Economics of marriage and real estate in China

Economists have long realised that marriage is just a contract like any other.

Given the relative shortage of females, supply and demand suggests that the price of marriage should go up. The price it seems to to "own" an apartment. Given the cost this is pricing many men out of the market.

This is exactly what is happening.

A large number of young, single restless men is never going to be good for political stability.

The upcoming property crash may also kill off a few marriages.

This story teaches us many things - I just need to work out what they are but I think they are important.

For Many Chinese Men, No Deed Means No Dates [NYT]

BEIJING — In the realm of eligible bachelors, Wang Lin has a lot to recommend him. A 28-year-old college-educated insurance salesman, Mr. Wang has a flawless set of white teeth, a tolerable karaoke voice and a three-year-old Nissan with furry blue seat covers.

What will happen if China's overheated real estate market goes bust?

“My friends tell me I’m quite handsome,” he said in confident English one recent evening, fingering his car keys as if they were a talisman.

But by the exacting standards of single Chinese women, it seems, Mr. Wang lacks that bankable attribute known as real property. Given that even a cramped, two-bedroom apartment on the dusty fringe of the capital sells for about $150,000, Mr. Wang’s $900-a-month salary means he may forever be condemned to the ranks of the renting.

Last year, he said, this deficiency prompted a high-end dating agency to reject his application. In recent months, half a dozen women have turned down a second meeting after learning that he had no means to buy a home.

“Sometimes I wonder if I will ever find a wife,” said Mr. Wang, who lives with his parents, retired factory workers who remind him of his single status with nagging regularity. “I feel like a loser.”

There have been many undesirable repercussions of China’s unrelenting real estate boom, which has driven prices up by 140 percent nationwide since 2007, and by as much as 800 percent in Beijing over the past eight years. Working-class buyers have been frozen out of the market while an estimated 65 million apartments across the country bought as speculative investments sit empty.

The frenzy starts with the local governments that sell off land at steep prices, and is frothed up by overeager developers who force residents out of old neighborhoods, sometimes prompting self-immolations among the dispossessed. But largely overlooked is the collateral damage to urban young professionals, especially men, who increasingly find themselves lovelorn and despairing as a growing number of women hold out for a mate with a deed.

Although there are few concrete ways to measure the scope of involuntary bachelorhood, more than 70 percent of single women in a recent survey said they would tie the knot only with a prospective husband who owned a home.

Among the qualities they seek in a mate, 50 percent said that financial considerations ranked above all else, with good morals and personality falling beneath the top three requirements. (Not surprisingly, 54 percent of single men ranked beauty first, according to the report, which surveyed 32,000 people and was jointly issued by the Chinese Research Association of Marriage and Family and the All-China Women’s Federation.)

The marriage competition is fierce, and statistically, women hold the cards. Given the nation’s gender imbalance, an outgrowth of a cultural preference for boys and China’s stringent family-planning policies, as many as 24 million men could be perpetual bachelors by 2020, according to the report.

Zhang Yanhong, a matchmaking consultant at Baihe, one of the country’s most popular dating sites, said many disheartened men had simply dropped out of the marriage market.

“This fixation on real estate has twisted the popular notion of love and marriage,” she said. “Women are putting economic factors above everything else when looking for a mate, and this is not a good thing for relationships or for society.”

The nation’s real-estate obsession is especially noteworthy given China’s relatively recent embrace of home ownership.

The sale of residential property was not allowed until the late 1980s, and even then under a leasehold system that gives buyers 70 years of ownership. Today, about two-thirds of all Chinese under 40 own their own homes, slightly higher than the average for Americans of the same age group.

With few other outlets for investment (those who park their money in a Chinese bank effectively lose money, given low interest rates and high inflation), many families have been plowing their savings into apartments, spurring what some economists describe as a bubble.

Han Han, one of China’s most widely read bloggers, frequently assails the government policies that he and many economists say have contributed to rapidly rising prices.

In an interview, he said one consequence of the single-minded focus on real estate, or on earning the money to make mortgage payments and repay family loans, is that young people have little time for anything else. “We’ve created a generation of young people whose sole ambition is to have a piece of property under their name,” he said.

Like many anxious bachelors, Yang Xuning, 29, a sportswriter from Beijing, said much of the pressure comes from parents who feel taunted by the wealth around them.

He recalls his first meeting with his girlfriend’s parents in Shanghai last winter, when he was asked about his salary and his nesting plans. “I tried to reason with her mother, explaining that it’s not practical to buy something at this stage in our lives but she wouldn’t hear it,” he said.

What will happen if China's overheated real estate market goes bust?

He stood his ground, she stood hers, and a few months later, on the second anniversary of their relationship, Mr. Yang’s girlfriend called it quits.

“A lot of girls, encouraged by their parents, see marriage as a way of instantly changing their status without the hard work,” he said bitterly.

Many women are unapologetic about their priorities, citing the age-old tradition in which men provided a home for their brides, even if that home came with a mother-in-law.

There are also other concerns, including the instability of starting a family in rented premises and the endless badgering of parents.

Status also plays a role, but so, too, do fears that those who put off buying will be priced out of the market indefinitely.

Gao Yanan, a 27-year-old accountant with a fondness for Ray-Bans and Zara pantsuits, said the matter was not up for debate. “It’s the guy’s responsibility to tell a girl right away whether he owns an apartment,” she said. “It gives her a chance not to fall in love.”

