Shiyi Chen, Joshua Graff Zivin, Huanhuan Wang, Jiaxin Xiong, 28 July 2022

In order to improve the water quality of the downstream stretch of the Xin’an River, in 2011 China implemented the Ecological Compensation Initiative, a pioneering policy establishing side payments between upstream and downstream provinces. This column shows that the initiative mitigates cross-border externalities by sharply reducing water pollutant emissions by upstream firms and also induces firms to relocate to neighbouring cities. The findings highlight the potential for bilateral compensation for ecosystem services to reduce pollution.

Tianlei Huang, Nicolas Véron, 07 July 2022

Widespread narratives for China under Xi Jinping, especially in the past half-decade, emphasise a ‘pivot to the state’ and increasing repression of the private sector, in contrast with previous decades of more dynamic private sector development. But is China's private sector truly being crushed? This column uses company-level data for China’s largest companies, ranked by either revenue or (for listed ones) market capitalisation, to show that, in fact, the share of the private sector in that group has expanded rapidly and near-continuously over the past decade.

Debin Ma, Kaixiang Peng, 21 May 2022

A pessimistic view of Chinese agriculture development is based on a Malthusian trap, characterised by diminishing returns to agriculture and a declining land-labour ratio. This column presents stylised empirical facts of 19th and 20th century Chinese agriculture, focusing on the seasonality of labour demand and the resulting rise of sideline employment, to challenge the implications of this view. The reallocation of labour across idle seasons facilitated commercialisation and higher population densities, yet it was industrialisation, occurring outside the agriculture sector, which enabled modernisation. 

Scott Baker, Efraim Benmelech, Zhishu Yang, Qi Zhang, 11 May 2022

China’s high household savings rate remains a puzzle, with potential explanations including demographic, policy, and financial causes. This column investigates China’s savings rate using individual income and spending transactions linked to demographic characteristics and financial information on loan applications and credit availability. The authors match bank customers to administrative records covering marriage and births to obtain a unique insight into consumption and savings patterns around important life events. The results point to income growth, financial instability, and credit access, rather than directives such as the one-child policy, as the primary drivers of high savings among Chinese households.

Youngmin Baek, Kazunobu Hayakawa, 09 May 2022

What can explain the small or even negative effects of regional trade agreements on trade? Using trade data between Japan and other 68 countries from 2002 to 2018, this column argues that RTAs reduce fixed costs for foreign direct investment more than exporters. This could have a negative effect on trade. A simulation exercise indicates that introducing RTA between Japan and China would incentivise Japanese firms to set up production in China and sell locally rather than export from Japan.

Harry X. Wu, Zhan Li, 21 April 2022

Observers of the Chinese economy have long argued that the country’s practices in price statistics are the major barrier to more reliable measurement of its real growth performance. This column proposes a national accounts approach to address some of the biases behind the gap between the underlying real growth rate and the ‘real growth rate’ reported by the statistical authorities. Compared to the official estimates, the authors’ method not only exposes more volatile movements and greater impacts of external shocks, but also slower growth. 

Harry X. Wu, Janet X. Hao, 17 April 2022

China expects its service sector to play an important role in helping the economy restructure. This column measures China’s investment in intangibles as a good indicator of an economy’s future creativity. China’s services sector does not invest sufficiently in intangibles. The Chinese wholesale and retail sector, for example, spends only 1.21% of its value added on intangible assets, compared to 5.7% in the US. Chinese wholesale and retail services would have to invest heavily in building strong brands to catch up with their US counterparts.

Chad Bown, 29 March 2022

The US ended the WTO dispute management system in 2019. How can we restore some form of binding dispute settlement, and what are the hurdles that stand in the way?

