The Journal of World Economy 2024, No.6
The Peace Effect of the Belt and Road Initiative
Cao Guoqiang, Xie Jianguo, Liao Chencheng
Abstract
As a Chinese scheme with the attribute of international public goods in the new era, whether the Belt and Road Initiative can solve the global peace deficit has attracted attention from all walks of life. Based on Uppsala Conflict Data from 2006 to 2019, this paper constructs a multiple period DID model to test the impact of the Belt and Road Initiative on internal conflicts in participating countries. The results show that the Belt and Road Initiative has effectively curbed the internal conflicts in participating countries, and with the extension of a country's participation time, this inhibitory effect increases marginally. The mechanism test shows that, on the one hand, the Belt and Road Initiative has significantly improved the employment, income distribution and other livelihood conditions of participating countries, thus increasing the opportunity cost of people's participation in conflict, easing the dissatisfaction of low-income groups, and promoting more stability of the domestic situation. On the other hand, the concept of “mutual consultation” advocated by the Belt and Road Initiative has been widely practiced and deeply internalized, significantly improving the level of consultative democracy in participating countries. As a result, social conflicts and differences can be effectively resolved, and the domestic political environment continues to improve, leading to a significant reduction in conflicts. In addition, the peace effect of the the Belt and Road Initiative shows great heterogeneity in the dimensions of conflict scale, cooperation content, economic development level of participating countries, and political relations between participating countries and the United States. The research results of this paper show that the Belt and Road Initiative, as a concrete practice platform for China's participation in global governance, has become a powerful driving force and a solid link for maintaining world peace and stability.
Key words
the Belt and Road Initiative / domestic conflict / livelihood state / deliberative democracy / multiple period DID
Tax Governance in the Context of High-Level Openness: Import Competition and Corporate Tax Avoidance
Zhao Chunming, Zhong Xiaohuan, Ban Yuanhao
Abstract
Expanding imports is essential for promoting high-quality domestic economic development and building a global community with a shared future. However, the resulting competitive effects may influence corporate tax avoidance motives, thereby eroding the national tax base. This study, based on data from Chinese listed companies from 2000 to 2020, leverages the impact of import tariff adjustments to identify the causal relationship between import competition and corporate tax avoidance. The findings indicate that increasing import competition significantly exacerbates corporate tax avoidance. This occurs because import competition squeezes the profits of domestic enterprises, highlighting the competitive disadvantages of lagging firms and forcing them to resort to tax avoidance to compensate or survive. The tax avoidance induced by heightened import competition is not a random short- term phenomenon but is driven by the reinforcing feedback of tax avoidance capital market premium effects. When import competition continues to intensify, the digital upgrading of tax administration and the reduction of taxes and fees can enhance corporate tax compliance, though the latter serves as a palliative rather than a curative measure. This study enriches research on the external drivers of corporate tax avoidance and deepens the understanding of trade gains under China's import expansion from a tax perspective, providing decision-making references for the coordinated advancement of tax governance and high-level openness.
Key words
import competition / corporate tax avoidance / tax equity / trade gains
External Tariff Shocks, Entrepreneurial Attention Allocation, and Technological Innovation
Yu Zhen, Li Yuankun, Li Xun
Abstract
The increasingly complex international environment has put forward more urgent requirements for China to accelerate technological innovation. This paper exploits the external shock of U.S. tariff increase on China in 2018 to explore the impact of external tariff shocks on Chinese firms' innovation output and efficiency using difference in differences method, and measures entrepreneurs' attention allocation through text analysis and Word2vec machine learning techniques, through which we further analyze the transmission mechanism of external tariff shocks affecting firms' innovation. The results find that: (1) External tariff shocks can significantly reduce Chinese firms' innovation output and efficiency; (2) Entrepreneurs' attention content allocation and attention time allocation are two important channels to produce the above effects; (3) Government increasing R&D subsidies, the media and analysts reducing excessive attention, and entrepreneurs with high stress resistance can mitigate the negative effects of external tariff shocks on firms' innovation. The conclusion of this paper implies that government need to create a favorable policy orientation and public opinion environment for entrepreneurs to alleviate external tariff pressure and thus enables them to better exercise their entrepreneurial spirit in independent innovation.
Key words
tariff shock / entrepreneurial attention allocation / firm innovation / textual analysis / machine learning
Industry Layout and Systemic Risk of Chinese Financial Institutions
Yang Zihui, Wang Shudai, Sun Lin
Abstract
In recent years, the successive financial storms have shaken European and American institutions. In this context, the industry layout and risk prevention of financial institutions have attracted high attention from regulatory authorities. This paper measures the industry layout of China's 38 listed commercial banks and 52 capital market service institutions, and adopts extreme value theory to decompose the institutions' systemic financial risk. Based on this, the impact of industry layout on systemic financial risk is empirically assessed. The findings reveal that when financial institutions implement differentiated, high-financial-exposure and high-real-estate-exposure layouts, they face more significant systemic financial risk. Meanwhile, financial institutions can achieve refined management through specialisation, thereby reducing financial risk. Based on the above conclusions, the paper makes suggestions on the industry layout of financial institutions in China, offering policy implications for financial risk prevention.