With such women on the prowl, even men who do have their own homes have come up with techniques to weed out the covetous and the inordinately materialistic.

Liu Binbin, 30, an editor at a publishing house in Beijing, said he often arrived at first dates by bus, even though he owned a car. “If they ask me questions like ‘Do you live with your parents?’ I know what they’re after,” he said.

Mr. Liu said he went on 20 unfulfilling blind dates until finding a suitable girlfriend last year. He said he knew she was the one after passing the three-month mark.

“The whole time she thought I didn’t own an apartment and she still wanted me,” he said. “Someone like that is rare.”

.

Remaking the World of Chinese Labour

Labour relations in China over time make for fascinating reading. To the outsider it appears strange that a communist country run by and for the workers appears in many respects to be exploiting workers more than in any capitalist country demonstrated not least by widening income inequality.

This paper in the BJIR looks interesting.

I agree with the conclusions - the new labour laws are good ones but there is a delicate balance of power that the state will have to very carefully.


"Remaking the World of Chinese Labour: A 30-Year Retrospective"

British Journal of Industrial Relations, Vol. 48, Issue 3, pp. 507-533, September 2010

ELI FRIEDMAN, affiliation not provided to SSRN
CHING KWAN LEE, affiliation not provided to SSRN

Over the past 30 years, labour relations, and, indeed, the entirety of working-class politics in China, have been dramatically altered by economic reforms. In this review, we focus on the two key processes of commodification and casualization and their implications for workers. On the one hand, these processes have resulted in the destruction of the old social contract and the emergence of marketized employment relations. This has implied a loss of the job security and generous benefits enjoyed by workers in the planned economy. On the other hand, commodification and casualization have produced significant but localized resistance from the Chinese working class. Up until now, the activities of labour non-governmental organizations and of the official trade unions have contributed to the state's effort of individualizing and institutionalizing labour conflict resolution through labour law and arbitration mechanisms. Finally, we provide a brief discussion of the impact of 2008's Labour Contract Law and the outbreak of the economic crisis on labour relations. We conclude that the continual imbalance of power at the point of production presents a real dilemma for the Chinese state as it attempts to shift away from a model of development dependent on exports.

.

"Female Employment and Fertility in Rural China"

Interesting new NBER paper. The results have potentially important implications for China's one child policy. Note that female employment which is growing rapidly reduces the probability of having more that one child significantly.

One possible implication is that by encouraging female participation the one child policy could be phased out over time. Korea has no such policy and a birth rate comparable to China's with the policy.

"Female Employment and Fertility in Rural China"

NBER Working Paper No. w15886

HAI FANG, University of Miami
KAREN EGGLESTON, University of California, Los Angeles (UCLA) - International Institute
JOHN A. RIZZO, Stony Brook University - Department of Economics and Department of Preventative Medicine
RICHARD J. ZECKHAUSER, Harvard University - John F. Kennedy School of Government,

Data on 2,288 married women from the 2006 China Health and Nutrition Survey are deployed to study how off-farm female employment affects fertility. Such employment reduces a married woman’s actual number of children by 0.64, her preferred number by 0.48, and her probability of having more than one child by 54.8 percent. Causality flows in both directions; hence, we use well validated instrumental variables to estimate employment status. China has deep concerns with both female employment and population size. Moreover, female employment is growing quickly. Hence, its implications for fertility must be understood. Ramifications for China’s one-child policy are discussed.

Chinese labour shortages and demand hots up

Apologies for the lack of posts on Chinaeconomicsblog. I hope to catch up soon. The real academic job is taking its toll on my posting frequency.

I will get up to speed with more simple links. Ironically post frequency falls when I am in China to the great fire wall of China.

There is much to talk about. The whole financial crisis leads to more questions than answers. I am not convinced by the Chinese recovery although there is no doubt things could have been worse. The problems now are asset bubbles and bad loans that will cause their own problems sooner rather than later.

One thing I would not have expected would be labour shortages given the massive layoffs over the last two years. The FT reports.

The impact of the massively overdone fiscal stimulus package is still being felt.

Labour shortage hits China export recovery [FT]

An export recovery in the world’s most populous country is running up against an unexpected constraint – manpower.

With Chinese exports back to their early 2008 levels, factory owners are worried about their ability to service a surge in orders now that a new manufacturing cycle has begun after the lunar new year holidays.

The problem is particularly acute in southern Guangdong province and its Pearl river delta manufacturing heartland near Hong Kong, the region known as “the workshop of the world”.

Guangdong accounts for a third of China’s exports and would rank as one of the world’s 10 largest exporters if it were a country in its own right. But the province’s ability to attract and retain migrant labour from China’s vast interior is slipping.

“Labour availability is tight right now in Guangdong compared to other regions,” said Paul Hussey, chief executive of Strix. The Isle of Man company, which dominates the global market for thermostatic controls on electric kettles, maintains most of its manufacturing operations in the provincial capital, Guangzhou.

Quantifying labour shortages is extremely difficult given large variances by region, industry and skill level. Recruiters for Galanz, the world’s largest manufacturer of microwave ovens, were this week offering production line workers a relatively robust monthly base wage of Rmb1,700 ($250). Skilled technicians in much greater demand were commanding 65 per cent more.

