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on China |
| By: | Camila Gutierrez (International Monetary Fund); Javier Turen (Pontificia Universidad Catolica de Chile); Alejandro Vicondoa (Pontificia Universidad Católica de Chile) |
| Abstract: | We study how Chinese macroeconomic surprises affect global financial markets. Exploiting forecast errors around key data releases and a 60-minute window around therelease, we show that positive industrial production (IP) surprises lead to immediate increases in Chinese and Asia-Pacific stock returns, global long-term yields, andcommodity prices highly demanded by China. A complementary identification strategy, which builds on different time-zones, confirms positive spillovers to international equity markets, with stronger effects in countries more exposed to Chinese trade. Our results highlight the role of both Hedging Premia and Growth Expectations in driving asset price comovement. The findings support China’s growing influence in global markets and position it as a driver of the Global Financial Cycle. |
| Keywords: | Spillovers, Global Financial Cycle, China, High-frequency |
| JEL: | E44 F21 F30 F40 G15 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:366 |
| By: | Huang, Bin (Nanjing University of Finance and Economics); Tani, Massimiliano (University of New South Wales); Xu, Lei (Loughborough University); Zhu, Yu (University of Dundee) |
| Abstract: | We study the impact of higher education (HE) on marriage incidence in China using the 2017 China Household Finance Survey. Taking advantage of the dramatic HE expansion starting in 1999, we explore the effect of education on marriage outcomes by instrumenting years of schooling using the interaction of childhood urban hukou status and a set of time dummy and trend variables capturing the exposure to the expansion. Contrary to conventional wisdom, the 2SLS results suggest that increased education induced by the HE expansion leads to higher marriage rates. These positive effects tend to be larger for women living in coastal areas or larger cities. The estimates are robust to alternative specifications, age range, the age cut-offs for childhood hukou status and controls for birth cohort-city specific sex ratios. Our findings imply that the strong negative relationship observed between college education and marriage outcomes for women is likely driven by educational assortative mating due to persistent gender norms in favour of status hypergamy, which prevents the Chinese marriage market from adjusting to the reversed gender gap in HE post-expansion. |
| Keywords: | higher education expansion, 2SLS, marriage market outcomes, educational assortative mating, China |
| JEL: | I23 J12 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17986 |
| 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 |
| JEL: | E58 F14 F31 F33 G21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11964 |
| By: | Natalie Chen; Dennis Novy; Diego Solorzano |
| 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: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2109 |
| By: | Tatjana Schulze; Weining Xin |
| Abstract: | So-called “connector” countries have been argued to benefit from the US-China trade tensions, given their rising share in US imports. This paper draws an important distinction between trade reallocation—countries increase domestic production to substitute for declining Chinese exports to the US—and trade rerouting—countries serve as one-stop place for transshipment of Chinese exports to the US. Leveraging granular data on trade and FDI flows and global input-output linkages, focusing on six Asian countries, we first document that the connector role of these countries may reflect their growing domestic markets and Chinese supply chain reconfiguration, beyond trade rerouting from China to the US. We then zoom in on value-added components and deploy a synthetic control approach to disentangle trade reallocation from trade rerouting. While the evidence remains elusive for five of the six countries, Vietnam appears to have benefited from trade reallocation, with increased domestic content in its exports to the US in strategic sectors, instead of facilitating significant transshipment of Chinese exports to the US. Such domestic production expansion also helped increase domestic content in Vietnam’s exports to the rest of the world, and may be partly due to Chinese firms relocating to Vietnam through greenfield FDI. Despite potential short-term gains, trade reallocation increases connector countries’ vulnerability to geoeconomic fragmentation with losses to all countries in the long run. |
| Keywords: | Geoeconomic Fragmentation; Trade Reallocation; Trade Rerouting; US-China Trade Tensions; Connector Countries |
| Date: | 2025–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/129 |
| By: | Lin, Yuheng (University of Dundee); Rambaccussing, Dooruj (University of Dundee); Zhu, Yu (University of Dundee) |
| Abstract: | Using the China Employer-Employee Survey (CEES) data, this study examines the returns to college education for employees across China’s manufacturing industry, most of them work in small and medium-sized enterprises (SME). Our baseline model finds that while the 1999 higher education (HE) expansion has no significant impact on college enrollment for male employees, it significantly increases college enrollment for female employees by 23.7% in the manufacturing sector. College education significantly increases the returns by 45.20% for males and 88.33% for females. Moreover, there is heterogeneity in the effects by potential gains: individuals who failed to attend college would have had a higher return compared to college graduates, indicating reverse selection into HE. Further analysis reveals that the effects are more pronounced among female managers, middle birth cohorts (born between 1984 and 1987), female vocation-track degree holders, and STEM graduates. Additionally, college education facilitates employment in roles requiring cognitive skills and reduces the likelihood of female employees performing physically demanding tasks. |
| Keywords: | marginal treat- ment effect, manufacturing industry, China employer-employee survey, returns to college education |
| JEL: | I23 I26 J31 L60 O14 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17980 |
| By: | Mavrovitis (Mavis), Christos (University of Surrey); Pal, Sarmistha (University of Surrey) |
