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on China |
| By: | Adrian van Rixtel (BANCO DE ESPAÑA) |
| Abstract: | This paper discusses the challenges the Chinese economy has been facing and assesses the policy measures taken to mitigate them. The analysis starts in September 2024, when Chinese policymakers announced the largest package of stimulus measures in years, reflecting their concerns about the situation of the Chinese economy. This situation is indeed concerning, with a multitude of problems needing to be addressed. Economic growth has been declining, China is in mild deflation which could turn into a deflationary spiral, it has a severe property crisis and a concerning debt situation (with a large fiscal deficit according to IMF estimates). Moreover, the structure of its economy is unbalanced, with very low domestic demand, especially private consumption, and considerable industrial overproduction contributing to deflationary pressures. Furthermore, China has considerable demographic pressures, its banks – especially the smaller ones – have high non-performing loan ratios, partly due to loans to the property sector, and external risks have been growing, in particular those related to import tariffs and other trade restrictions imposed by the United States and the threat of even higher tariffs. The paper discusses in detail the policy measures taken during September-December 2024 by a large number of policy bodies. The Chinese economic policy regime is very complex, with many political, administrative and government organizations involved and with many policy conferences. These, and their policy measures, are all explained carefully. Monetary policy measures adopted by the People’s Bank of China are discussed and assessed in particular. Next, given that several of China’s economic challenges are rather similar to those that Japan faced during its “three lost decades”, an increasingly common question is whether China will be the next Japan, or whether China will face a “Japanification” of its economy. |
| Keywords: | China, economic policy, monetary policy, fiscal policy, economic slowdown, deflation, property crisis, demographics, “japanification” |
| JEL: | E00 E58 E60 E62 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:bde:opaper:2517e |
| By: | Hussinger, Katrin; Palladini, Lorenzo |
| Abstract: | China's special economic zones (SEZs) have been established to foster business growth and innovation by improving the institutional context of specific sub-regional areas. We examine the effect of SEZs on the contribution of research and development (R&D) to the market value of firms located in these areas. The market value reflects investors' expectations of future returns to R&D, providing crucial information for strategic investment decisions. Larger R&D contributions to the market value create stronger incentives for firms to invest in innovation. Empirical results suggest that the contribution of R&D to the market value increases through the SEZs program, particularly for R&D intensive firms. This suggests that regional policies, while increasing incentives to innovate, may widen the gap between less and more R&D intensive firms, potentially impacting competition and long-term growth. |
| Keywords: | Special economic zones (SEZs), China, Market value, R&D, Institutional development, Innovation incentives |
| JEL: | O32 R58 O25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:319898 |
| By: | Sha Jiang (Max Planck Institute for Demographic Research, Rostock, Germany); Haili Liang; Diego Alburez-Gutierrez (Max Planck Institute for Demographic Research, Rostock, Germany); Emilio Zagheni (Max Planck Institute for Demographic Research, Rostock, Germany) |
| Abstract: | Objective: Population aging and shrinking family structures in China are placing unprecedented strain on traditional family-based systems of old-age support. This study develops and applies a capital-based caregiving framework that integrates human capital with the structural dimension of social capital (i.e., kinship networks) to assess the caregiving dynamics within families. We provide the first long-term projection of family caregiving dynamics in China, modeling how rising education--by improving health--can simultaneously enhance caregiving capacity and moderate care needs amid declining kin availability. Methods: We used formal demographic kinship models to project the number and age composition of a broad range of kin for older adults in China from 1950 to 2100, capturing kinship structure as the structural dimension of social capital. Educational attainment and education-specific health gradients were then integrated to model the human capital of each kin member. These dimensions were synthesized into novel health-adjusted kin-dependency ratios to assess caregiving dynamics over time. Results: We find that while the number of working-age kin declines substantially across cohorts, rising education and health among both working-age and older kin enhance caregiving capacity and reduce care needs. Under a rapid educational expansion scenario, the health-adjusted kin-dependency ratio is projected to be approximately 10% lower by 2100 compared to a stalled education scenario, indicating a substantial buffering effect of human capital on aggregate caregiving burdens. Conclusions: Human capital investment, particularly in education, serve as a powerful, though partial, demographic buffer against the family caregiving challenges posed by population aging and shrinking family size. These findings demonstrate that overlooking the human capital composition of kin leads to overly pessimistic assessments of family caregiving capacity. The capital-based framework developed here offers a new perspective for integrating demographic and resource-based approaches to family support, with implications for aging societies beyond China. |