In Dongguan, a manufacturing centre near Guangzhou, the local government estimates that there is now just one worker for every two jobs. At the height of the crisis, which for Chinese manufacturers came last spring, local officials calculated there were four workers competing for every three jobs.

Beijing’s successful economic stimulus programme has contributed to a coastal scramble for labour, by increasing investment and employment opportunities elsewhere.

“Fiscal stimulus has spurred jobs growth in the interior provinces,” Ben Simpfendorfer, Royal Bank of Scotland economist in Hong Kong, said.

In December, China unveiled the world’s fastest passenger train service between Guangzhou and the central city of Wuhan, covering 1,100km in just three hours. The Harmony Express line has reduced travel time between Guangzhou and Shaoguan, an industrial backwater in Guangdong’s remote mountain region, to just 40 minutes, anchoring local workers closer to home.

.

The Great "Social Unrest" in China mystery

In my recent experience with Chinese economists I have found them and indeed other academics with an interest in China remarkably reluctant to mention the "social unrest" word in conjunction with a global recession.

Given China's reliance on exports and the number of jobs China has to create just to stand still each year coupled with an increasingly brave populous not (as) scared to speak out it appeared to me that the conditions for "social unrest" were aligning themselves nicely.

Yet this element seems to be absent from serious discussion. Clearly China is still well positioned to crush any unrest but with the eyes of the world increasingly on them it may not be as easy as in previous decades.

It was reassuring therefore to read in this week's economist that someone, somewhere has put a number to the issue. The Economist's number just so happens to match mine.

This means we are getting close. All eyes on China.

Here is the quote in the lead article "Into the Storm" looking at how the emerging world will cope with the current "global downturn" or as I prefer to call it "cliff jump".

In many places—eastern Europe is one example (see article)—financial turmoil is hitting weak governments. But even strong regimes could suffer. Some experts think that China needs growth of 7% a year to contain social unrest. More generally, the coming strife will shape the debate about the integration of the world economy. Unlike many previous emerging-market crises, today’s mess spread from the rich world, largely thanks to increasingly integrated capital markets. If emerging economies collapse—either into a currency crisis or a sharp recession—there will be yet more questioning of the wisdom of globalised finance.

Among the giants, China is in a league of its own, with a $2 trillion arsenal of reserves, a current-account surplus, little connection to foreign banks and a budget surplus that offers lots of room to boost spending. Since the country’s leaders have made clear that they will do whatever it takes to cushion growth, China’s economy is likely to slow—perhaps to 8%—but not collapse. Although that is not enough to save the world economy, such growth in China would put a floor under commodity prices and help other countries in the emerging world.

.

EPI "China trade costs jobs in every state"

More China bashing or more to it? The Economic Policy Institute report that Chinese trade is causing job losses in every state of the US. The counter arguments are too numerous to go into but a basic trade text book should suffice.

China trade costs jobs in every state [EPI]

Unbalanced U.S. trade with China since 2001 has had a devastating effect on U.S. workers. Between 2001 and 2007, 2.3 million jobs were lost or displaced, including 366,000 in 2007 alone (Scott 2008). These jobs were displaced by the growth of the U.S. trade deficit with China, which increased from $84 billion in 2001 to $262 billion in 2007.

Growing China trade deficits between 2001 and 2007 eliminated jobs in all 50 states and the District of Columbia. Jobs displacement exceeded 2.0% of total employment in Idaho, New Hampshire, South Carolina, Oregon, California, Minnesota, Vermont, Texas, and Wisconsin (see Map). The effects of growing trade deficits with China have been felt widely across the United States and no area has been exempt from their impact. While traditional manufacturing states such as Wisconsin, Tennessee, and the Carolinas were certainly hard hit, so too were states in the tech sector such as California, Texas, Oregon, and Minnesota. Rapidly growing imports of computers and electronic parts accounted for almost half of the $178 billion increase and eliminated 561,000 U.S. jobs. Idaho, which lost an estimated 9,000 jobs in computer and electronic products alone, was the hardest-hit state in the country in terms of share of total state employment.

This press release is based on a longer paper that is worth having a look at.

The China trade toll [EPI]

In addition to its finding of 2.3 million U.S. jobs lost and workers displaced between 2001 and 2007, this study finds:

