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on China |
| By: | Yan Liang |
| Abstract: | Western media and academia have heralded the China collapse narrative. This paper provides a critical and balanced examination of the four challenges facing the Chinese economy--namely, deflation, debt, demographics, and de-coupling/de-risking. It argues that while deflationary pressure is present, consumer demand has been improving as the property market stabilized and policies to bolster domestic demand were and continue to be effective in reflating the economy. China's debt is predominantly internal and semi-public; the central government could leverage up to resolve the local government debt conundrum. A talent dividend and employment optimization could offset the dissipating population dividend; and finally, China's high-quality opening, its participation in the multilateral system and its meaningful engagement with the Global South help counteract the decoupling/de-risking strategies of the US. In sum, while challenges abound, China's sound economic foundations and sensible developmental and macroeconomic policies help to propel economic growth, structural transformation, and green transition. |
| Keywords: | China; Economic Recovery; Public Debt; Government Debt; Job guarantee; Financial Structure; Economic Collapse |
| JEL: | O20 O53 E12 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1077 |
| By: | Kristina Butaeva (University of Chicago); Albert Park (Asian Development Bank) |
| Abstract: | In this paper, we conduct the first systematic empirical analysis of income inequality in the People’s Republic of China (PRC) at the provincial level. Using data from the China Household Finance Survey (CHFS) and a semiparametric distribution model, we estimate Gini indices for a set of provincial-level administrative units in 2012, 2014, 2016, and 2018. We find that differences in the “prices” and “quantities” of human capital are important factors in explaining differences in inequality between these provincial areas. Our findings suggest that poor areas are highly disadvantaged compared with rich ones, as they face higher income and educational inequality, as well as higher returns to education, while at the same time exhibiting lower average educational attainment. We conclude that filling existing interprovincial human capital gaps and accelerating labor market integration through appropriate government policies could reduce spatial disparities in inequality levels across regions and overall income inequality in the PRC. |
| Keywords: | income inequality;provinces;People’s Republic of China;human capital |
| JEL: | D31 I24 O15 |
| Date: | 2025–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021691 |
| By: | Dro, César (Directorate-General for Research and Innovation, European Commission); Schwaag Serger, Sylvia (Directorate-General for Research and Innovation, European Commission); Mazak-Huemer, Alexandra (Directorate-General for Research and Innovation, European Commission) |
| Abstract: | This policy brief discusses the state of play in technology monitoring and assessment (TMA) in the US, China, and the EU, and how the EU could tailor such monitoring to its needs and interests. It first outlines the role of TMA in R&I and economic policy, then compares features of the EU, US, and Chinese TMA systems, and concludes by outlining methodologies and features of a coherent TMA system in the European Union. TMA plays a central role in enabling governments to respond swiftly to crises and rapid shifts in the global technological landscape. |
| Keywords: | Technology Monitoring, Assessment, EU, US, China, Innovation Policy, Strategic Autonomy, Technology Sovereignty |
| JEL: | O32 O33 Q55 Q56 I28 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:eug:wpaper:ki-01-25-004-en-n |
| By: | Gong, Di; Ongena, Steven; Qi, Shusen; Yu, Yanxin |
| Abstract: | Banks are multidivisional organizations in which branches hold local knowledge about borrowers. Can this "soft" information be transmitted across units? Studying the population of corporate loans originated by a large commercial bank in China from 2010 to 2020, we find that when firms switch branches within bank, the switching loans carry a significantly lower spread than comparable nonswitching loans. After switching, the new branch further reduces the loan spreads initially, but ratchets it up afterwards, surprising evidence of intra-bank hold-up. By documenting how internal communication failures distort lending, we link relationship banking with delegation, coordination, and information transmission within organizations. |
| Keywords: | organization structure, bank lending, hold-up, firm-bank relationship |
| JEL: | G21 G32 L14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofitp:330334 |
| By: | Mr. Paul Cashin; Mr. Fei Han; Ivy Sabuga; Jing Xie; Fan Zhang |
| Abstract: | This paper evaluates three approaches to address parameter proliferation issue in nowcasting: (i) variable selection using adjusted stepwise autoregressive integrated moving average with exogenous variables (AS-ARIMAX); (ii) regularization in machine learning (ML); and (iii) dimensionality reduction via principal component analysis (PCA). Utilizing 166 variables, we estimate our models from 2007Q2 to 2019Q4 using rolling-window regression, while applying these three approaches. We then conduct a pseudo out-of-sample performance comparison of various nowcasting models—including Bridge, MIDAS, U-MIDAS, dynamic factor model (DFM), and machine learning techniques including Ridge Regression, LASSO, and Elastic Net to predict China's annualized real GDP growth rate from 2020Q1 to 2023Q1. Our findings suggest that the LASSO method outperform all other models, but only when guided by economic judgment and sign restrictions in variable selection. Notably, simpler models like Bridge with AS-ARIMAX variable selection yield reliable estimates nearly comparable to those from LASSO, underscoring the importance of effective variable selection in capturing strong signals. |