| Abstract: | This study examines factors influencing full (FP) versus partial (PP) privatization and how markets respond to government control in PP and FP firms. Exploiting China’s 2005 NTS reform as a natural experiment, we find that treated PP firms experienced significantly lower post-reform performance, driven by persistent private benefits of control, failure to adopt value-maximizing behavior, and unchanged liquidity and information asymmetry. In contrast, FP firms eliminated all NTS, maximized value; showed higher stock market liquidity and lower information asymmetry, improved market performance; and gained market confidence in the post-reform period. These findings challenge the effectiveness of China's authoritarian approach to private sector development. |
| Keywords: | local government incentives, authoritarian central government, firm value maximization, full and partial privatization, non-tradable shares reform, difference-in-differences |
| JEL: | G31 G38 L33 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17985 |
| By: | Deng, Guoying; Du, Pengcheng; Hernandez, Manuel A.; Xu, Shu |
| Abstract: | This paper examines the association between corporate income taxes and labor market informality. We present a theoretical framework showing that a higher tax enforcement can push firms to pass on the burden to workers by reducing their social security compliance as well as downsizing and lowering wages. The model propositions are tested using a regression discontinuity design that exploits a national corporate tax reform in China. We find that for every one percentage point increase in the effective tax rate, firms reduce their probability of making basic social security contributions by 0.8%, their compliance rate by 1.4 percentage points, and the probability of making supplementary contributions by 0.6%, while the number of workers and wages fall by 4.4% and 0.7%, respectively. We observe that the effects are more salient among firms privately owned and controlled, large businesses, and in locations where social security contributions are directly collected by the social security administration. The findings suggest that workers not only bear part of the higher corporate taxes faced by firms, but an increase in firms’ tax burden contributes to social security evasion and informality in labor markets. JEL Codes: H32, H55, J30, J23, H25 |
| Keywords: | taxes; labour market; social security; remuneration; China; Asia; Eastern Asia |
| Date: | 2024–03–18 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:140480 |
| By: | Yusheng Feng; Haishi Li; Siwei Wang; Min Zhu |
| Abstract: | Using Chinese firm-level trade data combined with global anti-dumping (AD) and countervailing duty (CVD) investigations, we uncover a hidden cost of industrial policy under WTO agreements. At every stage of AD/CVD investigations, industrial subsidies significantly raise the probability of affirmative tariff rulings and lead to higher imposed tariffs. Firms that received larger subsidies are also less likely to be granted firm-specific duties, which are lower than the product-level tariffs applied to all other firms exporting the investigated product. While AD/CVD tariffs create a moderate trade barrier that an average Chinese firm expects to face, they represent a significant cost of subsidy for those heavily subsidized and those potentially receiving firm-specific duties. AD/CVD tariffs induced by subsidies reduced the subsidy effect on firm revenue growth by 25%. The intended benefits of industrial subsidies are partially offset by increased foreign trade protection. |
| Keywords: | industrial policy, subsidies, anti-dumping, countervailing duties |
| JEL: | F13 L52 O25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11982 |
| By: | Yafei Wang; Marielle Brunette; Fanny Claise |
| Abstract: | Forest insurance is a relevant tool to consider in a context of increasing natural hazard due to climate change. However, forest insurance is highly heterogeneous from one country to another, with some countries having large insured forest areas and others not. In this article, we attempt to identify the reasons for this heterogeneity. To do so, we compare the forest insurance schemes of two countries, France and China. France is characterized by a low level of insured forest area, while China is the opposite. We identify differences and similarities between the two schemes that can explain the heterogeneity in terms of insured area. In particular, we highlight the different role of the government in these schemes. Finally, we present some innovative insurance products likely to encourage insurance adoption. |
| Keywords: | Insurance, Forestry. |
| JEL: | G22 Q54 Q23 Q58 O57 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2025-14 |
| By: | Cai, Zhengyu; Yan, Yu |
| Abstract: | This paper empirically examines the causal effects of population concentration on household consumption in China and explores the underlying mechanisms. After addressing endogeneity concerns from various sources, our results show that a 1% increase in urban population density leads to a 0.43 percentage point increase in household average propensity to consume and a 59.73 yuan increase in per capita consumption expenditure. Mechanism analysis reveals that, beyond the effects of urban income premiums, population density reduces consumption transaction costs and enhances social interactions, both of which encourage higher consumption. Additionally, population density raises non-housing consumption among some households by driving up housing prices. |
| Keywords: | population density, household consumption, transaction costs, social interactions, housing prices |
| JEL: | R12 R23 D12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1631 |
| By: | Jing Cai; Sai Luo; Shing-Yi Wang |
| Abstract: | Higher compensation and increased monitoring are two common strategies for addressing the moral hazard problem between firms and workers. In a field experiment with new hires at an automobile manufacturing firm in China, we randomly varied both signing bonuses and monitoring intensity. Both interventions increased worker output but through different channels: signing bonuses led to longer working hours without significant gains in performance, while enhanced monitoring improved performance as evaluated by managers. Additionally, bonuses reduced quit rates, whereas monitoring raised them. These results suggest that firms should carefully consider their primary objectives and weigh these trade-offs when designing optimal labor contracts. |
| JEL: | C93 J24 J30 M52 O15 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33977 |