Chinese Policymakers Research Articles

Identifying the Determinants of Urbanization in Prefecture-Level Cities in China: A Quantitative Analysis Based on Spatial Production Theory

China’s urbanization has attracted considerable academic attention. However, more work is required to understand and examine the driving mechanisms of urbanization, especially within the context of the transition from socialism. We used a regression model and a geographical detector technique to determine the direction and strength of factors influencing urbanization in prefecture-level cities in China. We found that China’s urbanization development model has two characteristics: administrative hierarchy and spatial agglomeration. Based on our conceptual framework, we identified the positive effect exerted by the real estate investment and per capita fiscal expenditure on urbanization, as well as the negative impact exerted by the urban–rural income ratio. The results revealed that China’s urbanization is a hybrid process: the forces from power and capital contribute to high levels of urbanization. When comparing the strength of the factors influencing urbanization between coastal and inland cities, we found that real estate investment and per capita fiscal expenditure in coastal cities have a greater impact on urbanization than in inland cities. In contrast, the impact of the urban–rural income ratio on urbanization is larger in inland cities than in coastal cities. A close examination on the factors influencing China’s rapid urbanization is the key to further advancing our understanding of the dynamic mechanisms of China’s urbanization. Our findings can help Chinese policy makers formulate more detailed urbanization strategies with consideration of regional characteristics.

Deregulation of power generation planning and elimination of coal power subsidy in China

In this research, we define three kinds of subsidy to coal power under the existing institutional structure in China. They are an environmental subsidy, a squeezing-out renewable subsidy, and a price-protection subsidy. Based on a practical account framework, solid dataset, and reasonable assumptions, we estimate a total subsidy of 263.7 billion Chinese Yuan in 2016. We also provide a reference estimate on environmental subsidy by using the Externality Cost approach. Though these subsidies will be removed by 2020, with the deregulation of the power sector, such a shift will trigger stranded asset risks. We conclude with policy implications for the deregulation of power generation planning and market reform to Chinese policymakers.

The impact of regional financial development on economic growth in Beijing–Tianjin–Hebei region: A spatial econometric analysis

The Beijing–Tianjin–Hebei (BTH) integration project in China is ambitious which offers great potential with its promotion of sustainable and inclusive development. This study investigates the impact of regional financial development on economic growth in the BTH region, with panel data collected from 2007 to 2016. Two indicators namely, CREDIT (denoted as regional financial development depth) and BRANCH (denoted as regional financial intermediaries accessibility) are used to construct an integrated regional financial development indicator through the spatial econometrics approach. The spatio-temporal distribution characteristics of regional financial development and economic growth are analyzed. Afterward, the global Moran’s I and local Getis–Ord Gi* statistics are applied to detect the presence of spatial autocorrelation. Finally, a spatial Durbin model (SDM) is utilized to examine spatial distribution and spatial association. The research findings of this study suggest that the CREDIT has a positive effect on regional economic growth, while the BRANCH has no impact on regional economic growth. Moreover, it is found that the spatial autocorrelation of CREDIT and BRANCH are statistically significant. The CREDIT of the neighboring areas has a negative spatial spillover effect on economic growth of one area, while the BRANCH in the neighboring areas has a positive effect on the one area. The results and research findings reported in this article highlight the role of regional financial development in improving the economic growth not only for Chinese policy makers but also for other countries’ researchers and practitioners in this field.

The Effect of European Intellectual Property Institutions on Chinese Outward Foreign Direct Investment

ABSTRACTThis study examines the role of the strength of the Intellectual Property (IP) institutions of 23 European countries in attracting Chinese Outward Foreign Direct Investment (OFDI) during the time period 2003–2015. Following a dynamic panel data analysis methodology, we find that the strength of IP institutions has a positive effect in attracting higher levels of OFDI from China. This is an important finding for the OFDI literature from emerging markets, since previous studies have researched this relationship from the OFDI perspective of developed countries. However, we also find a weak indication of a potential U-shaped relationship between the strength of IP institutions and Chinese OFDI. To better understand this relationship, we interact a European country's membership in the Former Eastern Bloc (FEB) with the strength of IP institutions and find a negative moderating effect. We therefore find that when investing in FEB countries, Chinese firms are attracted to weaker levels of IP institutional strength. The results of this study have important implications for future studies on the determinants of OFDI from emerging markets, as well as for European and Chinese businesses and policy-makers concerning the importance of IP institutional strength.

How much does financial development contribute to renewable energy growth and upgrading of energy structure in China?

