A Bridge on Economic Issues between China and the World
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China Needs Tighter Macro-Prudential Regulations to Loosen Capital Controls
Ambrogio Cesa-Bianchi, Andrea Ferrero, Alessandro Rebucci, Nov 29, 2017China is on a path to capital account liberalization. If the renminbi is to become an international reserve currency (e.g. Prasad, 2016), as it has started to and one day will be, China must have an open capital account. But once the capital account is open, the economy will be exposed to gyrations of the global financial cycle (Rey, 2014). This column argues that international credit supply shocks have powerful effects on real and financial variables of the receiving countries, but not all economies are affected similarly, and those that have lower loan-to-value ratios (LTVs) and limits on foreign currency borrowing (FXLs) are less vulnerable. As China lowers controls on capital flows (e.g., Benigno et al., 2016) it should consider tightening domestic macro-prudential policy regulations (e.g., Cesa-Bianchi and Rebucci (2017) to avoid excessive volatility.
China’s Rebalancing and Gender Inequality
Mariya Brussevich, Era Dabla-Norris, Bin Grace Li, Jun 23, 2021This study documents women’s declining relative wages and labor force participation in China over the last two decades, in contrast with the predictions of the structural transformation literature, suggesting that rising service sector share is associated with narrowing gender gaps. We show that women’s labor supply elasticity to spouse’s wages increased dramatically between 1995 and 2013, which is consistent with a U-shaped relationship between economic development and women’s...
Does VAT Have Higher Tax Compliance Than a Turnover Tax? Evidence from China
Jianjun Li, Xuan Wang, Jan 15, 2020We study the effects of compliance with the value-added tax (VAT) by exploiting the reform that replaced business tax (BT) with VAT in China beginning in 2012. We find that replacing the BT with VAT significantly increases the reported sales and costs for treated firms, and the impact is much stronger for business-to-business (B2B) transactions than for business-to-consumer (B2C) transactions. Buyers in B2B transactions...
Growing like China: Firm Performance and GVC Position
Davin Chor, Kalina Manova, Zhihong Yu, Apr 14, 2021We use firm-level customs and manufacturing survey data, together with Input-Output tables for China, to examine how Chinese firms position themselves in global production lines. We document a sharp rise in the upstreamness of China’s imports, while the positioning of its exports has remained relatively stable, over the 1992-2014 period. Participation in global value chains thus appears to have facilitated an...
Physician-Induced Demand: Evidence from China’s Drug Price Zero-Markup Policy
Hanming Fang, Xiaoyan Lei, Julie Shi, Xuejie Yi, Aug 11, 2021We exploit the staggered rollout of China’s drug price zero-markup policy (ZMP) to study physician-induced demand in healthcare. Our results show that the drug expenses in the treatment hospitals dropped by 63 log points (47 percent) compared with those of the control group; however, the expenses for non-drug services were 28 log points (32 percent) higher in the treatment group than in the control group. Our results provide robust evidence for physician-induced demand.
