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on China |
| By: | Devasmita Jena ((corresponding author) Madras School of Economics, Chennai, Tamil Nadu, India, 600025); Uzair Muzaffar (Madras School of Economics, Chennai, Tamil Nadu, India, 600025); Rahul Nath Choudhury (Economist, EY LLP India) |
| Abstract: | Over the past couple of years import dependency on China has deepened and expanded globally. Incidences like supply chain disruption during COVID19 due to over dependence on single supply source, and countries’ heavy reliance on Chinese imports—often termed the “China shock”— has garnered anxiety worldwide and forced them to make efforts to wean away from China. The weaning attempt started in 2018 when the US imposed additional tariffs on its imports from China. Gradually, the process of decoupling or weaning away from China, was adopted by other economies. Despite the motivation to move away from China, data shows that nations continue to depend increasingly on imports from China. In this study we empirically quantify the trade dependence on China and estimate the costs associated with weaning away from China using structural gravity model of trade. We find that lowering dependence on Chinese imports results in diminishing countries’ propensity to export. Furthermore, general equilibrium counterfactual simulations show that if US progressively reduces import dependency on China, the welfare loss will be higher for the US as compared to that of China. The rest of the world will also suffer welfare losses owing to US’ action to bar Chinese imports. |
| Keywords: | China, Decoupling, Import Dependency, Structural Gravity, Welfare, PPML |
| JEL: | F13 F14 F17 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:mad:wpaper:2025-279 |
| By: | Schulte, Erik V.; Kaplan, Lennart |
| Abstract: | Global powers increasingly use trade as a tool of geopolitical influence. But can trade also foster soft power? We provide novel evidence on this relationship by combining geo-referenced survey data from 22 African countries sourced from the Gallup World Poll with Chinese import data. Exploiting plausibly exogenous variation in manufacturing imports induced by the "China shock, " we find that trade does not affect African citizens' attitudes towards China in the aggregate. However, the China shock is associated with higher perceived incomes and contributes to more favorable views of China in African countries with low technological intensity. Most notably, among citizens in democratic regimes, increased trade exposure is associated with more favorable perceptions of China, suggesting that political context mediates the effectiveness of trade-based soft power. |
| Keywords: | Trade, soft power, China-Africa, China shock, Gallup World Poll |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cegedp:320431 |
| By: | Shumin Qiu (East China University of Science and Technology); Claudia Steinwender (LMU Munich); Pierre Azoulay (MIT Sloan School of Management) |
| Abstract: | We investigate the phenomenon of home bias in scientific citations, where researchers disproportionately cite work from their own country. We develop a benchmark for expected citations based on the relative size of countries, defining home bias as deviations from this norm. Our findings reveal that China exhibits the largest home bias across all major countries and in nearly all scientific fields studied. This stands in contrast to the pattern of home bias for China’s trade in goods and services, where China does not stand out from most industrialized countries. After adjusting citation counts for home bias, we demonstrate that China’s apparent rise in citation rankings is overstated. Our adjusted ranking places China fourth globally, behind the US, the UK, and Germany, tempering the perception of China’s scientific dominance. |
| Keywords: | home bias; knowledge flows; citation patterns; china; science; |
| JEL: | F14 F6 F15 O3 O33 |
| Date: | 2025–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:534 |
| By: | Asmus-Bluhm, Gerda; Eichenauer, Vera Z.; Fuchs, Andreas; Parks, Bradley |
| Abstract: | China and India increasingly provide aid and credit to developing countries. This article explores whether India uses these financial instruments to compete for geopolitical and commercial influence with China. We build a new geocoded dataset of Indian government-financed projects in the Global South between 2007 and 2014 and combine it with data on Chinese government-financed projects. Our regression results for 2, 333 provinces within 123 countries demonstrate that India’s Exim Bank is significantly more likely to locate a project in a given jurisdiction if China provided government financing there in the previous year. Since this effect is more pronounced in countries where India is more popular relative to China and where both lenders have a similar export structure, we interpret this as evidence of India competing with China. By contrast, we do not find evidence that China uses official aid or credit to compete with India through co-located projects. |
| Keywords: | development finance, foreign aid, official development assistance, official credits, South-South cooperation, China, India, geostrategic competition |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:319916 |