| Keywords: | China |
| JEL: | J1 Z0 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:dem:wpaper:wp-2025-021 |
| By: | Peter Chai (Kai Shibata) (Graduate School of Political Science, Waseda University) |
| Abstract: | In this study, I use the latest three waves of the Asian Barometer survey to investigate the relationships between a set of demographic indicators including (1) age (2) education (3) income (4) urbanization relevant for the postmaterialist thesis and attitudes toward family structure and gender roles represented by four question items in the traditionalism section which focus on (1) putting family interests first (2) obeying parents’ orders (3) wives obeying mothers-in-law (4) preferring boy than girl babies in Mainland China. This study employs a two-step approach conducting both separate regressions for each wave and an aggregated regression with all the waves combined. Descriptive statistics show that there is no decreasing trend in the traditional attitudes toward family and gender across the three waves. Separate regression results show that in general age and education perform more consistently than income and urbanization. Large inconsistencies exist in how the demographic variables perform across question items and waves and between the separate and aggregate regressions. The demographic variables perform more consistently in the aggregated regression than the separate regressions. The unclear longitudinal trends and inconsistencies in the regression results suggest that the “socialization” and “scarcity hypotheses” do not work so well, and the “Asian uniqueness” argument is relevant in the context of Mainland China, a “natural laboratory” with large demographic variations and a “Confucian” background. To elaborate more on the implications of “Confucianism, ” other societies in the Greater China area and East Asia can be compared, and to improve sample quality, provide qualitative explanations, and distinguish and address gender topics on different levels, other methods using domestic surveys, survey experiments, text analysis, interviews, and fieldwork can be incorporated. |
| Keywords: | Family Structure, Gender Roles, Asian Barometer, Mainland China |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2518 |
| By: | Liping Gao; Gueye N. Ghislain; Hyeongwoo Kim; Jisoo Son |
| Abstract: | Using data from 29 regional housing markets in China, we estimate the long-run relationship between housing prices and key macroeconomic variables. Our findings suggest that the conventional cointegration framework can be misleading, as the estimated coefficients often contradict standard demand and supply theory even when statistical tests confirm the presence of cointegration. Among the variables considered, only real income consistently explains regional housing price dynamics. In contrast, factors such as the real interest rate and real building cost fail to account for price movements in a consistent manner across regions. We identify region-specific models that are both statistically valid and economically meaningful, revealing substantial heterogeneity across markets. These results call for more tailored, region-specific housing policies rather than uniform national strategies. |
| Keywords: | Housing Market; Cointegration; Dynamic Oridinary Least Squares; Disaggregated Regional Data |
| JEL: | R30 E00 C51 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:abn:wpaper:auwp2025-04 |
| By: | Paul-Emile Bernard (University of Paris-Dauphine, PSL) |
| Abstract: | This paper examines the role of political connections in shaping firm-level resource allocation in China. Using administrative data, I distinguish between national and local ties and estimate their effects on subsidies, capital costs, and tax liabilities. Politically connected managers secure systematically larger transfers and face more favorable financial conditions. National connections increase access to direct subsidies, while local ties reduce capital costs and effective tax rates. A difference-in-differences design reveals that nationally connected firms receive 38% higher annual subsidies over four years. Locally connected firms lower their capital costs by 2.5%. Political access substitutes for marketbased allocation. |
| Keywords: | Political Connection, Subsidy, Tax Avoidance, Misallocation |
| JEL: | D24 D72 L38 L52 H2 O25 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:dia:wpaper:dt202505 |
| By: | Jorge Alonso-Ortiz; José María Da-Rocha |
| Abstract: | We quantify the short-run impact of U.S. tariffs with a 77-country, 11-sector input-output model calibrated to OECD´s ICIOs. All intermediate inputs are locked in fixed Leontief proportions, so relative prices-not quantities-absorb the shock. A uniform 10% duty trims world GDP by 0.73% and U.S. GDP by 0.83%; ratcheting the schedule to 25% on NAFTA, to 15% on EU partners, and to 145% on China deepens those losses to 3.38% and 3.78%, respectively. Global trade flows in value, measured as exports plus imports over GDP, drop by 4.60% on average, but the U.S. is the biggest loser as its trade flows drop by -2.40% with a uniform duty, but drops can be as large as -11.60%. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaddt:2025-09 |
| By: | Qichun He (CEMA, Central University of Finance and Economics) |