* Because U.S. exports to China are much more commodity intensive (i.e., comprising products such as grains, steel scrap, and paper scrap) than Chinese imports (99% of which are manufactured products), average wages earned in jobs producing U.S. exports to China paid 4.4% less than the jobs displaced by imports from China. More than one-fourth of U.S. exports to China on a value basis were commodities.
* The 2.3 million jobs lost/workers displaced nationwide since 2001 are distributed among all 50 states and the District of Columbia, with the biggest losers, in numeric terms: California (325,800 jobs lost), Texas (202,900), New York (127,000), Illinois (102,800), Ohio (102,700), Florida (100,900), Pennsylvania (85,100), North Carolina (79,800), Michigan (79,500), and Georgia (73,600).
* In the past year alone, each of these states has also lost more than 10,000 jobs due to growing China trade deficits, including California (55,400 jobs), Texas (34,100), New York (21,300), Illinois (17,300), Ohio (17,000), Florida (17,000), Pennsylvania (12,400), North Carolina (12,400), Michigan (12,300), and Georgia (11,500). Many of these are among the hardest-hit states in the current labor market downturn.
* The hardest-hit states, as a share of total state employment, are Idaho (14,700, 2.59%), New Hampshire (15,700, 2.5o%), South Carolina (42,600, 2.34%), Oregon (36,800, 2.29%), California (325,800, 2.23%), Minnesota (58,700, 2.18%), Vermont (6,500, 2.15%), Texas (202,900, 2.13%), and Wisconsin (59,100, 2.10%).
* Rapidly growing imports of computers and electronic parts accounted for almost half of the $178 billion increase in the U.S. trade deficit with China between 2001 and 2007. The $68 billion deficit in advanced technology products with China in 2007 was responsible for more than 25% of the total U.S.-China trade deficit. The growth of this deficit eliminated 561,000 U.S. jobs in computer and electronic products in this period. Other hard-hit industrial sectors include apparel and accessories (153,000 jobs), miscellaneous manufactured goods (134,000), and fabricated metal products (102,000); several service sectors were also hard hit by indirect job losses, including administrative support services (139,000) and professional, scientific, and technical services (128,000).
* More than two-thirds of the jobs displaced by China trade deficits were in manufacturing, which tends to employ a higher-than-average share of workers with a high school degree or less (43.7% of workers displaced) and to provide those workers with good wages and benefits. More than half (55.6%) of the jobs displaced came from the top half of the U.S. wage distribution, and among this group a disproportionate share came from the top 10th of all U.S. wage earners. African Americans (230,000 jobs lost), Hispanics (339,000), and other ethnic groups (219,000) all suffered from the loss of jobs such as these that pay substantially more and offer better benefits than jobs in other industries.

So who are EPI: "The Economic Policy Institute is a nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy."

Politics is the US is as always never clear. It appears to me that both the left and the right (or right and slightly less right) all want to bash China whenever possible. Where are the reports on how much better off US consumers are from access to cheap Chinese imports thus leaving them with more money to spend on other goods such as food?

These reports are at best misleading and at worst simply wrong. From the articles above it is not possible to pin the blame on China. What about Mexico, India and other developing countries?
.

"Wrong number": On the reliability of Chinese Data

Following on the heals of the last post and thanks to Chinalawblog for the pointer.

As an economist who works with large amounts of Chinese data this issue has arisen many many times without a satisfactory solution. The Economist discusses this issue at length. I tend to use province level data - this raises a set of problems that this article also covers.

An aberrant abacus

AS CHINA'S importance in the global economy increases, investors are paying more attention to its economic numbers. Yet the country's official statistics are notoriously ropy. Some commentators accuse China's government of overstating GDP growth for political reasons, others complain that the official inflation rate is fraudulently low. So which data can you trust?

One reason to be suspicious of GDP figures is that China is always one of the first countries to report them, usually only two weeks after the end of each quarter. Most developed economies take between four and six weeks to produce them.

So which data to trust. From Statistics that Don’t Add Up [China Business Services]

The Economist also provides a guide (developed by Goldman Sachs) to the reliability of official Chinese numbers. It gives a score to different sets of stats, 5 being the most reliable, and 0 the least:

• Foreign Trade: 5
• Money Supply: 5
• Industrial production: 4
• Consumer Prices: 4
• GDP: 3
• Retail Sales: 3
• Fixed Investment: 2
• Employment: 2
• Average Earnings: 1
• Unemployment: 1

On the issue of province versus country level data:

Chinese provinces independently report GDP, and a weighted average of their figures consistently gives higher rates of output and growth than those reported by the central government (see chart). True, local officials have an incentive to inflate growth numbers because promotion depends upon economic performance; however, experience suggests that number crunchers in local government are more accurate than Beijing's. For instance, the figures first published for 2004 showed that the sum of the provincial GDPs was 19% bigger than the reported national figure. Lo and behold, in 2005, after a national economic census picked up more services, the NBS revised its GDP up by 17%; it also lifted the annual growth rate over the previous decade.

Finally, as someone who uses a lot of trade data here is the good news:

Foreign trade is perhaps the most accurate economic indicator. Critics accuse China of fiddling its trade figures, because the value of its exports as measured by the importing country is always much bigger than what the Chinese report. This discrepancy reflects the fact that China's bilateral trade figures exclude goods shipped to Hong Kong before being re-exported. But this should not affect total export figures and detailed Hong Kong data are available to adjust bilateral trade flows.

An interesting topic.

China's economic development in pictures

This month the National Geographic has a "China Special". The photographs are always of the very highest quality and the story is a good one.

There is a surprising amount of economics in the text and correctly so.

China's Journey [National Geographic]

My students wrote essays on paper so cheap and thin that it felt like the skin of an onion. The brittle pages tore easily; if held to the light, they glowed. The English was flawed, but sometimes that only gave the words more power. "My parents were born in poor farmer's family," wrote a young man who had chosen the English name Hunt. "They told us that they had eaten barks, grass, etc. At that time grandpa and grandma had no open minds and didn't allow my mother to go to school because she is a girl." Another classmate described his mother: "Her hair becomes silver white, and some of her teeth become movable. But she works as hard as ever." Those were common themes—my students valued patience and diligence, and they liked to write about family. National events often left them perplexed. "I'm a Chinese, but I feel it difficult to see my country clearly," wrote a woman named Airane. "I believe there are many young people are as confused as I'm."

