nep-cna New Economics Papers
on China
Issue of 2024‒07‒15
twelve papers chosen by
Zheng Fang, Ohio State University

  1. The development of China's exports: Is there a decoupling from the EU and the United States? By Brühl, Volker
  2. Whole-of-Nation Innovation: Does China's Socialist System Give it an Edge in Science and Technology? By Groenewegen-Lau, Jeroen
  3. Huawei is Quietly Dominating China's Semiconductor Supply Chain By Hmaidi, Antonia
  4. Commercial Rivalry as Seller Incidence Shifting: Non-parametric Accounting of the China Shock By James E. Anderson
  5. Can Trade Integration Reduce Emissions from Production? The Product Composition Channel By Lu, Yue; Ma, Minghui; Gao, Longfei; Tang, Yao
  6. Government reform and innovation performance in China By Zhang, Min; Rodríguez-Pose, Andrés
  7. National Strategic Integration: How China Is Building Its Strategic Power By Cheung, Tai Ming
  8. Between Two Economic Traps: Did China Peak in 2021? By Lee, Keun
  9. Guangdong's New R&D Institutes: China's Regional Tool for Innovation and Technology Transfer By Conlé, Marcus
  10. Inclusive growth and climate change adaptation and mitigation in Australia and China : Removing barriers to solving wicked problems By Bell, William Paul; Zheng, Xuemei
  11. Intergenerational Mobility of Immigrants in the Netherlands By van Elk, Roel; Jongen, Egbert L. W.; Koot, Patrick; Zulkarnain, Alice
  12. Back to the future of the Arctic: The enduring relevance of arms control By Paul, Michael

  1. By: Brühl, Volker
    Abstract: Some observers warn that a high level of economic dependence on China could negatively affect the economic resilience of Western economies and therefore recommend reducing such dependence by gradually decoupling from China. On the other hand, industry leaders emphasise the economic importance of China and warn against any kind of trade conflicts. Against this background, we briefly analyse the development of China's export strategy. We find that the export intensity of the Chinese economy is diminishing and that exports are becoming more diversified overall. In addition, the relative importance of the United States and the European Union as export markets has been reduced, indicating a gradual decoupling of China from Western economies. Conversely, we find that exports to China have become more important, both for the EU and the United States. Although the figures remain at a non-critical level, Europe's export activities could be more diversified as well.
    JEL: F01 F14 O1 O53
    Date: 2024
  2. By: Groenewegen-Lau, Jeroen
    Abstract: China wants to become a science, technology, and manufacturing superpower by upgrading and modernizing its industrial base and concentrating the nation’s innovation resources around strategic priorities. However, in this policy brief, Jeroen Groenewegen-Lau, head of the Science, Technology and Innovation program at MERICS, argues that it is difficult for the state to integrate innovation resources because of the gap separating universities and research organizations from industry, which impedes the translation of scientific output into technological prowess. By contrast, Beijing has been much more successful at directing industrial development. As a result, he says, achieving a modernized industrial base is now the dominant framework for Chinese policymakers as they pursue technological self-reliance.
    Keywords: Social and Behavioral Sciences, china, chinese communist party, science and technology, innovation
    Date: 2024–02–29
  3. By: Hmaidi, Antonia
    Abstract: In this policy brief, Antonia Hmaidi, Senior Analyst in the Science, Technology and Innovation Program at MERICS, analyzes Huawei, a company that is emerging as the leader of China’s national team in semiconductors, dominating chip manufacturing and seeking to integrate the country’s entire supply chain. Its ambitions stem from both its placement on the U.S. Entity List and strong government support at the national and local level. Internationally, Huawei is coy about these ambitions, hiding its supply chain involvement and often operating under a different company’s name. Meanwhile, Huawei’s experience is also encouraging other Chinese technology companies to support China’s quest for chip self-sufficiency, developing new hardware and software for that purpose. The clandestine nature of Huawei’s involvement—it is not known who serves what role in semiconductor production—makes it more difficult for Western companies and governments to assess China’s progress in technology, vet potential partners and customers, and conduct risk assessments.
    Keywords: Social and Behavioral Sciences, huawei, semiconductor, supply chain, china
    Date: 2024–04–05
  4. By: James E. Anderson
    Abstract: Intense US-China commercial rivalry is quantified in this paper with novel non-parametric relative resistance sufficient statistics. The accounting method minimizes the demand specification error variance in revealed resistances. China's manufacturing seller incidence falls (seller price rises) 7.6% yearly as China's sales share quadruples over 2000-14. US seller incidence rises 4.1% yearly as US sales share halves. Domestic trade shares closely fit revealed relative resistances with trade elasticity equal to one. Industrial policy pays for itself in suggestive projections. A 10% rise in US 2014 sales share reduces seller incidence 6.0%, exports rise and net benefit is positive.