Developing renewable energy sector and upgrading energy structure have strategically important role in China's commitments against climate changes. Policymakers and authorities have put forward great efforts to make them happen. But one of the key constraints of China's energy revolution is financial issues, which is inevitably linking to the country's financial development. It is of great importance to understand how much financial development contributes to the renewable energy development in China, and more importantly what aspects of financial development matter. Through a time series analysis based on macro-level data, this paper provides clear evidence that financial development is critically important and contributes an overall of 42.42% to the variation of renewable energy growth. Specifically, we are able to demonstrate that capital market is the most important factor, followed by foreign investment. A simple comparison to the EU and the US cases indicates that the EU path is more relevant and should be studied more carefully by the Chinese policymakers.

Unveil the economic impact of policy reversals: the China experience

PurposeThe purpose of this paper is to reveal the economic impact of policy reversals related to market liberalization reforms in China.Design/methodology/approachTo perform the analysis, the authors hand-collect 59 financial market liberalization policy reversals from 1999 to 2017. These reversals are related to the liberalization of the stock market, bond market, derivatives market, forex market, lending market, and real estate market etc. The authors employ a stylized equilibrium interest rate model from Li et al. (2013) to deduce the impact of policy reversals on economic growth and the associated volatility after the announcement of each policy reversal.FindingsFirst, the authors discover that about half of reversals are related to some tradeoff between the economic growth and the volatility associated with growth. Second, the authors also find that about a quarter of the reversals are detrimental to both the growth and the stability. These reversals, if known to policymakers, should be entirely avoided or corrected. Third, using a simple diagnostic test, the authors can identify detrimental reversals at the intra-day frequency by computing the change of the term spread and the volatility before and after the reversals.Practical implicationsThe findings are useful for identifying effective policymaking in developing countries where mature democratic and rigorous policymaking processes are often lacking and formulating economic policies is challenging. The findings suggest that policy reversals serve China well by improving the quality of the policy made without posing destructive consequences to the existing economic infrastructure. This empirical evidence is important for a better understanding of the benefits of policy reversals on economic growth.Social implicationsThe empirical procedure provides a timely and objective evaluation of policy shifts, allowing for the general public to discern the rationale behind the policy decisions. Consequently, stakeholders’ trust and confidence in policymakers is enhanced so that the probability of the successful implementation of structural reforms may increase in these developing countries.Originality/valueFirst, the results reveal some successful examples of Chinese policymaking in the path of liberalizing financial market. The authors find that the Chinese liberalization policy flip-flops have resulted in a more balanced growth on some occasions with reduced growth rate and volatility. Second, the proposed methodology provides an objective evaluation of policy shifts, allowing for the public to infer the general direction of the impact generated by policy shifts. Subsequently, stakeholders’ trust and confidence in policymakers can be enhanced and/or restored if the process of finding a successful path of structural reforms is unambiguous. Finally, the interest rate model also provides a timely method to evaluate the impact of policy shifts at an intra-day frequency, whereas most macroeconomic indicators are available at longer frequencies such as monthly or quarterly. The timeliness in understanding the economic consequences of policy reversals can be critical to prevent the destructive consequences of bad ones.

Wage-Led Demand as a Rebalancing Strategy for Economic Growth in China

Rebalancing growth in favor of domestic consumption has been an objective of Chinese policy makers for over two decades. However, until recently little progress has been achieved. This article argues that the nature of the demand regime is a major reason for the limited rebalancing operated thus far. Until the great recession (2008-09), Chinese growth was profit-led, which means that an increase in the profit share of income had a positive effect on investment and net exports that exceeded the negative effect on consumption. We show that after the great recession, China's demand regime turned wage-led, which means that an increase in the wage share results in a positive effect on households' consumption which exceeds the negative effect on investment and net exports. The conclusion is that a pro-labor policy may now contribute to rebalance China's growth and make it less dependent on exports, overinvestment and carbon-intensive industries.

Of Bombs and Bureaucrats: Internal Drivers of Nuclear Force Building in China and the United States

ABSTRACTThis article examines the domestic influences on US and Chinese nuclear forces. While strategic factors largely drive each side’s, underappreciated domestic and organizational factors also influence outcomes. Partisan politics shape US policies regarding arms control, missile defense, and the roles of nuclear forces. China has its own— more opaque—politics. Organizational factors have affected the status and role of the Chinese Rocket Forces. Constituencies for nuclear weapons have gained ground, and the military services appear to be competing for nuclear missions. The absence of organizational firewalls within the Rocket Forces suggests that assertive operational practices might bleed across different parts of the organization. These domestic influences on US and Chinese nuclear policymaking are likely to have interactive and accelerating effects. Both sides will assume measures taken by the other are driven by strategic intent, when the actual drivers may be mixed. To the extent that domestic factors are responsible, the resulting spirals of suspicion and conflict will be inadvertent—but may nevertheless take on a life of their own. While strategic nuclear interactions are not currently at the center of the bilateral relationship, they may come to be so in the future for all the wrong reasons.

