high-speed railways. Mean distance from zip-code centroids in China to nearest motorway access point fell from 302 km in 1993 to 15 km in 2020. Average within-county connectivity to the transport network rose sharply. We also show that discrepancies between distance to nearest motorway access point and straight-line distance to motorway routes are often large, and they correlate with calendar time, terrain features, and economic development. This finding raises concerns about the use of straight-line distance when estimating the causal effects of transport improvements. Our GIS database is freely available on an open-access basis, creating an empirical laboratory for new research in multiple directions.
    JEL: L92 N75 O18 R40
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:nbr:nberwo:33515
  12. By: Karan Bhuwalka; Hari Ramachandran; Swati Narasimhan; Adrian Yao; Julia Frohmann; Leopold Peiseler; William Chueh; Adam Boies; Steven J. Davis; Sally Benson
    Abstract: The increasing demand for graphite in batteries, particularly for electric vehicles, has led to concerns around supply chain security. Currently, over 92% of global anode material is produced in China, posing a geopolitical risk for other countries reliant on graphite supply for domestic industries. This paper assesses the costs of producing battery-grade graphite (natural and synthetic) in the US and China using process-based cost models. We find that production costs in the US significantly exceed those in China due to higher capital intensity and input costs. Our analysis reveals that a majority of modeled projects in the US are not competitive at current market prices. We identify key cost drivers, including capital costs, economies of scale, and input material prices, and explore pathways to improve the competitiveness of US graphite production, such as supportive financing and process innovation directions. The analysis of conventional graphite production costs at scale also informs ceiling costs for alternative, promising pathways such as methane pyrolysis and catalytic graphitization. This study highlights the challenges and trade-offs in building a diversified graphite supply chain and informs policy and investment decisions.
    Date: 2025–03
    URL: https://d.repec.org/n?u=RePEc:arx:papers:2503.21521
  13. By: Mei Lu; Michael G Pollitt
    Keywords: Carbon price, carbon trading, CBAM, energy price elasticity
    JEL: L94
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2508
  14. By: Ming-Jen Lin; Yi-Ting Wang; Sung-Ju Wu
    Abstract: This paper studies how liberalizing outward foreign direct investments (FDI) affects manufacturers’ engagement in global production and their domestic workers’ labor market outcomes. Focusing on a liberalization policy in 2001 by the government of Taiwan that allowed 122 electronic products to be produced in China, we estimate its effect on Taiwanese electronic manufacturers and their domestic workers. Employing a matched difference-in-differences strategy, we find that the manufacturers targeted by the policy were on average 14% more likely to invest in China relative to the non-targeted ones. Correspondingly, the domestic incumbent workers of the targeted manufacturers were on average more likely to change their jobs, stay employed for fewer years, and have lower wages in subsequent years relative to those employed by the non-targeted ones. The worker-level effects of the policy exhibited substantial heterogeneity across the initial wage distribution, with the top-decile workers benefiting and the other workers losing on average
    Keywords: foreign direct investments; labour markets
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:not:notgep:2025-01
  15. By: Shuoge Qian; Hong Ru; Wei Xiong
    Abstract: Amid rising global interest in state interventions, this paper examines how China’s infrastructure investments—a key macroeconomic policy tool—affect firm productivity. We focus on a policy that encourages regional governments to improve market conditions for private enterprises. Our analysis shows that a better market environment amplifies infrastructure investment spillovers. However, the overall impact remains neutral or negative despite greater gains in industries with improved market access. These findings highlight the complex interplay between state intervention and market forces, raising concerns about the effectiveness of infrastructure investments in sustaining growth, especially in regions with weak market institutions.
    JEL: H54 O10
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:nbr:nberwo:33725
  16. By: Dominguez, Alvaro
    Abstract: We investigate the spatial distribution of air pollutants in Japan, South Korea, and China for the year 2021. Our analysis utilizes satellite data on fine particulate matter at the municipal/county level, along with population density, vegetation difference, and night lights. Using dependence analysis and a clustering method to classify municipalities and counties based on geographical and similar attributes, we delineate distinct clusters within each country. Furthermore, through this spatial examination, we identify consistent positive correlations between air pollution and economic activity in each country. These methods allow us to detect areas where targeted policies can effectively enhance air quality for the population.
    Keywords: Air pollution, Japan, South Korea, China, Spatial analysis
    Date: 2025–03
    URL: https://d.repec.org/n?u=RePEc:agi:wpaper:02000199
  17. By: Jiuli Huang; Yabin Wang; Min Zhu
    Abstract: This paper studies the firm-level impact of the world’s largest targeted capital import subsidy program implemented in China. Drawing on rich manufacturing firm survey data, product-level trade transactions, and a comprehensive list of capital goods eligible for subsidies, we exploit variation in firms’ exposure to the subsidy program to assess its impact on credit access, investment, sales, and trade. We find that a one-standard-deviation increase in a firm’s exposure to the subsidy leads to a 0.03% increase in total borrowing and a 0.05% reduction in financing costs. These financial benefits translate into substantial real effects, including a 0.15% rise in investment and a 1.39% improvement in the marginal revenue product of capital. The program’s benefits persist over time and are especially pronounced for financially constrained firms and non-state enterprises, indicating that targeted import subsidies can effectively alleviate market frictions and foster industrial development.