| Keywords: | China; GDP; Nowcasting |
| Date: | 2025–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/217 |
| By: | Jan-Tjibbe STEEMAN (European Commission, Directorate-General for Research and Innovation); Océane PEIFFER-SMADJA (European Commission, Directorate-General for Research and Innovation); Julien RAVET (European Commission, Directorate-General for Research and Innovation) |
| Abstract: | Research and innovation (R&I) are essential for countries’ competitiveness, prosperity, and societal resilience. Therefore, governments around the globe have established extensive R&I programmes to enhance R&I funding. This paper compares public R&I funding across the EU, US, and China - the world's largest R&I spenders – over recent years and identifies five key findings and their policy implications for the EU. First, all three economies have implemented strong R&I policies to boost investments in strategic areas, maintaining global leadership and safeguarding national interests, urging the EU to keep pursuing a strategic and balanced approach in line with 'promoting, protecting and partnering’. Second, China and the US have surpassed the EU in leveraging public R&D investments into private sector funding, suggesting the EU should reflect on its economic structure and focus more on disruptive innovations and advanced technologies. Third, EU public R&D funding is fragmented, indicating a need for better coordination, simplification, and potential consolidation. Fourth, despite relying more on public funding, the EU allocates less in absolute amounts to public R&D compared to the US, and EU’s Framework Programme (EU FP) budgets lag behind those of the US and Chinese counterparts, emphasising the need for EU R&D budget prioritisation. Fifth, R&D funding distribution varies: the EU emphasises research efforts, while the US and China invest more on later R&D stages, prompting policy reflections on aligning means with objectives. |
| Keywords: | Research and Innovation funding, impact assessment, econometric methods, spillover effects, mediation analysis, policy evaluation |
| JEL: | O32 O38 C18 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:eug:wpaper:ki-01-25-090-en-n |
| By: | Lin, Ziruo |
| Abstract: | This essay compares the influence of Confucianism in China and the Protestant ethic in Europe on both formal and informal institutions, examining their role in shaping divergent economic trajectories. Drawing on historical and institutional analysis, this essay integrates insights from economic history, sociology, and political theory. The findings contribute to debates on the cultural origins of the Great Divergence and offer broader insights into how culture interacts with governance structures and economic incentives over the long run. Understanding these historical dynamics is valuable not only for explaining the Great Divergence but also for interpreting contemporary patterns of development, governance, and social trust. In an era where policymakers and international organizations grapple with institutional reform, corruption, and cultural barriers to economic growth, the study highlights the importance of aligning institutional design with prevailing social norms to foster sustainable, inclusive development. |
| Keywords: | Confuscanism; the Protestant ethic; ideology; economy |
| JEL: | J1 |
| Date: | 2025–10–14 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129934 |
| By: | Sun, Yiyang |
| Abstract: | Yang, drawing on his inframarginal economics framework, argued that China's dual-track reforms would fail without constitutional shock therapy, predicting that the absence of proper institutional transitions would lead to corruption and economic stagnation. Conversely, Lin's New Structural Economics advocated for gradual reform based on comparative advantages, arguing that late-comers could benefit by developing industries aligned with their factor endowments. This essay examines the 2002 to 2003 debate between economists Justin Yifu Lin and Xiaokai Yang regarding China's economic reforms and late-comer advantages. Through an analysis of recent empirical evidence (2020-2025), this essay demonstrates that Yang's predictions largely failed to materialize: China's dual-track system succeeded despite lacking constitutional transformation, with state-owned enterprises contributing positively to growth and anti-corruption campaigns improving productivity. However, Lin's framework also proves insufficient in explaining China's success. The paper concludes that economic forecasting necessarily sacrifices scientific rigor in favor of broad generalizations, suggesting that economics should focus on explaining existing phenomena rather than predicting uncertain futures. |
| Keywords: | later-comer advantage/disadvantage; constitutional transition; Chinese economy; dual-track reforms; empirical revolution |
| JEL: | N0 |
| Date: | 2025–10–14 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129935 |