| By: | Jiawei Xu (School of Management and Engineering, Digital Finance Key Laboratory of Jiangsu Province, Nanjing University, 22 Hankou Road, Nanjing, Jiangsu 210093, China); Elie Bouri (School of Business, Lebanese American University, Lebanon); Libing Fang (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | The US and China maintain deep economic ties, yet geopolitical tensions, especially during events such as the trade war, exert significant influence on their financial markets. This study examines how US-China tensions, as captured by the US-China Tension Index (UCT), affect the correlation between US and Chinese stock markets and stock market volatility using a DCC-DAGARCH-MIDAS model. Unlike prior studies that consider geopolitical risk and trade war shocks separately or give the same weight to positive and negative shocks of UCT, our approach jointly models asymmetric short-term volatility, macro-driven long-term variance, dynamic inter-market correlations, and assigns different weights to positive and negative shocks of UCT. The findings show that heightened tensions lead to stronger co-movements in return volatility, with effects becoming more immediate during the trade war. Beyond aggregate indices, we analyze the multi-tiered structure of the Chinese stock market, covering small and medium-sized enterprises (SMEs), blue-chip stocks, and technology-focused stocks. The results show that sensitivities vary across China's stock market indices, where SME index displays the most sensitive to UCT. These results provide practical insights for investors and policymakers aiming to manage risks in an increasingly geopolitically sensitive environment. |
| Keywords: | US-China Tensions, Geopolitical Tensions, US and Chinese Stock Returns and Volatility, DCC-DA-GARCH-MIDAS |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:pre:wpaper:202522 |
| By: | Felipe Benguria; Dennis Novy |
| Abstract: | How can a currency achieve more widespread international use? We study the internationalization of the Chinese renminbi (RMB) through the lens of a unique policy experiment in Argentina. In 2023, amid a severe dollar shortage, Argentina expanded a currency swap line with the People's Bank of China. Within the next few months, the share of imports from China invoiced in RMB surged rapidly to nearly 50% - displacing the US dollar, which had previously accounted for virtually all invoicing. Following the presidential election of late 2023, as macroeconomic policies changed and the dollar shortage eased, invoicing in RMB declined. We explore the mechanisms behind this aggregate pattern, using rich firm-level data on imports, bank-firm loan relationships, and bank balance sheets. Our results indicate that banks played a key role, in line with the dollar shortage narrative. First, firms with pre-existing relationships to banks with limited US dollar loans were more likely to switch to RMB. Second, firms borrowing from a Chinese state-owned bank were significantly more likely to use RMB. We also document firm-level spillovers, with RMB use for imports from China increasing the likelihood of RMB use for imports from other countries. Finally, we observe an effect on trade volumes. Firms switching to RMB saw increased total imports. |
| Keywords: | Banking, Central Bank, China, Geoeconomics, Invoicing, Lending, Renminbi, Swap, Trade, US Dollar |
| Date: | 2025–07–02 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2112 |
| By: | Natalie Chen; Dennis Novy; Diego Solórzano |
| Abstract: | In 2018 and 2019, the US administration increased tariffs on imports from China. Did these tariffs lead to more US imports from other countries such as Mexico? Using highly disaggregated data on the universe of Mexican firm-level exports, we find evidence of trade diversion from China to Mexico. We then combine the export data with detailed longitudinal employer-employee data to investigate the impact of trade diversion on labor market outcomes for workers employed by Mexican exporters. We find that trade diversion increased the labor demand of exporters exposed to US tariffs against China, resulting in more employment and higher wages, especially for low-wage workers such as female, unskilled, younger, and non-permanently insured employees. The effects were concentrated in technology and skill-intensive manufacturing industries. |
| Keywords: | employment, exports, firms, tariffs, trade costs, trade diversion, wages, workers |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11941 |
| By: | John Chung |
| Abstract: | To what extent do domestic distortions influence the gains from trade? Using data from Chinese manufacturing surveys and U.S. census records, I document two novel stylized facts: (1) Larger producers in China exhibit lower revenue productivity, whereas larger producers in the U.S. exhibit higher revenue productivity. (2) Larger exporters in China exhibit lower export intensity, whereas larger exporters in the U.S. exhibit higher export intensity. A model of heterogeneous producers shows that only the U.S. patterns are consistent with an efficient allocation. To reconcile the observed patterns in China, I introduce producer- and destination-specific subsidies and estimate the model without imposing functional form assumptions on the joint distribution of productivity and subsidy rates. Accounting for distortions in China leads to substantially smaller estimated gains from trade. |
| JEL: | F14 F12 D61 O17 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-33 |
| By: | Mao, Haiou; Görg, Holger |