Read more about the research behind this and download the free DPs:

Bown, C. 2022. 'Trump ended WTO dispute settlement. Trade remedies are needed to fix it.'. CEPR
Bown, C and Keynes, S. 2020. 'Why Trump Shot the Sheriffs: The End of WTO Dispute Settlement 1.0'.CEPR

,

Call for Papers - Deadline: 6 May 2022 (Friday)
 
China Economics Summer Institute (CESI)
 
23-25 August 2021, Tsinghua University

 

The 15th China Economics Summer Institute (CESI) will be held online between 23-25 August 2022 by Tsinghua University. The objective of CESI is to create a network and community of top level scholars working on Chinese economic development (working papers of previous CESI available at http://cesi.econ.cuhk.edu.hk/). This initiative is currently co-sponsored by the Chinese University of Hong Kong-Tsinghua University Joint Research Center for Chinese Economy, the Institute for Emerging Market Studies at the Hong Kong University of Science and Technology, the Guanghua School of Management at Peking University, the Stanford King Center on Global Development at Stanford University, and the School of Economics and Management at Tsinghua University. The Summer Institute is organized in collaboration with the BREAD, NBER and CEPR networks of academic economists.

 

This call invites you to submit a paper or express your interest in attending the above Summer Institute, which will be hosted online this year by Tsinghua University, during 23-25 August 2022. The workshop intends to bring together the best scholars working on China in China, the US and Europe with other top level scholars who have an interest in working on China in the future. We welcome applications not only from those who want to present their research on China but also from anybody who has an interest in doing serious economic research on China and would like to use the workshop as means of exploring this possibility.

 

During the workshop for a period of three days, there will be seminar presentations. Senior scholars who will attend will be available for consultations with junior scholars. Afternoon sessions will give the opportunity to a select group of young scholars and Ph.D students to present their work.

 

The scientific committee of the China Economics Summer Institute is composed of Chong-En Bai, Ruixue Jia, Amber Li, Hongbin Li, Ernest Liu, Yi Lu, Albert Park, Gérard Roland, Zheng (Michael) Song, Heiwai Tang, Daniel Xu, Xiaobo Zhang, Yifan Zhang, and Li-An Zhou. The committee is co-chaired by Ruixue Jia and Michael Song.

 

Please register online (https://cloud.itsc.cuhk.edu.hk/mycuform/view.php?id=986684) for possible presentation at the meeting or expressions of interest in attending the meeting by 6 May 2022 (Friday).

 

If you need further information, please do not hesitate to contact us.

 

Yours sincerely,

China Economics Summer Institute (CESI)

Website: http://cesi.econ.cuhk.edu.hk/

Email: [email protected]

Kazunari Kainou, 16 March 2022

The Clean Development Mechanism under the Kyoto Protocol is the world’s first international carbon finance scheme. Companies can acquire tradeable certified emission reduction credits by investing in energy conservation and new energy projects in developing countries. Despite its early success, the scheme collapsed following a ‘carbon panic’ in 2012. This column reviews the collapse of the mechanism and its spillovers on Paris Agreement negotiations. While the scheme was unexpectedly revived thanks to interest from the US and developing countries, carbon financing remains structurally prone to panic.

Raphaël Lafrogne-Joussier, Julien Martin, Isabelle Mejean, 05 February 2022

Global supply chains have been central in economic and policy debates since the start of the Covid-19 pandemic. This column uses the first lockdown in China in 2020 to study how firms involved in global value chains can help mitigate the effects of supply disruptions. Using monthly data on French firms, it finds that inventory management helped firms mitigate the shock, but the geographic diversification of input sourcing did not. Governments may thus consider giving incentives to firms to depart from just-in-time production processes, especially for those engaged in the production of critical products. 

Noam Yuchtman, 14 January 2022

The Chinese government isn't just a world leader in the use of AI for facial recognition, its orders are funding innovation in its domestic industry too. But what's good news for entrepreneurs may be bad news for political protest, Noam Yuchtman tells Tim Phillips.

