China & World Economy最新文献

The development of spatial interactions of land resources enhances virtual built-up land flow, which contributes to China's inter-regional trade inequality. Little is known about the degree of inequality among regions. This work seeks to estimate the degree of interregional trade inequality through environmental-economic benefits. We combined a multiregional input–output model at the city level with a new classification to calculate the virtual built-up land flow among cities and analyzed its implications for the regional economy and carbon balance. The results indicate that developed regions were the main beneficiaries of inter-regional trade, as reflected in land-use efficiency. China's economic hub has been progressively shifting southward, and the inter-regional trade inequality has continuously increased. The flow of virtual service industry land among developed regions rose, while underdeveloped regions remained suppliers of raw materials, further increasing inter-regional trade inequality.

Financial systems generally operate under two different models: one where capital markets play a primary role in financial transactions and resource allocation (market-oriented model), and another where banks are the central institutions for these activities (bank-oriented model). The degree of investor protection afforded by the legal system varies across these systems. What is the most efficient alignment between financial structure and investor protection? This paper attempts to quantify the structural matching relationship between the financial structure and investor protection in various countries, and examines empirically the impact of this relationship on economic development. Using a sample of cross-country panel data, it finds that the degree of structural matching was positively related to economic development. Both the combination of a securities market and strong investor protection and the combination of a banking system and weak investor protection can contribute to promoting economic development. It extends the law and finance theory framework, enhances the analysis of scenarios with weak alignment between financial structure and investor protection, explains the growth path of developing countries, and highlights the diversity and the dynamic nature of the optimal financial structure.

Economic globalization in the 21st century has been characterized by the rise and spread of global value chains (GVCs). It faces significant challenges due to increasing domestic and international policy uncertainty in the context of emerging mega risks like geopolitical tensions and climate change. This paper begins by constructing a theoretical model for an open economy to study how risk-averse firms make decisions regarding the sourcing of intermediate inputs in an uncertain environment. Our model solution proposes that firms will source fewer intermediate inputs from countries with more economic uncertainty. An increase in domestic and foreign uncertainty will have opposite impacts on a country's position in GVCs. In this sense, we argue that a country tends to move downstream along GVCs if its own economic policies become more uncertain, and it tends to move upstream with an increase in the uncertainty of its trading partner countries. Our regression analyses, based on data including the World Input–Output Database, World Development Indicators, the UN Comtrade database, and the Economic Policy Uncertainty Index, provide empirical support for this model-based conclusion. Our findings highlight that a nation must consider foreign economic policy uncertainty and maintain domestic policy stability to participate in GVCs.

Environment-related notifications play an important role in the coordinated development of trade and environment protection. In this paper, we examine how Chinese exporting enterprises responded to environment-related notifications implemented by the US through green innovation practices. These notifications significantly encouraged exporting firms to increase green innovation, as evidenced particularly by the number of green utility model patents granted. This effect was most pronounced in non-foreign-invested enterprises, high-total-factor-productivity firms, technology-intensive industries, and nongreen industries. These notifications also increased the probability of enterprises exiting the market while reducing the probability of new enterprises entering it. The innovation motivation of surviving firms was higher than that of the new entrants. Our analysis also suggests that environment-related notifications had a crowding-out effect on other innovation rather than a leverage effect. This study offers important empirical evidence that helps enterprises to respond to green non-tariff measures effectively, enrich the existing literature, and provide practical guidance for both policymaking and corporate development.

Greater participation in global value chains (GVCs) has highlighted the impact of exchange rate shocks on international trade. This paper examines how such participation influences firms' responses to exchange rate movements, focusing on the relationship between firms' pricing and value-added in exports. This study, using detailed Chinese firm-level data, demonstrates that firms with a high degree of GVC participation reacted to currency appreciation by lowering their export prices more substantially and reducing their export volumes less. This is mainly attributable to the “cost-hedging effect” within the marginal cost channel and the “pricing inhibition effect” within the markup channel. By categorizing export firms by trade models and product types, this study further demonstrates that processing trade firms at the low end of the value chain and those with low product differentiation were more inclined to absorb exchange rate shocks. This study adds to the existing theoretical framework and provides strong evidence for China in deepening GVC integration and supporting the development of high-quality export firms.

Using panel data from 2012 to 2020 for publicly traded Chinese companies, we explored the efficacy in mitigation of tax information asymmetry to combat profit shifting and transnational tax avoidance. Our empirical analysis revealed that, after the implementation of the inaugural multilateral automatic information exchange system known as the Common Reporting Standard, there was a statistically significantly increase in the effective tax rate by 1.4 percentage points, accompanied by an increase in instances of tax compliance. These trends were discernibly associated with a reduction in profit shifting and notable changes in reported profit margins, particularly influenced by actions related to debt shifting and strategic management of intellectual property assets. These findings underscore the strong connection between these effects and various factors such as investment destinations, asset portfolios, and industry classifications. The results imply a prospective decline in the incidence of cross-border tax avoidance by Chinese multinational entities and demonstrate the potential of emerging international tax cooperation frameworks for curbing the global tax avoidance practices of multinational corporations.

In this study, we expanded upon the current benchmark model of external adjustment and dissected the concept of international financial adjustment into two distinct components: valuation effect and investment income. Our enhanced model, which we refer to as “tri-channel model,” incorporates three key elements: trade balance, valuation effect, and investment income. Using a consolidated quarterly dataset that encompassed China's balance of payments and international investment positions from 1998 to 2020, we estimated the relative importance of the three newly introduced adjustment channels to China's cyclical external imbalance. We found that the trade balance channel played a major role, accounting for approximately 76 percent of cyclical external adjustment. The contribution of the investment income channel to cyclical external adjustment (21 percent) was much greater than that of the valuation effect channel (3 percent). These findings imply that policy responses to the cyclical external imbalance in China should focus more on the trade balance and investment incomes channels rather than exploiting the valuation effects.

Policymakers in China have attempted to improve the quality of rural education by investing in teacher salaries through initiatives like the Rural Teachers Support Plan (RTSP). This study estimates the effects of teacher salary increase on students' educational outcomes in rural China by utilizing the exogenous variations of rural teacher salaries induced by the RTSP. It employs an intensity-based difference-in-differences strategy and panel data from 2010 to 2018 with 3,351 rural children. The findings reveal that an increase in teacher salaries had a significant positive impact on students' examination results. Moreover, the results of mechanism analysis indicate that salary increases could have both quality and quantity effects on students' outcomes by increasing the proportion of highly educated teachers and reducing the student–teacher ratio. Our findings contribute to the discussion on the importance of teacher salary incentives in education production functions and provide insights for other countries undertaking rural education reforms.

This paper explores how learning from neighboring firms affects new exporters' product quality. It builds a Bayesian learning model to study how new exporters revise their prior beliefs about foreign customers' preferences for product quality from neighboring pioneering exporters. The model shows that a new exporter improves its product quality when it receives a positive quality-preference signal from its neighbors. The learning process of a firm depends on the number of neighbors, the level and heterogeneity of their export quality, and its own prior knowledge of the market. Highly disaggregated firm–product–country level transaction data provide robust evidence for this. The results also suggest that the impact of neighboring signals on a new exporter's quality can be channeled through the importation of high-quality intermediate inputs and more fixed investment. Learning effects are heterogeneous across firms and learning can influence other aspects of export performance.