| Abstract: | Geographical Indication (GI) is a rising policy in developing countries, which has been relatively neglected in the existing literature. This article studies Chinese agricultural GIs and its impact on firms’ exports. By relating newly authorized GIs with firm‐product‐location‐destination level customs trade data according to GIs’ geographical coverage and product type, we estimate the impact of these new GIs on firm's exports. Importantly, we can distinguish GIs with and without quality supervision. For the latter we find negative impacts on export quality, which is not the case for GIs with quality supervision. We interpret this in the context of our theoretical framework as evidence for quality free‐riding, where individual firms have an incentive to lower the quality of the export product. We show that this negative effect is less, the more concentrated an industry is or the more GIs there are for a particular product. Furthermore, our results suggest that the China‐EU agreement on Geographical Indications may play the role of quality supervision and prevent the possibility of free‐riding. |
| Keywords: | Agricultural Geographical Indications, China, export quality, free‐riding |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:319297 |
| By: | Liang , Pinghan (Sun Yat-sen University); Lou , Yadi (Sun Yat-sen University); Tian , Shu (Asian Development Bank) |
| Abstract: | Since the early 21st century, air quality concerns in the People’s Republic of China (PRC) have garnered significant attention from both the public authorities and society. This study investigates the effects of digital environmental monitoring technology on air pollution. Specifically, we explore the data from government procurement of digital environmental monitoring technologies over the 2014–2019 period. The baseline results indicate that on average, each additional environmental contract per 100, 000 residents signed by governments is associated with an 8-percentage point reduction in city PM2.5 levels. This effect arises from more accurate pollutant identification, which strengthens enforcement of environmental regulations, facilitating any necessary transition and, where applicable, orderly exit of heavily polluting enterprises, and fosters green innovation. Further, this effect exhibits regional variation in the extent of environmental concern and the level of information disclosure. The results suggest that technology-driven environmental governance, supported by public engagement and policy frameworks, plays a crucial role in enhancing air quality in the PRC. |
| Keywords: | digital environmental monitoring; PM2.5; public monitoring; information disclosure |
| JEL: | O18 O33 Q50 |
| Date: | 2025–07–02 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:0788 |
| By: | Laura Alfaro; Maria Brussevich; Camelia Minoiu; Andrea F. Presbitero |
| Abstract: | Finding new international suppliers is costly, so most importers source inputs from a single country. We examine the role of banks in mitigating trade search costs during the 2018–19 US-China trade tensions. We match data on shipments to US ports with the US credit register to analyze trade and bank credit relationships at the bank-firm level. We show that importers of tariff-hit products from China were more likely to exit relationships with Chinese suppliers and find new suppliers in other Asian countries. To finance their geographic diversification, tariff-hit firms increased credit demand, drawing on bank credit lines and taking out loans at higher rates. Banks offering specialized trade finance services to Asian markets eased both financial and information frictions. Tariff-hit firms with specialized banks borrowed at lower rates and were 15 percentage points more likely and three months faster to establish new supplier relationships than firms with other banks. We estimate the cost of searching for suppliers at $1.9 million (or 5 percent of annual sales revenue) for the average US importer. |
| Keywords: | financial frictions; bank lending; supply chains; trade policy |
| JEL: | G21 F34 F42 |
| Date: | 2025–05–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:101193 |
| By: | Hanming Fang; Ming Li; Guangli Lu |
| Abstract: | We decode China’s industrial policies from 2000 to 2022 by employing large language models (LLMs) to extract and analyze rich information from a comprehensive dataset of 3 million documents issued by central, provincial, and municipal governments. Through careful prompt engineering, multistage extraction and refinement, and rigorous verification, we use LLMs to classify the industrial policy documents and extract structured information on policy objectives, targeted industries, policy tones (supportive or regulatory/suppressive), policy tools, implementation mechanisms, and intergovernmental relationships, etc. Combining these newly constructed industrial policy data with micro-level firm data, we document four sets of facts about China's industrial policy that explore the following questions: What are the economic and political foundations of the targeted industries? What policy tools are deployed? How do policy tools vary across different levels of government and regions, as well as over the phases of an industry's development? What are the impacts of these policies on firm behavior, including entry, production, and productivity growth? We also explore the political economy of industrial policy, focusing on top-down transmission mechanisms, policy persistence, and policy diffusion across regions. Finally, we document spatial inefficiencies and industry-wide overcapacity as potential downsides of industrial policies. |
| JEL: | C55 L52 O25 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33814 |
| By: | Thomas Fent; Stefan Wrzaczek; Gustav Feichtinger; Andreas Novak |