| Abstract: | China's environmental pollution casts a shadow on its economic success. Concerning fiscal decentralization, China introduced the rule-based tax assignment systemin 1994. To avoid the structural change in underlying fiscal regimes, we use the provincial panel data during the period 1995-2010. We find that fiscal decentralization has no significant effect on environmental pollution as it is measured per capita emission of wastewater, waste gas or solid waste in system GMM (Generalized method of moments) estimation. Our results are robust when we use different measures of fiscal decentralization. We further find that fiscal decentralization has a significant, positive effect on pollution abatement spending and pollutant discharge fees, which indicates possible mechanisms for fiscal decentralization to help protect the environment |
| Keywords: | Fiscal decentralization, Environmental pollution, Pollution abatement spending, Pollutant discharge fees, Panel data |
| JEL: | H77 Q53 C23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:776 |
| By: | Heng-fu Zou |
| Abstract: | This paper develops a dynamic two-country differential game model to examine the long-term economic and geopolitical implications of the trade war between the United States and China. Departing from classical com parative advantage theory, the model incorporates national preferences for industrial self-sufficiency, trade balance, and strategic power accumulation. Each country is represented as a national agent optimizing intertem poral welfare based on consumption, production, trade, and geopolitical rivalry. Endogenous capital accumulation, productivity growth through learning-by-doing, and disutility from foreign dependence are central to the analysis. Strategic power is derived from both capital stock and trade surpluses, reflecting their role in underwriting technological leadership and military influence. Through simulations, we demonstrate how persistent trade surpluses allow China to accumulate strategic advantage, while sustained U.S. deficits weaken industrial capacity and global leverage. The framework challenges the orthodoxy of free trade and provides a basis for evaluating nationalist economic strategies and decoupling policies in a multipolar world. |
| Keywords: | Trade war, U.S.–China rivalry, differential game, capital accumulation, strategic power, tariffs, industrial policy, geopolitical economy, learning-by-doing, reindustrialization, dynamic optimization, economic nationalism |
| Date: | 2025–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:774 |
| By: | Eric A. Hanushek; Le Kang; Xueying Li; Lei Zhang |
| Abstract: | The changing pattern of quality in China’s rural schools across time and province is extracted from the differential labor market earnings of rural migrant workers. Variations in rates of return to years of schooling across migrant workers working in the same urban labor market but having different sites of basic education provide for direct estimation of provincial school quality. Corroborating this approach, these school quality estimates prove to be highly correlated with provincial cognitive skill test scores for the same demographic group. Returns to quality increase with economic development level of destination cities. Importantly, quality appears higher and provincial variation appears lower for younger cohorts, indicating at least partial effectiveness of more recent policies aimed at improving rural school quality across provinces. Surprisingly, however, provincial variations in quality are uncorrelated with teacher-student ratio or per student spending. |
| JEL: | H40 I26 J69 O15 R11 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34005 |
| By: | Heng-fu Zou |
| Abstract: | This paper develops a unified theoretical and historical framework to explain the cyclical structure of political purging and institutional collapse in totalitarian regimes, with a focus on the Chinese Communist Party(CCP) from 1942 to the present. We introduce three formal models: a dynamic signaling game with time-inconsistent punishment, a modified epidemic model of political participation and removal, and a quota driven reinterpretation game that captures the regime's shifting definition of guilt. These models reveal a structural logic in which early-stage partic ipation is incentive-compatible but later becomes retroactively incriminating as political needs evolve. Simulations demonstrate how participation spreads rapidly, trust deteriorates, and long-run strategy space collapses under coercive reinterpretation. By mapping these models onto major Chinese political campaigns-from the Yan'an Rectification and the Anti Rightist purge to the Cultural Revolution and Xi Jinping's anti-corruption drive -- we show that totalitarian governance operates through sequential betrayal of compliance. The regime manufactures loyalty, rewards it in the short term, then redefines it as disloyalty to fulfill ideological or factional quotas. This dynamic creates a system where no strategy ensures safety and all signals become vulnerable to reinterpretation. We conclude that this self-consuming logic of incentive collapse is not an aberration but a mathematically demonstrable feature of totalitarianism itself. |
| Keywords: | Chinese Communist Party, totalitarianism, political purges, game theory, incentive compatibility, signaling games, reinterpretation of guilt, quota systems, Cultural Revolution, authoritarian collapse |
| Date: | 2025–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:769 |
| By: | Terzi, A.; Ramsay, A. |