    JEL: F10 F14
    Date: 2024–06
  5. By: Lu, Yue; Ma, Minghui; Gao, Longfei; Tang, Yao
    Abstract: In a trade model incorporating within-firm productivity differences in intermediate products, we show that specialization in the production of intermediate products enabled by decreased trade costs can reduce firm-level emissions. Using firm-level data from China (1998-2012), we provide supporting evidence in the context of domestic trade. Increased domestic trade integration, associated with the expansion of China's railway network, reduces emissions of sulfur dioxide, carbon dioxide, and other pollutants. Counterfactual analysis indicates that without the 1.88% (1, 203-kilometer) railway expansion in 2005—--the year in the middle of our sample period, as an example---national SO2 emissions would have been 0.43% higher.
    Keywords: emissions, market access, railway network, Chinese manufacturing firms
    JEL: F18 Q56 R40
    Date: 2024–06–06
  6. By: Zhang, Min; Rodríguez-Pose, Andrés
    Abstract: Innovation is key for economic growth and well-being. The capacity for innovation, however, is profoundly influenced by the quality of local institutions. Although the impact of national institutions on innovation is well-documented, the effects of subnational institutional variations on innovation remain underexplored. This paper studies the impact of government agency reforms, designed to enhance local government effectiveness, on the innovation performance of city-regions in China. We examine the adoption of these reforms between 2009 and 2016 as an exogenous shock to regional institutions. Our analysis identifies a positive and significant relationship between improvements in institutional quality and the innovation performance of Chinese city-regions, particularly pronounced in regions with medium to high levels of innovation. The results are robust to a series of checks including placebo and endogeneity tests and potential confounding policies. This research highlights the critical role of government institutions in driving innovation across China, bringing the fore important regional variations in the adoption of government agency reforms that are defining the country’s innovation landscape.
    Keywords: institutions; government quality; institutional reform; regional innovation; China; REF fund
    JEL: R11 O11
    Date: 2024–06–01
  7. By: Cheung, Tai Ming
    Abstract: Xi Jinping has significantly elevated the importance of national security and technological innovation in China’s overall priorities since coming to power in 2012. Under his leadership, China has sought to integrate the country’s economy, political system, society, and defense apparatus behind the goal of national security. This brief explores the newest and most sweeping iteration of that policy: national strategic integration, which aims to remake China into the global leader in technology and security.
    Keywords: Social and Behavioral Sciences, china, national strategic integration, technology and security
    Date: 2023–10–26
  8. By: Lee, Keun
    Abstract: China’s uneven recovery from the pandemic and U.S.-imposed limits on the country’s access to technology could limit China’s ascent to become an economic peer to the United States. In this policy brief, Keun Lee, distinguished professor of economics at Seoul National University, analyzes recent economic data from the International Monetary Fund to reveal that while China’s rise to become a high-income country remains on course, the country remains far from rivaling the economic power of the United States.
    Keywords: Social and Behavioral Sciences, china, chinese economy
    Date: 2024–05–31
  9. By: Conlé, Marcus
    Abstract: In pursuit of technological development, China has created new organizations to promote innovation. In this brief, Marcus Conlé, an associate at the German Institute for Global and Area Studies (GIGA), examines New Research and Development Institutes (NRDIs), which are designed to foster knowledge transfer to industry. NRDIs were pioneered in Guangdong province in the 1990s, and have gained prominence in China’s national science, technology, and innovation policies since the 13th Five-Year Plan (2016-2020). NRDIs are defined by their market orientation and extremely flexible organizational form. They work by establishing “innovation platforms” with local governments and private knowledge actors to carry out research and development (R&D), commercialize scientific and technological achievements, incubate local technology industries, and cultivate high-end talent. NRDIs have been instrumental to regional development in Guangdong, and especially Shenzhen, where they have succeeded in attracting talent from outside the region. NRDIs have important policy implications for international competition for talent. Understanding NRDIs is crucial for other countries that want to improve their own inter-regional innovation resources and respond to the challenge of China’s drive to attract global talent and knowledge resources.