Most telling from an economic perspective is the final paragraph in response to a questionnaire sent out to the authors old students:

I asked what worried them the most. Several mentioned relationships; one woman wrote: "The marriage is not safe any more in China, it is more common for people around here to break up." A couple of respondents who now work far from home were concerned about their status as migrants. "I am like a foreigner in China," Willy wrote. But the most common source of worry seemed to be mortgage payments. "Ten years ago, I worried that I could not have a good and warm family," Belinda wrote. "Now I am worried about my loan at the bank." None of her classmates expressed concern about political reform, foreign relations, or any other national issue. Nobody mentioned the environment.

.

Are There Lessons for Africa from China's Success Against Poverty?

A recent World Bank working paper considers the differences and similarities between China and Africa and how the former managed to take millions out of poverty and the latter did not.

The key line for me from the abstract is in bold and is certainly not rocket science.

I have my doubts about the validity of the results in this paper but should read it first before jumping to conclusions.

Are There Lessons for Africa from China's Success Against Poverty?

MARTIN RAVALLION
World Bank - Development Research Group (DECRG) January 1, 2008

World Bank Policy Research Working Paper No. 4463

Abstract:
At the outset of China's reform period, the country had a far higher poverty rate than for Africa as a whole. Within five years that was no longer true. This paper tries to explain how China escaped from a situation in which extreme poverty persisted due to failed and unpopular policies. While acknowledging that Africa faces constraints that China did not, and that context matters, two lessons stand out. The first is the importance of productivity growth in small holder agriculture, which will require both market-based incentives and public support. The second is the role played by strong leadership and a capable public administration at all levels of government.

Keywords: Rural Poverty Reduction, Population Policies, Achieving Shared Growth, Services & Transfers to Poor

The great migration of China

Slate recently published an excellent series of articles from rural China.

The beauty of these stories is that they provide the missing pieces between economic articles that take vast microeconomic datasets and often come up with some counter-intuitive findings and what is actually happening on the ground. There is also a good "China-US" migration history lesson thrown in.

The hard-working US based Chinese and their exported babies is something I was simply unaware of. After the standard journalistic introduction using some specific story telling example to suck us in we get to the meat.

China's Great Migration [Slate]

The overwhelming majority of Chinese who have emigrated to the United States over the past 20 years come from a handful of counties around Fuzhou, the capital of Fujian province, which lies along the banks of the Min River, just across the strait from Taiwan. Seeking better economic opportunities, the Fujianese fled their farms and fishing villages throughout the 1990s and took circuitous—and often illegal—journeys to America. In 1994, then-CIA Director James Woolsey estimated that as many as 100,000 Chinese were entering the country illegally every year. That figure was probably a little high, and the exact numbers are impossible to tabulate. But you get the idea.

The Fujianese are known for their work ethic and entrepreneurial zeal, and the new arrivals fanned across the United States and started businesses. That generic Chinese restaurant in the strip mall near your house? Almost certainly run by Fujianese. Those no-frills "Chinatown buses" that initially linked Eastern seaboard cities and now rival Greyhound, crisscrossing the continent? A Fujianese innovation.

The Fujianese in America work so hard, in fact, that when they have babies—babies who, by virtue of being born on American soil, are U.S. citizens—they don't have time to raise them. So, they send the babies home, back to the very villages the parents left, to be raised by their grandparents. The babies sitting around me—who begin screaming in unison as the plane nears Fuzhou and begins its descent—are packing something that many of their chaperones lack: U.S. passports.

The Growth in Higher Education in China and the Global Implications

Higher education is a topic we have covered a great deal in this blog.

This new paper by John Whalley and others looks at the growth in higher education in China and comments on the global implications.

Admissions officers everywhere need to read this paper.

------------------

The Higher Educational Transformation of China and its Global Implications

YAO LI
University of Western Ontario - Department of Economics
JOHN WHALLEY
University of Western Ontario - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for International Governance and Innovation (CIGI)
SHUNMING ZHANG
Xiamen University - School of Economics
ZHAO XILIANG
Xiamen University - Department of Economics March 2008

NBER Working Paper No. W13849


Abstract:
This paper documents the major transformation of higher education that has been underway in China since 1999 and evaluates its potential global impacts. Reflecting China's commitment to continued high growth through quality upgrading and the production of ideas and intellectual property as set out in both the 10th (2001-2005) and 11th (2006-2010) five-year plans, this transformation focuses on major new resource commitments to tertiary education and also embodies significant changes in organizational form. This focus on tertiary education differentiates the Chinese case from other countries who earlier at similar stages of development instead stressed primary and secondary education. The number of undergraduate and graduate students in China has been grown at approximately 30% per year since 1999, and the number of graduates at all levels of higher education in China has approximately quadrupled in the last 6 years. The size of entering classes of new students and total student enrollments have risen even faster, and have approximately quintupled. Prior to 1999 increases in these areas were much smaller. Much of the increased spending is focused on elite universities, and new academic contracts differ sharply from earlier ones with no tenure and annual publication quotas often used. All of these changes have already had large impacts on China's higher educational system and are beginning to be felt by the wider global educational structure. We suggest that even more major impacts will follow in the years to come and there are implications for global trade both directly in ideas, and in idea derived products. These changes, for now, seem relatively poorly documented in literature.