The effect of production structure on the total CO2 emissions intensity in the Chinese construction industry

Reducing the total CO2 emissions intensity (TCEI) in the Chinese construction industry is an important strategy to cut its CO2 emissions, which share a considerable proportion of sectoral CO2 emissions in China. However, there is lack of an in-depth analysis of the effect of production structure on the TCEI. This study comprehensively investigates the effect of production structure on the TCEI in the Chinese construction industry by using structural decomposition analysis and sensitivity analysis methods collectively. The results show that the TCEI in the Chinese construction industry declined by 0.3505 tons CO2/104 RMB between 2007 and 2012, and the effect of production structure contributed 110.66% to such decline. Over 95% of the effect was contributed by the electricity, steam and hot water production and supply industry and the refined petroleum, coke products, and nuclear fuel industry. The results also demonstrate that the three most critical technical coefficients were for the nonmetallic mineral products industry consumed by the construction industry, the metal smelting and pressing industry consumed by the construction industry, and the metal smelting and pressing industry consumed by itself in 2012. Besides the first two coefficients, the coefficient for the electricity industry consumed by itself was also critical in 2007. The production chains of the construction industry itself and the metal smelting and pressing industry included over half of the twenty most critical technical coefficients. This study can provide valuable reference for Chinese policy makers to take proper strategies to adjust the production structure in order to reduce the TCEI.

Chinese consumer preferences for fresh produce: Interaction between food safety labels and brands

AbstractIn this study, 938 consumers in China's Shandong Province were surveyed for their preferences for tomatoes in a real choice experiment varying in three product attributes: food safety label, brand, and price. Using a mixed logit model, results revealed that consumer willingness to pay for organic tomatoes was higher than that for tomatoes labeled as Green or Generally Regarded as Safe (GRS). With regard to brands, consumers prefer brands affiliated with proprietary enterprises over brands held by agricultural cooperatives. The interactions between organic label and brands as well as that between Green label and brands were significantly positive suggesting synergy between these labels and brands. Conversely, the interaction between the GRS label and brands was insignificant. The conclusions should not only aid Chinese policy makers in developing its food safety certification strategies but also provide references for producers and certification bodies for their business decision‐making.

Ethical issues in human germline gene editing: a perspective from China.

The ethical issues associated with germline gene modification and embryo research are some of the most contentious in current international science policy debates. In this paper, we argue that new genetic techniques, such as CRISPR, demonstrate that there is an urgent need for China to develop its own regulatory and ethical framework governing new developments in genetic and embryo research. While China has in place a regulatory framework, it needs to be strengthened to include better compliance oversight and explicit criteria for how different types of research should be reviewed by regulatory authorities. We also document a variety of opinions about the new technologies among the public, scholars, and policy makers. China needs to develop its own regulations in coordination with other countries; but it is unlikely that an international consensus will be achieved in this area, given the existing differences in regulations between countries. We should aim at harmonization, not necessarily complete consensus, and the perspective from China is vital when international norms are developed and harmonized. Chinese policy makers and researchers need to be aware of the international discussions, at the same time as the international community is aware of, and accommodates, Chinese positions on important policy options.

How is the environmental efficiency in the process of dramatic economic development in the Chinese cities?

In the past decades, unprecedented dramatic economic development in the Chinese cities has also brought serious environmental problems. In line with this, the Chinese government has been investing great efforts and resources in addressing environmental problems. However, little previous studies have been conducted in examining whether this development is efficient from a win-win perspective balance between economic growth and environmental protection. This paper presents a comprehensive analysis on the environmental efficiency (EE) in the process of dramatic economic development in the Chinese cities. The Super-slack-based measure (Super-SBM) model is adopted to analyze the EE performance. Data used for analysis are collected from 283 sample cities in China. The research results indicate that the overall EE performance across the Chinese cities is relatively low, and the differences in EE performance among the 283 cities are significant. The top three EE performers are Shenzhen, Sanya and Erdos, and Baiyin, Xinzhou and Liupanshui are the bottom three performers. The results also suggest that the EE performance in the Eastern area, where most first-tier cities are located in, is significantly higher than that in the Central and Western areas (aggregated with fourth and fifth tier-cities). From the dynamic perspective, the results show that China has achieved significant improvement in environmental efficiency across the surveyed period of 2003–2016. The research findings provide valuable references not only for the Chinese policy-makers and practitioners to adopt measures for promoting a win-win balance between environmental protection and economic development in the Chinese context, but also for further studies on environmental efficiency in the international context.