| Abstract: | China and India, two Asian countries that experienced a rapid decline in fertility since the middle of the twentieth century, are the focus of this paper. Although there is no doubt that lower fertility levels have many positive effects on the economy, development and sustainability, little is known about the optimal transition from high to medium or even low levels of fertility. Firstly, implementing policies that have the potential to reduce fertility is costly. Secondly, additional costs arise from adapting the infrastructure to a population that fluctuates quickly not only in terms of size but also with respect to the age structure. We apply an intertemporal optimisation model that takes the costs and benefits of fertility decline into account. The optimal time path depends on the cost structure, the planning horizon and the initial conditions. In the case of a long planning horizon and high initial fertility, it may even be optimal to reduce fertility temporarily below replacement level in order to slow down population growth at an early stage. A key finding of our formal investigation is that, under the same plausible parameter settings, the optimal paths for China and India differ substantially. Moreover, our analysis shows that India, where the fertility decline emerged as a consequence of societal and economic developments, followed a path closer to the optimal fertility transition than China, where the fertility decline was state-imposed. The mathematical approach deployed for this analysis provides insights into the optimal long-term development of fertility and allows for policy conclusions to be drawn for other countries that are still in the fertility transition process. |
| Keywords: | Fertility decline, age structure, China, India |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:vid:wpaper:2401 |
| By: | Xie, Danyang |
| Abstract: | The United States and China exhibit markedly different development paths in digital assets and blockchain technology. The US relies on market-driven approaches, with the private sector promoting stablecoin innovation to strengthen the dollar’s global position, while China adopts a government-led approach, implementing centralized systems such as consortium chains and the digital yuan (e-CNY), emphasizing financial security and regulation. These divergent paths reflect fundamental institutional differences: American distrust of centralized institutions has fostered distributed ledger development, while China mitigates risks through government leadership. Currently, the digital yuan faces adoption challenges due to insufficient enthusiasm from commercial banks. We propose implementing a “dynamic reserve mechanism” to incentivize circulation and enhance privacy protection to address user concerns. The private sector should participate more actively in innovation, and we recommend establishing AI-supported “dynamic regulatory sandboxes” or “smart regulatory gateways” based on smart contracts to better balance innovation and regulatory needs. To address inflation and depegging risks of stablecoins, we recommend moving beyond fiat currency pegging to explore new models anchored to consumer goods, such as a “BigMac Coin.” |
| Keywords: | Central Bank Digital Currency; Stablecoins; Blockchain; Financial Regulation; Financial Innovation; Regulatory Sandbox |
| JEL: | E42 E58 F33 G28 |
| Date: | 2025–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124989 |
| By: | Sakaki, Alexandra |
| Abstract: | Southeast Asia has long been a foreign policy priority for Japan, but Tokyo has intensified its engagement - both with the ASEAN Community as a whole and with individual member states - since 2012. Japan views China's growing influence in Southeast Asia as a major foreign policy challenge and is seeking to prevent the emergence of a hierarchical order centred around China. It has economic as well as foreign and security policy interests in the region. Tokyo's engagement in Southeast Asia aims to uphold the rules-based multilateral order in the region, underpinned by US involvement. Of particular significance is Tokyo's commitment to shared rules, principles and norms - for example, in the areas of free trade, infrastructure development and maritime security. Japan's approach to Southeast Asia since 2012 has been characterised by both continuity and change. Unlike in the past, Japan is now seeking more comprehensive security cooperation with the region, including through dialogues, military exercises and capacity building programmes. ASEAN is important for Japan as the linchpin of regional cooperation. Tokyo supports the institutional development of the Community and helps reduce socio-economic differences between individual member states. Japan is intensifying its relations both with countries that are more critical of China - such as the Philippines - and with those considered more aligned with China - such as Cambodia. This approach extends to security policy. By offering to cooperate, Japan provides Southeast Asian countries with alternatives to Chinese initiatives and thereby prevents China from monopolising the region. apan and Europe are both interested in a stable, multilateral order in Southeast Asia. The two sides should therefore step up their engagement with the region and leverage their influence over regional geopolitical dynamics through complementary or joint initiatives. |
| Keywords: | Japan, Southeast Asia, ASEAN Community, South China Sea, Taiwan, EU, US, China's influence, foreign and security policy, US involvement, military exercises, capacity building programmes, regional cooperation, Philippines, Cambodia, Vietnam |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swprps:319902 |