.

Poverty is China - RDE Special Issue

The latest issue of "Review of Development Economics" (a decent development journal) has a special section of 3 papers looking at poverty in China.

----------------------------------------------------------

Special Section: Poverty and Inequality in China
Guest Editor: Guanghua Wan

Introduction to the Special Section: Poverty and Inequality in China
Guanghua Wan
pages 416–418

How Should We Measure Poverty in a Changing World? Methodological Issues and Chinese Case Study
Lars Osberg and Kuan Xu
pages 419–441

Gender Earnings Differential in Urban China
Meiyan Wang and Fang Cai
pages 442–454

Explaining the Poverty Difference between Inland and Coastal China: A Regression-based Decomposition Approach
Guanghua Wan and Yin Zhang
pages 455–467

Capitalists take control of China - labour left with less

Karl Marx would have a field day. It is clear that capitalism now has China in its icy grip. The workers are, as always, being exploited.

Below is an interesting artcile from the Peterson Institute. I tend to agree with most of the arguments raised. Technological progress has certainly played a part (driven partically by foreign direct investment).

What Is China Doing to Its Workers?

Is the dramatic decline in labor's share of the economic pie ominous?

A silent revolution has been taking place in China. Somehow, without anyone noticing, the capitalists have upended the People's Republic. Over the past few years, they have effected a significant redistribution of income away from workers. This might well be the mother of all redistributions.

Normally, in most countries, the distribution of income between labor and capital changes not at all or very slowly. For example, in the United States, the share of the economic pie going to workers has been, with some small exceptions, roughly stable in the postwar period. In China itself, this share was roughly stable for over 25 years since the Chinese economy took an outward turn in 1978.

But recently there have been tectonic shifts. Between 2002 and 2005, according to Berkeley economists, Chong-En Bai, Chang-Tai Hsieh, and Yingyi Qian, the share of the economic output going to workers decreased by about 8 percentage points, from about 50 percent of GDP to 42 percent of GDP. Which means that China—yes, the People's Republic—now has perhaps the lowest labor share of any major country in the world.

The article concludes:

How might this decline in labor's share—a source of potential social disaffection and unrest—be reversed? To begin with, it is likely that public pressure will force the government to share the large returns to capital with savers, thereby improving household investment income. Most Chinese savers, who have their money in the Chinese banking system, today obtain zero or negative returns. And they have become wise to this large disparity. Thus, the government has been forced to list more firms in the stock market so that households can enjoy some of the high returns that companies are making. Households have also been investing heavily in the real estate market. But this government strategy has limits because stock and real estate prices are exceptionally high, and as they return to earth, households could be left with depreciated assets and poor returns, which might do little to increase their income.

Over a longer period, further economic forces will come into play. New entrants will emerge and bid away the excessive return to capital. But the big question is this: What if these forces are too weak or too slow, and the public becomes impatient? Will the decline in labor's share of the economic pie be reversed through political change? That may be China's big question.

Gordon Brown in China: Is it all about the economics?

The Guardian today report on Gordon Brown's visit to China.

This is a trip that is all about economics and job creation. Human rights will again come to the surface as always but do not be mistaken, GB is in China to promote UK plc and will only play lup service to the human rights issue.

It is remarkable that GB is there to ask for Chinese investment in the UK after a decade of almost total one-way FDI from the UK to China. This shows how far China has come in such a short amount of time.

For more information on this turn around and why such investment may be BAD for the Chinese people you should read the $1.4 Trillion question.

What GB is asking for is for China to yet again put the Chinese people last.

Brown seeks to take China relationship to new level [Guardian]

BEIJING, Jan 18 (Reuters) - Prime Minister Gordon Brown told China on Friday he wanted Britain to be the number one choice for Chinese trade and investment as he sought to take the relationship to a "higher level".

Brown also brought up human rights and democracy in his talks in Beijing with leaders of the world's fastest-growing major economy before heading off to Shanghai on Saturday and India on Sunday.

"Britain will welcome substantial new investment from China in our country in the years to come," Brown told a news conference alongside Premier Wen Jiabao.
"We want Britain to be the number one destination of choice for Chinese business as it invests in the rest of the world."

The two leaders agreed to expand trade to a value of $60 billion by 2010, compared to about $40 billion last year, as they watched the signing of agreements on education cooperation, climate change, sustainable cities and clean-energy development.

"I believe by 2010 we will see 100 new Chinese companies investing in the UK, we will see 100 partnerships between our universities and Chinese universities and we will double the number of firms listed on the London Stock Exchange and thousands of jobs will be created," Brown said.

He added that he welcomed investment from Beijing's huge sovereign wealth fund.
"We are now able to sell to China not just financial and business services and environmental technologies, but also a whole range of British brands that are now becoming very popular among the rising number of Chinese consumers."

"We are moving our partnership with China to a higher level," Brown said.
Among executives travelling with him was entrepreneur Richard Branson, who said he planned "a number of businesses" in China including a clean-energy company.
"China is very interested in developing clean energy. I am seeing a number of potential staff while I am there for running the company," he said on the flight from London.