Key words
industry layout of financial institutions / differentiation / specialisation / sectoral exposure / risk prevention
Tax Neutrality and Industry Chain Reshaping: An Analysis from the Corporate Specialisation Perspective
Zeng Yi, Zhou Xiaochang, Feng Chen
Abstract
Deepening the specialisation of the corporate specialization serves as the bedrock for shaping modern industrial and supply chain relationships. Achieving value-added tax (VAT) neutrality plays a crucial role in facilitating corporate specialisation. This study uses the quasi-natural experiment of the 2018 VAT Refund (VATR) Reform to investigate the impact of VAT tax neutrality on corporate specialisation using the difference-in-differences (DID) technique based on financial information from listed business group parent companies. The study finds that VATR stimulate the enhancement of specialisation following business separation, primarily by improving the financial situation of enterprises and reducing the institutional transaction costs brought about by VAT deferral. The specialisation further enhances transactional relationships between enterprises and the external market. The heterogeneity analysis also suggests that the promotional effect of VATR on specialisation is more pronounced when there are significant differences in input and output tax rates, greater financing constraints and a favourable local business environment.
Key words
VAT neutrality / specialisation / VAT Refund (VATR) Reform
Mandate-based and Market-based Policies: Comparative Analyses on Carbon Mitigation Effectiveness of China's Climate Policies
Lin Pengsheng, Li Shuo
Abstract
Mandate-based and market-based policies are two ways to achieve policy goals, and there is no consensus on which is better. Taking China's climate policies for example, this paper compares the carbon mitigation effectiveness and mechanisms of the low-carbon provinces and cities pilot (LCPC), a mandate-based policy, and the emission trading system pilot (ETS), a market-based policy, using event study analyses. Through mechanism tests, we find that LCPC achieved carbon reduction effects by curbing output, but the emission intensity did not decrease. On the other hand, ETS resulted in a reduction in carbon emission intensity and an expansion of economic output, though the total carbon emissions increased. The heterogeneity analyses show that the main driving force for reducing carbon emissions in LCPC is from regions with relatively worse economic status, and the effect on increasing carbon emissions of ETS is most obvious in areas with low carbon emission intensity. In the context of China's goal of carbon peaking and carbon neutrality, this paper provides a beneficial reference for future climate policy design.
Key words
low-carbon province and city pilot / emission trading system pilot / mandate-based policy / market-based policy
Robotic Applications, Firm-scale Differentiation and Labor Share
Yi Miao, Liu Pengchun, Guo Baiying
Abstract
How robotic applications affect income distribution has attracted widespread attention. Using micro aggregated data from Chinese industrial firms, and drawing on the mean-covariance decomposition of labor share at the “provincial-industrial” level, this paper examines the impact and mechanism of industrial robot import applications on labor share from a firm-scale differentiation perspective. The results reveal that robotic applications not only reduce the average labor share but also exacerbate the negative structural effect of a larger firm with a lower share, thereby reducing the overall weighted labor share. Robots reduce labor share by promoting capital substitution for labor, improving labor productivity and expanding scale, and they also lead to a scale differentiation effect and thus lower labor share. The findings provide new evidence about the structural changes in the labor share among firms caused by the application of AI technologies such as robots, and provide new ideas for increasing labor share and improving income distribution.
Key words
robot import applications / labor share / firm-scale differentiation
Information Barriers and Spatial Allocation of Capital: A Dialectal Perspective
Liu Yuyun, Yan Cuixin, Chen Qiangyuan
Abstract
The spatial allocation of capital plays an important role in international and domestic dual circulation, but China has long been grappling with the problem of capital segmentation in the local market. Unlike previous studies that attribute this to institutional cost, this paper explores the influence of the cost of information on this issue from a dialectal perspective. The study indicates that the interregional dialectal distance significantly hinders the spatial allocation of capital, which is not limited to listed companies, and instead also affects non-listed companies. The mechanism of influence reveals that dialectal distance is not conducive to the establishment of cross-regional social networks, it weakens interregional social trust and mutual assistance, and increases the information cost of cross-regional business investment. Improving the business environment cannot overcome the information barriers created by dialect in the short term but inclusion of culture can mitigate this impact to some extent. This study suggests that in the process of the continuous improvement of China's institutional environment, it is of utmost importance to promote the strong inclusion of Chinese culture so as to break down the implicit barriers of cross-regional resource allocation.
Key words
spatial allocation of capital / information costs / dialect