| Abstract: | As climate change intensifies, it is expected to affect countries across the globe in highly heterogeneous ways, depending on each nation's geographical location and level of development. Yet, most long-term economic projections do not take this factor explicitly into account. Could climate-induced weather events shape the relative wealth – and therefore geopolitical clout – of countries over the 21st century? In this paper, we present GDP projections for 164 countries between 2025 and 2100 under different SSP-RCP scenarios. Three fundamental conclusions emerge. First, under any climate scenario, the world is heading towards a multipolar equilibrium, with the US, China and Europe remaining the dominant economic blocs. India is on the rise, but is not currently expected to match the scale of these three by century’s end. Second, the global concentration of GDP is projected to decline, indicating increasing potential for geopolitical fragmentation and a relative "rise of the Rest". Third, a scenario marked by heightened geopolitical rivalry would exacerbate climate damages and harm growth in all countries, but particularly so for emerging markets, making China's surpassing of the US even more unlikely. Despite the large direct nominal losses arising from climate change, our results suggest that its indirect effects—through slower productivity growth and demographic shifts—will be even more consequential in shaping the future wealth of nations. |
| Keywords: | Climate Change, Geopolitics, Socio-Economic Pathways, Economic Growth, International Political Economy |
| JEL: | F02 F52 O44 O47 Q56 |
| Date: | 2025–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2548 |
| By: | Heng-fu Zou |
| Abstract: | This paper develops a mathematical framework for analyzing brainwashing and ideological control as employed by totalitarian regimes from the Cold War era to the present. Drawing on classic psychological studies from the Korean War and Chinese reeducation campaigns, as well as more recent research on propaganda, surveillance, and mass conformity, we construct a system of nonlinear differential equations to model the dynamic interaction between political power, belief conformity, and institutional memory. Simulations demonstrate how regimes consolidate control through feedback mechanisms of coercion and indoctrination, how ideological collapse can cascade into political breakdown, and how some regimes recover through adaptive belief reconstruction.By integrating historical case studies-ranging from Maoist China and Stalinist Russia to North Korea and digital authoritarianism in the 21st century -- this study provides a rigorous account of how totalitarian brainwashing operates and endures. The model offers predictive insights into regime stability, vulnerability to ideological shocks, and the long-run entropy of enforced belief systems. |
| Keywords: | Brainwashing, Totalitarianism, Indoctrination, Ideological Control, Mathematical Modeling, Differential Equations, Belief Dynamics, Political Power, Cold War, Surveillance, Propaganda, Authoritarianism, Conformity, Institutional Memory, Regime Collapse |
| Date: | 2025–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:766 |
| By: | Heng-fu Zou |
| Abstract: | This paper presents a mathematically rigorous and historically informed the ory of violent revolutions, treating them as nonlinear dynamical systems governed by fluid dynamics, energy dissipation, and structural feedback. Revolutionary processes-across France, Russia, China, and Cambodia-are modeled through continuity equations, Navier-Stokes dynamics, and vorticity flows, cap turing ideological momentum, factional swirl, and collapse. We analyze shocks, turbulence, energy cascades, and boundary-layer separation to explain how rev- olutions detach from elite control and enter hysteresis, where irreversible po litical and institutional deformation occurs. The framework culminates in a Hamiltonian phase-space model of revolution, illustrating trajectories through attractors, bifurcations, and limit cycles. By unifying physics and political his- tory, this model offers predictive insight into the life cycles of revolutions-and the irreversible scars they leave behind. |
| Keywords: | revolution, fluid dynamics, nonlinear systems, hysteresis, phase space, political instability |
| Date: | 2025–05–17 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:770 |
| By: | David Autor (MIT); David Dorn (University of Zurich); Gordon Hanson (Harvard University); Maggie Jones (US Census Bureau); Bradley Setzler (Pennsylvania State University) |
| Abstract: | This chapter analyzes the distinct adjustment paths of U.S. labor markets (places) and U.S. workers (people) to increased Chinese import competition during the 2000s. Using comprehensive register data for 2000-2019, we document that employment levels more than fully rebound in trade-exposed places after 2010, while employment-to population ratios remain depressed and manufacturing employment further atrophies. The adjustment of places to trade shocks is generational: affected areas recover primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service industries in healthcare, education, retail, and hospitality. Using the panel structure of the employer-employee data, we decompose changes in the employment composition of places into trade-induced shifts in the gross flows of people across sectors, locations, and non-employment status. Contrary to standard models, trade shocks reduce geographic mobility, with both in- and out-migration remaining depressed through 2019. The employment recovery stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas, with minimal contributions from cross-sector transitions of former manufacturing workers. Although worker inflows into non-manufacturing more than fully offset manufacturing employment losses in trade-exposed locations after 2010, incumbent workers neither fully recover earnings losses nor predominantly exit the labor market, but rather age in place as communities undergo rapid demographic and industrial transitions. |
| Keywords: | China trade shock, Local labor markets, Sectoral reallocation, Manufacturing decline, Worker mobility |
| JEL: | F16 J23 J31 J62 L6 R12 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2537 |