Wen greeted Brown at the Great Hall of the People, the iconic heart of Communist Party rule. Wen assured reporters China was committed to eventual introduction of democracy.

"China will remain committed to advancing democracy -- that is to say our people will gradually exercise greater democratic elections and participation in political affairs," he said.

Brown said that he had raised the issue of elections in Hong Kong, which Britain handed back to China in 1997.

"I welcomed his assurances that they will move to elections both for the chief executive and for the council in Hong Kong over the next period of time," he said.

HUMAN RIGHTS
While Britain is keen to promote trade, the two countries do not always see eye-to-eye on Iran, Myanmar or the conflict in Sudan's Darfur province. Brown said he would discuss human rights and democracy during his visit.

Human Rights Watch said in an open letter to Brown that he should use his visit to press Beijing on rights in the run-up to the Beijing Olympics.

Western politicians and rights groups have accused China in the past of selling Sudan arms that end up in Darfur and of fending off stronger U.N. Security Council resolutions.

Wen said he and Brown agreed to press for a negotiated settlement on Darfur.
On Iran, Britain has supported its ally, the United States, in pressing for new sanctions against Tehran's nuclear activities, but China wants a negotiated solution.
Brown congratulated China on its successful bid to hold the Olympics and told students at People's University he would definitely come back to Beijing to attend if asked, at which point Wen promptly extended an invitation.

.

China Analyst Job

China Analyst (New York or DC)

Eurasia Group is seeking an experienced and motivated analyst of Chinese political affairs, to be located in the firm's New York or Washington, DC office.

In this position, you will assess the political risks flowing from political, security and economic developments in China of relevance to Eurasia Group's financial, corporate, and government clients. You will either have, or will develop, the ability to analyze specific sectors of the Chinese economy. You will perform in-depth research and will write both short analyses and longer papers. You will frequently brief both private sector and government clients. You will therefore have excellent analytical and presentation (oral and written) skills. You understand deadlines and you write in a good, succinct style at native English standard.

You will have at least an MA in political science or a relevant field (PhD preferred). Fluent Mandarin Chinese skills are required, and a minimum of three to five years of relevant work experience. One year of relevant in-country experience is preferred. Applications from more senior applicants are also welcomed. All applicants must be eligible to work in the United States.

To apply for a position, please submit cover letter, resume and salary history (plain text, PDF, or MS Word documents only) to careers@eurasiagroup.net with "China Analyst" in the subject line. The resume evaluation process will take place on an ongoing basis until the position has been filled.

H/T: AsiaBizblog

Growth, population and industrialization, and urban land expansion of China

A new trend in academic economic research is the use of satallite data to examine different economic questions.

This paper in the Journal of Urban Economics is a good example and is another paper that I have to read.

Growth, population and industrialization, and urban land expansion of China

Xiangzheng Denga,
Jikun Huanga,
Scott Rozelleb,
Emi Uchidac

Abstract

China is experiencing urbanization at an unprecedented rate over the last two decades. The overall goal of this paper is to understand the extent of and the factors driving urban expansion in China from the late 1980s to 2000. We use a unique three-period panel data set of high-resolution satellite imagery data and socioeconomic data for entire area of coterminous China. Consistent with a number of the key hypotheses generated by the monocentric model, our results demonstrate the powerful role that the growth of income has played in China's urban expansion. In some empirical models, the other key variables in the monocentric model—population, the value of agricultural land and transportation costs—also matter. Adapting the basic empirical model to account for the environment in developing countries, we also find that industrialization and the rise of the service sector appear to have affected the growth of the urban core, but their role was relatively small when compared to the direct effects of economic growth. We also make a methodological contribution, demonstrating the potential importance of accounting for unobserved fixed effects.

Keywords: Urbanization; Spatial scale; Monocentric urban model; Industrialization; Remote sensing; Econometric analyses; Decomposition analyses; China

.

Returns to Education in Rural China

Studies of the labour market in China are beginning to come on stream.

The issue of rural wages is a crucial aspect of the Chinese economy and this will directly influence rural-urban migration and wage increases may lead to inflationary pressures.

The results of this paper in Review of Development Economics (decent journal but not Journal of Development Economics standard) by Alan de Brauw and Scott Rozelle are not surprising and explains why wage inflation has not been higher even in the wake of double digit growth spanning a number of years.

The key to this paper is what data they used, how trustworthy the data is and what methodology was employed to obtain their results.

Reconciling the Returns to Education in Off-Farm Wage Employment in Rural China

* Alan de Brauw and Scott Rozelle.

Abstract

Previous studies have found that the returns to education in rural China are far lower than estimates for other developing economies. In this paper, we seek to determine why previous estimates are so low and provide estimates of what we believe are more accurate measures of the returns. Whereas estimates for the early 1990s average 2.3 percent, we find an average return of 6.4 percent. Furthermore, we find even higher returns among younger people, migrants, and for post-primary education. The paper demonstrates that, although part of the difference between our estimate and previous estimates can be attributed to increasing returns during the 1990s, a larger part of the difference is due to the nature of the data and the methodological approaches used by other authors.

.

Internal Migration in China

Interesting video discussing the internal migration in China and the difficulties faced by many. The prediction is that there are over 100 internal migrants.

http://current.com/items/76373322_the_big_move_part_2#

This article gives more information on the closure of schools for migrant children. Why are they being shut down? As a negative incentive to migrate? Migrants also pay taxes.