Market Opportunities and Political Responsibilities: The Difficult Development of Chinese Private Security Companies Abroad

Building upon the conceptual work of Krahmann and Habermas, this study explains how political power and market forces in China combined to create an enormous domestic market for overseas security services and, at the same time, undermined the full development of domestic private security companies (PSCs). The growing responsiveness of the state to the request for protection of Chinese citizens and assets abroad made room for the initial development of Chinese PSCs’ overseas operations. However, the policy makers’ focus on political loyalty has inhibited the full-fledged maturation of China’s private security industry. So far, large foreign PSCs have been the main beneficiaries of this situation. The future development of Chinese PSCs remains possible in a gradual and pragmatic way, but Chinese policy makers will have to deal with important diplomatic and political questions before the development of any “Chinese Blackwater” will be imaginable.

Innovation and control: universities, the knowledge economy and the authoritarian state in China

ABSTRACTLike many other education systems in the world, Chinese education has undergone various reforms in order to adapt to the challenges that are perceived to emanate from the knowledge economy. Central to this transformation is the concept of ‘innovation’, which is to guide the country on its path from a production economy to a knowledge economy. Chinese policymakers have been targeting the higher education sector both as a motor for innovation and as a realm to be innovated, and have invested heavily in the sector’s internationalization, above all in the form of international collaboration and student mobility, affecting higher education and academia worldwide. However, a number of structural and political constraints delimit the directions that innovation can take, both within Chinese education in general and within Chinese higher education. The article takes stock of these constraints and assesses the potential for innovation in Chinese higher education in terms of the underlying school system, exam and recruitment policies, the (re-)organization of universities, as well as the universities’ and science system’s performance according to indicators of innovation. The article then identifies four ‘Chinese innovation dilemmas’, that is, educational policies and developments that are to spur innovation but run counter to existing structures and practices of educational, social, and political governance: ideological control versus creativity; state planning versus grassroots innovation; old-boy networks versus anti-corruption; and exam-based student recruitment versus flexible recruitment.

What makes the difference in construction carbon emissions between China and USA?

It is commonly acknowledged that China and USA are the two largest carbon emitters in the world, but the differences in the emissions between the two countries is significant. This paper reveals the carbon emissions difference in the context of construction industry. The drivers contributing to the difference are analyzed by the structural decomposition analysis method. The results suggest that the construction carbon emissions in China are much larger than USA, and the difference in the emissions between China and USA increased by 439.8% between 1995 and 2009. The results also demonstrate that the total final demand effect contributed most to narrowing the emissions difference, whilst the final demand ratio effect had the largest enlarging impact on the difference. The second significant factor for the enlargement of the emissions difference between the Chinese and the US construction industry was the production structure effect, followed by the energy intensity effect and the carbonization factor effect. It is noteworthy that the carbonization factor effect has surpassed the energy intensity effect since 2008. This study can provide the Chinese policy makers with a systematic understanding on which part of policy should be concentrated in order to reduce the construction carbon emissions.

Structural Changes in Chinese Economy: Progress and Challenges

This article presents a review of the progress in economic restructuring in the Chinese economy. It explores the role of consumption versus investment in economic growth, trends in inequality, growth of the state and non-state sectors, and balancing between short-term and long-term development goals. It also discusses the major challenges in China’s economy and hence Chinese policymakers’ possible responses in the coming decade.

Haze Attitudes and the Willingness to Pay for Haze Improvement: Evidence from Four Cities in Shandong Province, China.