    Keywords: Social and Behavioral Sciences, Guangdong, research and development, technology, innovation
    Date: 2024–03–21
  10. By: Bell, William Paul; Zheng, Xuemei
    Abstract: This reports aims to assist the Sino-Australian bilateral relationship adapt to meet China’s new policies and to facilitate a smoother transition to a low carbon future. Southwest University of Finance and Economics (SWUFE), Chengdu, China and the University of Queensland, Brisbane, Australia held a workshop at SWUFE to develop a guide to China’s low-carbon policies and their implications for the Sino-Australian energy trade and sectors. This report results from the workshop. Chapter 3 contains the guide to China’s low emission policies and discusses market-based experiments within China’s command-and-control electricity sector. Chapter 4 discuses Australia’s poorly implemented neoliberal polices within its energy sector and provides an informative market-based case study for China on what to avoid. Chapter 2 discusses the implications of Australia and China’s low emission policies. Chapter 5 discusses barriers to the transition to a low emissions economy. Climate change is one of the world’s major challenges. Others include increasing inequality and poor economic growth, creating a decline in inclusive growth. Declining inclusive growth and climate change are interrelated wicked problems. Their solution is technically and economically viable given appropriate investment but the absence of a price on carbon in Australia is a major obstacle to directing investment consistent with a low emissions future. Australia is transitioning from a mining to a more service orientated economy. However, Australia’s uncoordinated energy and climate change policy and poorly implemented neoliberal policies in the energy sector are undermining investment confidence and hindering both inclusive growth and the transition to a lower emissions economy. Energy and climate change policies need bring together to restore investment confidence within the electricity sector. The Integrated Systems Plan has gone some way to address this problem. Similarly, Australia’s uncoordinated growth and climate change policies are hindering inclusive growth and the transition to a lower emissions economy. Growth and climate change policies need bringing together to engender confidence and direct investment compatible with a low emissions future. Notably, Infrastructure Australia has gone some way to address this issue at the national level but the lack of transparency and independence in other jurisdictions undermines Infrastructure Australia’s effectiveness. Poor policy coordination is also hindering solutions to a host of other interrelated wicked problems. These wicked problems include massive increases in retail electricity prices, private school fees and private health insurance, the inability to undertake major tax reform, such as introducing a tax on sugar or carbon or introduce road user charges to replace the declining revenue from fuel excise duty. There is ample and sound evidence-based research to solve these wicked problems but there is an inability to enact policy in the interest of the electorate. The key findings of this report are four common barriers to enacting policy to solve these wicked problems. (1) Political donations present a conflict of interest. (2) Adversarial politics and political wedging reduce the ability to address complex problems. (3) There is an absence of academic economists informing the public debate to provide impartial advice. (4) Unrealistic models of the economy and human behaviour are misinforming policy.
    Keywords: Australia China wicked problems climate change electricity energy renewable energy inclusive growth inequality growth tax emissions generation coal electricity prices electricity market policies political donations political wedging adversarial politics economic growth donations neoclassical economics neoliberal policies government economic transition retail fossil fuel public good efficiency efficiency generators green investment green finance climate change risk housing boom mining boom zero net emissions
    JEL: H1 H2 O4 Q2 Q3 Q4 Q5
    Date: 2108–02–16
  11. By: van Elk, Roel (CPB Netherlands Bureau for Economic Policy Analysis); Jongen, Egbert L. W. (Leiden University); Koot, Patrick (Dutch Ministry of Social Affairs and Employment); Zulkarnain, Alice (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: A key measure of equality of opportunity is intergenerational mobility. Of particular interest is the extent to which children of immigrants catch up with natives. Using administrative data for the Netherlands, we find large gaps in the absolute income mobility of immigrants relative to natives (-23%), suggestive of large, persistent income gaps for future generations as well. Important drivers are differences in household composition and in personal incomes. However, we also uncover substantial heterogeneity by country of origin. Children of immigrants from China actually have higher incomes than natives, which is closely related to their educational outcomes.
    Keywords: intergenerational mobility, immigrants, Netherlands
    JEL: D31 J15 J61 J62
    Date: 2024–05
  12. By: Paul, Michael
    Abstract: Russia's war against Ukraine seems to have no immediate end in sight, the strategic competition between China and the US continues, and the expanding military cooperation between China and Russia increases the challenges facing the international community. In this context, the Arctic seems to be a relic of the past, no longer the "zone of peace" that Mikhail Gorbachev described in 1987. Indeed, this Arctic exceptionalism ended long before Russia's war of aggression began. In order to restore at least a minimum level of cooperation, informal talks are needed that could help to provide perspective after the end of the war. Two former relatively uncontroversial projects could serve as starting points: the recovery of radioactive remnants of the Cold War and an agreement to prevent unintentional escalation, namely, another Incidents at Sea Agreement (INCSEA). A return to old approaches to arms control could pave the way to renewed cooperation in the Arctic in the future.
    Keywords: Arctic, Arms Control, Russia's war against Ukraine, zone of peace, Vladimir Putin, Arctic Zone of the Russian Federation (AZRF), NATO, Arctic Council, Incidents at Sea Agreement (INCSEA), Arctic Security Forces Roundtable (ASFR)
    Date: 2024

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