    Keywords: Government subsidy, credit allocation, investment, financial constraint
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:not:notgep:2025-05
  18. By: Jeffery (Jinfan) Chang; Yuheng Wang; Wei Xiong
    Abstract: China’s hybrid economy blends state planning with market mechanisms, using annual economic targets to guide development and macroeconomic management to ensure their achievement. Local governments set ambitious growth targets to align with central mandates and incentivize subordinates, leading to asymmetric adjustments: targets rise rapidly during booms but decline sluggishly during slowdowns. This dynamic has heightened pressure on local governments to intervene in the economy, particularly after 2010. Our analysis shows that when a region falls short of its growth target, it increases infrastructure investment, land sales, and local government debt to close the gap. Notably, during the relatively stable period of 2011–2019, overly optimistic targets contributed an additional 14.0% of GDP to local government debt. While these interventions helped smooth cyclical fluctuations and moderated the trend of GDP deceleration, they also eroded GDP growth’s reliability as an economic indicator, weakening its correlation with corporate revenue, household demand, and TFP gains.
    JEL: E02
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:nbr:nberwo:33718
  19. By: Ruiyu Zhang; Lin Nie; Ce Zhao; Xin Zhao
    Abstract: We examine whether higher eco-efficiency encourages local governments to co-produce environmental solutions with citizens. Using Chinese provincial data and advanced textual analysis, we find that high eco-efficiency strongly predicts more collaborative responses to environmental complaints. Causal inference suggests that crossing a threshold of eco-efficiency increases co-production probabilities by about 24 percentage points, indicating eco-efficiency's potential as a catalyst for participatory environmental governance.
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:arx:papers:2504.13290
  20. By: Jimenez Lopez, Grace Annette
    Abstract: This paper delves into the strategic cooperation between Peru and China in the maritime trade sector by using the case study of the Chancay Mega port, infrastructure project preinaugurated in 2024 and expected to begin operating in 2025. As one of the first nodes in China’s Belt and Road Initiative in Latin America’s west coast, the port exemplifies the increasing bilateral trade and foreign investment. The research aims to address benefits and potential threats, including economic interdependence, regional cooperation, social disruption, and geopolitical tensions. Through the analysis of policy documents, official statements and government reports, future limitations and opportunities are underscored for the economic strategy in Peru and the Latin American region.
    Date: 2024–12–12
    URL: https://d.repec.org/n?u=RePEc:osf:osfxxx:43ncp_v1
  21. By: Horioka, Charles Yuji
    Abstract: Abstract: In this paper, I analyze detailed data on intergenerational transfers in 4 countries (China, India, Japan, and the United States) from the "Japan Household Panel Survey on Consumer Preferences and Satisfaction (JHPS-CPS)" which has been conducted by the Institute of Social and Economic Research of Osaka University in these 4 countries since 2003, in order to shed light on the impact of intergenerational transfers on household wealth disparities and on possible reasons for the substantial differences in household wealth disparities among the 4 countries. Almost all of the evidence I present suggests that intergenerational transfers have a disequalizing impact on household wealth disparities and promote the transmission of household wealth disparities from generation to generation in all 4 countries although the magnitude of these effects varies considerably from country to country. Moreover, the evidence I present sheds considerable light on possible reasons for the substantial differences in household wealth disparities among the 4 countries.
    Keywords: bequests, estates, household wealth, inheritances, inter vivos transfers, intergenerational mobility, intergenerational transfers, wealth disparities, wealth distribution, wealth inequality, China, India, Japan, United States
    JEL: D12 D31 D64 E21 E24 J16
    Date: 2024–09
    URL: https://d.repec.org/n?u=RePEc:agi:wpaper:02000143
  22. By: Pierre Jean-Claude Mandon
    Abstract: This paper examines global disparities in artificial intelligence preparedness, using the 2023 Artificial Intelligence Preparedness Index developed by the International Monetary Fund alongside the multidimensional Economic Complexity Index. The proposed methodology identifies both global and local overperformers by comparing actual artificial intelligence readiness scores to predictions based on economic complexity, offering a comprehensive assessment of national artificial intelligence capabilities. The findings highlight the varying significance of regulation and ethics frameworks, digital infrastructure, as well as human capital and labor market development in driving artificial intelligence overperformance across different income levels. Through case studies, including Singapore, Northern Europe, Malaysia, Kazakhstan, Ghana, Rwanda, and emerging demographic giants like China and India, the analysis illustrates how even resource-constrained nations can achieve substantial artificial intelligence advancements through strategic investments and coherent policies. The study underscores the need for offering actionable insights to foster peer learning and knowledge-sharing among countries. It concludes with recommendations for improving artificial intelligence preparedness metrics and calls for future research to incorporate cognitive and cultural dimensions into readiness frameworks.
    Date: 2025–02–24
    URL: https://d.repec.org/n?u=RePEc:wbk:wbrwps:11073

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