Background: Given the health and welfare impacts of haze, haze reduction governance challenges Chinese policy-makers. Surprisingly, there have been no studies of the differences in the public’s willingness to pay (WTP) for haze governance within a province. Yet haze reduction policies are implemented at the provincial level. Based on the contingent valuation method, data on WTP for haze governance across four industrial cities in Shandong province were collected using a questionnaire survey. Method: A combination of stratified sampling and non-probability sampling methods were used, yielding a valid sample of 1006 respondents. The Heckman sample selection model was used to analyze factors determining WTP and WTP amount. Results: 53% of respondents were unwilling to pay for haze reduction, while less than 1% of these respondents were satisfied with Shandong’s air quality. About half (47%) of the respondents were willing to pay, on average, US$14.14 per household per year for haze governance. We found that there were significant inter-city differences in the WTP and WTP amounts: those with a higher income, education, haze knowledge, and haze concern were WTP; age, marital status, and subjective indicators displayed a negative relationship with WTP amount. About two thirds of the non-payers, and those with poor environmental knowledge, argued that air quality improvement was mainly the responsibility of governments (39.3%) and polluters (25.6%), instead of ordinary citizens. Further, 27% of non-payers said that their income was too low to contribute to a pollution tax and 6.3% claimed that they did not believe the funds would be used effectively for environmental conservation. Conclusions: City-specific differences in WTP may caution against “one size fits all” policies. The study indicates that the government may need to target policies to specific cities and the characteristics of residents in those cities by age, education, and income groups and residents’ subjective evaluation of the government and the haze problem and those responsible for pollution.

Synergetic effects of water and climate policy on energy-water nexus in China: A computable general equilibrium analysis

A unified policy framework for energy and water would be beneficial considering the high interdependence of the two resources in China. In this paper, a recursive dynamic computable general equilibrium model is established to examine the existence of synergetic effects within water fee policy and energy related climate policy, i.e. carbon tax, and provide insights for Chinese integrative policy-making. The results show that water fee can contribute to industrial water conservation, whereas its effect is limited under current water fee level. The adoption of a carbon tax in addition to it might further improve its water saving benefits. Furthermore, water fee can also promote the enhancement of China's emission reduction goal, and a higher carbon tax and water fee rate can achieve greater emission reduction effects. At this point, the synergetic spillover effects that water conservation benefits will be achieved simultaneously via the transition of industry into a more low-carbon form is critical for elaborating an effective strategy of environmental policy. Besides, our results suggest that giving priority to renewable power is regarded as the silver bullet to address the water and emission constraints on energy system, as it can optimize the water conservation benefits of emission reduction.

Population Structure and Housing Prices: Evidence from Chinese Provincial Panel Data

ABSTRACTThis study analyzes the relationship between the proportion of the economically active population aged 15–64 to total population and housing prices. A panel of 31 provinces in China from 2002 to 2014 is used in our analysis. We find empirical evidence that the impact of the population structure on housing-price growth increases as the population growth rates rise. This observation suggests that, to understand provincial housing price movements in China, one should consider the ratio of working-age population to total population in a province. The main policy implication is that Chinese policymakers need to ensure a moderated population growth to effectively promote stability in housing prices and the economy.

China's Interest Rate Pass-Through To Government Bonds And Monetary Independence

The monetary policy has been a main driver of China's economic growth. Strong evidence shows China's monetary policy is designed to support real GDP growth. There are various and complicated monetary transmission channels. This study examines the relation between monetary independence and interest rate pass-through to government bonds in China. The sensitivity coefficients between government bond yields and the People's Bank of China's (PBC) policy rate FR007 are obtained through a series of univariate 200-trading-day rolling regressions between bond yields with different maturities and FR007. The Monetary Independence (MI) is measured as the reciprocal of the correlation of interest rates in China and the United States. 200-trading-day correlations are calculated using daily interest rate data. A simple regressions model is employed to test the relations between sensitivity coefficients and MI. The time period is between January 4, 2013 and November 30, 2016. The empirical results show that China's monetary independence is positively associated with China's interest rate pass-through to government bonds. This relation is also robust to various tests on the presence of outliers and causality. It means that the higher China's monetary independence, the greater China's interest rate pass-through to government bonds. During March 2016 – November 2016, China had been continuously suffering great capital outflows. China's monetary independence had dropped significantly during this period, and at the same time China's interest rate pass-through to government bonds had totally disappeared. The Impossible Trinity theory may provide the answer. In reality, the Chinese authorities have helped establish multiplier mechanisms that jeopardize both monetary autonomy and exchange-rate stability. The Chinese policy-makers such as finance minister Lou Jiwei also conceded that China's monetary tools were becoming less effective. Based on this study's findings, the PBC is suggested to relax its control of the exchange rate regime in order to increase the independence of the Chinese monetary policy. Accordingly, China's interest rate pass-through to government bonds will be improved, and Chinese economic growth will be more sustainable.