Read more about the research behind this podcast and download the free DP:
Beraja, M, Kao, A, Yang, D and Yuchtman, N. 2021. 'AI-tocracy'. CEPR

Michela Giorcelli, Bo Li, 10 January 2022

Understanding which industrial policies work is important to promote the development of poorer countries. This column examines the effects of technology and knowledge transfers on early industrial development, using evidence from the Sino-Soviet Alliance in the 1950s. The authors find that simultaneously receiving technologically advanced capital goods and know-how transfer had large, persistent effects on plant performance, while the effects of receiving capital only were short-lived. The know-how component was essential to generate horizontal and vertical spillovers and production reallocation from state-owned to privately owned companies since the late 1990s.

Martin Beraja, Andrew Kao, David Yang, Noam Yuchtman, 17 December 2021

The growth of artificial intelligence technology brings the potential of a ‘fourth industrial revolution’, but also poses challenges for democratic institutions. This column analyses the mutually reinforcing relationship between AI innovation and the political control objectives of autocrats. In the context of facial recognition AI in China, it shows that episodes of local political unrest lead to higher public procurement of AI technologies. Furthermore, these technologies are shown to mitigate the potential for exogenous shocks to trigger unrest, while also boosting broader software innovation in affected regions. 

Wolfgang Keller, Carol Shiue, 05 December 2021

There is little consensus about the impact that the Western colonialism had on China’s economy. This column revisits a period that saw China end centuries of relative isolation and open dozens of ‘treaty ports’ to Western traders, which shifted the focus of capital markets from inland areas to the coast. Western influence also increased the number of banks, firm investment, as well as the adoption of steam engines and industrial machinery, and significantly lowered local interest rates.

Davin Chor, Bingjing Li, 25 November 2021

Tariffs initiated by the Trump administration in 2018 raised duties on China’s exports to the US, sparking a ‘tariff war’. This column uses satellite readings of night-time luminosity to show that that locations within China that were more exposed to the US tariffs experienced a larger decrease in night light intensity, pointing to a contraction in local economic activity. By contrast, exposure to China’s retaliatory tariffs appeared to have no significant effect on grid-level night lights. 

Cathérine Casanova, Eugenio Cerutti, Swapan-Kumar Pradhan, 24 November 2021

The global footprint of Chinese banks is substantial and growing, including during the COVID-19 pandemic. While they are similar to other banks from emerging countries in terms of their ownership and asset structure, their global footprint often resembles that of banks from advanced countries. Geographical distance acts as a barrier for Chinese banks’ lending, comparable to that for US or European banks. Also like their US peers, the lending of Chinese banks strongly correlates with trade. Some differences are present, such as an atypical negative correlation between bank lending and portfolio investment.

Martin Ravallion, Shaohua Chen, 15 November 2021

China’s political leadership recently committed to expanding the proportion of middle-income groups to create a less polarised, and more ‘olive-shaped’, distribution of wealth. This column considers the potential trade-offs between reducing income polarisation and other goals, including poverty reduction. An obvious concern is how the process of economic growth impacts the extent of polarisation, but the country’s historical record does not point to any serious trade-offs going forward, including with economic growth, poverty reduction, and overall social welfare.  However, potential trade-offs would need to be considered further in the context of specific policy efforts, such as expanding social service coverage in rural areas.

Peter Robertson, 09 October 2021

US military spending is said to be greater than the next 11 countries combined. However, the conventional use of market exchange rates to compare across countries dramatically overstates US spending relative to other countries. This column introduces a military purchasing power parity exchange rate for 59 countries based on the relative unit cost ratio across counties. This ‘military PPP’ shows that the US military budget in 2019 was smaller than that of the next three largest military spenders – China, India, and Russia – combined.

Gabriel Felbermayr, Alexander Sandkamp, 10 October 2021

The recent combination of resurging demand and continuing disruptions in supply chains has led to a worrying return of inflation. In the EU, industry producer prices increased by 12.2% year-on-year in July 2021. This column argues that removing EU antidumping duties would at least partially ease the pressure on input and consumer prices. In contrast, the recent abandonment of China’s differential treatment in the EU’s antidumping legislation might even have contributed to increasing import prices.

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