Chinese Migrant Children Face Educational Hurdles


(H/T: China-Crossroads)

.

Consumerism gone mad - 3 dead in shop stampede.

If we needed any reminder that China is at the front line in the unending march of capitalism comes news that 3 people were killed and another 31 injured in a stampede at a "shop sale".

Not a political demonstration, not an over reaction from the police or the army but killed trying to snap up a bargain in the shops. The following quote shows how much things have changed and yet, how much further China has to go.

What was the bargain - a $1.5 reduction on the price of cooking oil. Not TV sets, not designer clothing but a food staple.

He Yu, one of the shoppers combating for the cooking oil, got bruises in his face and hands in the stampede.

From a purely economic perspective it will be interesting to see what the monetary compensation levels will be. What value does China put on the value of a statistical life (bearing in mind it is in the low millions of dollars in the US).

Three dead, 31 injured in stampede in Carrefour outlet's sales promotion [People's Daily]

Three people have died and 31 others were injured, seven severely, in a stampede triggered by sales promotion in a Carrefour outlet in southwest China Saturday.

The three-day promotion at the outlet in the Shapingba District, Chongqing Municipality, was launched Friday to celebrate the 10th anniversary of Carrefour's entering into the market of the city.

People began queuing at the entrance around 4:00 a.m. Saturday, waiting to buy a kind of cooking oil with a much favorable price, said Gao Chang, spokesman for the government of Shapingba District.

The shop offered a deduction of 11.5 yuan (1.5 U.S. dollars) from the original price of 51.4 yuan (6.9 U.S. dollars) for a five-liter bottle of the edible oil.

Around 8:40 a.m. when the shop started its business, throngs of people burst in and a mass stampede occurred.

He Yu, one of the shoppers combating for the cooking oil, got bruises in his face and hands in the stampede.

"I rushed to the oil shelf with other people and grabbed four bottles. Suddenly I was tripped over on the floor. Luckily I got hold of another person and escaped from being crashed," the young man said.

The injured people are being treated in four hospitals in the city.

By 9:00 p.m., three had been discharged from hospital, but one of the seven seriously injured reported critical condition.

"The outlet has been ordered to suspend operation and the work safety watchdog has started an investigation," said Gao.

The outlet has also been told to prepare money to compensate the victims.

The district government issued an urgent notice late Saturday, saying that all departments and organizations in the district must take effective precautionary measures to prevent such things from happening again while organizing public activities.

French retailer giant Carrefour has opened 103 supermarkets in China since it entered the Chinese market in 1995. The latest outlet was opened on Nov. 1 this year in Changchun, capital of northeast China's Jilin Province.

Carrefour entered the market of Chongqing in 1998 and now operates four outlets in the city.

The Shapingba outlet, covering a business area of 7,000 square meters, was opened in May last year as the fourth supermarket of Carrefour in Chongqing.

.

Long-Term Effects of the 1959-1961 China Famine

This new NBER working paper demonstrates how economists are not restricted to studying exchange rates and inflation.

I am always in two minds when I see a paper like this. It is an interesting topic with important conclusions. It is also a unique experiment that tells us more about biological processes than merely economics.

Given the sex imbalance in China between males and females the conclusions seem at odds with situation on the ground but that is another blog post entirely.

A paper worth reading. Contact a friendly blogger via email if you are unable to access this paper from the NBER.

"Long-Term Effects of the 1959-1961 China Famine: Mainland China and Hong Kong"
NBER Working Paper No. W13384


Contact: DOUGLAS ALMOND
Columbia University - Department of Economics,
National Bureau of Economic Research (NBER)
Email: da2152@columbia.edu
Auth-Page: http://ssrn.com/author=172748

Co-Author: LENA EDLUND
Columbia University - Department of Economics
Email: le93@columbia.edu
Auth-Page: http://ssrn.com/author=298099

Co-Author: HONGBIN LI
Chinese University of Hong Kong - Department of
Economics
Email: lhongbin@cuhk.edu.hk
Auth-Page: http://ssrn.com/author=251685

Co-Author: JUNSEN ZHANG
Chinese University of Hong Kong - Department of
Economics, Institute for the Study of Labor (IZA)
Email: jszhang@cuhk.edu.hk
Auth-Page: http://ssrn.com/author=172991

Full Text: http://ssrn.com/abstract=1013514

ABSTRACT: This paper estimates the effects of maternal malnutrition exploiting the 1959-1961 Chinese famine as a natural experiment. In the 1% sample of the 2000 Chinese Census, we find that fetal exposure to acute maternal malnutrition had compromised a range of socioeconomic outcomes, including: literacy, labor market status, wealth and marriage market outcomes. Women married spouses with less education and later, as did men, if at all. In addition, maternal malnutrition reduced the sex ratio (males to females) in two generations - those prenatally exposed and their children - presumably through heightened male mortality. This tendency toward female offspring is interpretable in light of the Trivers-Willard (1973) hypothesis, according to which parents in poor condition should skew the offspring sex ratio toward daughters. Hong Kong natality micro data from 1984-2004 further confirm this pattern of female offspring among mainland-born residents exposed to malnutrition in utero.
______________________________