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Using a recently constructed dataset that draws on the China Employer–Employee Survey, this paper provides new evidence on the earnings gap between rural migrant and urban manufacturing workers in the People's Republic of China. When we only control for province fixed effects, we find that rural migrant workers are paid 22.3% less per month and 32.2% less per hour than urban workers. We find that the gap in hourly earnings is larger than the gap in monthly earnings because rural migrant workers tend to work an average of 5.6% more hours per month than urban workers. Using these data, we also find that 87.4% of the monthly earnings gap and 73.9% of the hourly earnings gap can be attributed to differences in the individual characteristics and human capital levels of rural migrant and urban workers. Furthermore, we find that this unexplained earnings gap varies among different groups of workers. The earnings gap is much larger (i) for workers in state-owned enterprises than in nonstate-owned enterprises, (ii) for college-educated workers than workers with lower levels of educational attainment, and (iii) in Guangdong province than in Hubei province.

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Asian Development Review
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Hongbin Li
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Drawing on data from a random sample of manufacturing firms collected in 2016 for the China Employer-Employee Survey (CEES), we examine differences in measures of productivity and financial returns between state-owned enterprises (SOEs) and private firms in China. The summary statistics show that labor productivity and total factor productivity are generally higher at SOEs than at private firms, but the productivity advantage of SOEs can mostly be explained by the higher levels of human capital of their workers, greater market power, and better management. Furthermore, SOEs’ advantage in productivity exists only in industries with higher SOE concentrations. In contrast, measures of financial returns—return on assets and return on equity—are lower for SOEs than for private firms. We believe that these results may reflect the fact that SOEs generally have easier access to capital, human capital, and markets than other types of firms in China.

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Economic Development and Cultural Change
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Hongbin Li
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Cover of the book 'Shifting Gears in Innovation Policy' on the background of an embossed map of Asia.

In the six Asian countries focused on in this book—China, India, Japan, Singapore, South Korea, and Taiwan—high economic growth has been achieved in many industrial sectors, the catch-up phase of growth has ended or is about to end, and technological frontiers have been reached in many industries. These countries can no longer rely on importing or imitating new technology from abroad and expanding imports, and instead have to develop their own innovations to maintain growth. The policy tools they often used to advance "innovation," for the most traditional industrial policies of identifying promising industries and promoting them, will no longer be effective. And indeed, governments in Asia have recently put forward new policies, such as China's push for mass entrepreneurship and innovation.

Domestic conditions in Asian economies have also started to change. Many countries are facing rapidly aging populations and low birth rates: Japan’s population, declining for several years, is the first population decline not caused by war or disease in the modern world; South Korea’s labor force started to shrink in 2018 as well; China’s huge population will start to age, even as a large part of the population remains poor.

Facing these challenges, today Asia is at a turning point. East Asia as a whole has greater real economic output than North America, South and Southeast Asia possess enormous economic potential due to size and resources, and countries within Asia are becoming more connected in both trade and diplomacy. It is at this juncture that the authors of Shifting Gears examine and reassess Asia’s innovation and focus on national innovation strategies and regional cluster policies that can promote entrepreneurship and innovation in the larger Asia-Pacific. Chapters explore how institutions and policies affect incentives for innovation and entrepreneurship; whether Asia's innovation systems are substantially different from those of other countries, and in which ways, and whether there are any promising strategies for promoting innovation.

Desk, examination, or review copies can be requested through Stanford University Press.

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Strategies from Asia

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Yong Suk Lee
Gi-Wook Shin
Takeo Hoshi
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Shorenstein APARC
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The disruption of the 2020 pandemic, coupled with significant economic tensions between China and the US, have resulted in global companies rethinking their supply chains.  Many have called for drastic changes - reshoring, near-shoring, regionalization of vertical supply chains, increasing redundancies, or diversification of Chinese manufacturing to Southeast Asia, South Asia, Africa or Latin America, etc.  Empirical data, however, reveal that many are taking a more cautious approach.  Leading companies are continuing to develop innovative ways to redesign their supply chains that still preserve China as their key supply source.  This talk will share some of these innovative ways that, in the end, may provide better long term values.


Portrait of Hau L. LeeHau L. Lee is the Thoma Professor of Operations, Information and Technology at the Graduate School of Business at Stanford University.  He was the founding faculty director of the Stanford Institute for Innovation in Developing Economies (SEED), and is the current Co-Director of the Stanford Value Chain Innovations Initiative.  Professor Lee’s expertise is on global supply chain management and value chain innovations.  He has published widely in top journals on supply chain management.  He was inducted to the US National Academy of Engineering, and elected a Fellow of MSOM, POMS; and INFORMS.   He was the previous Editor-in-Chief of Management Science.  In 2006-7, he was the President of the Production and Operations Management Society.  His article, “The Triple-A Supply Chain,” was the Second Place Winner of the McKinsey Award for the Best Paper in 2004 in the Harvard Business Review.  In 2004, his co-authored paper in 1997, “Information Distortion in a Supply Chain: The Bullwhip Effect,” was voted as one of the ten most influential papers in the history of Management Science.  His co-authored paper, “The Impact of Logistics Performance on Trade,” won the Wickham Skinner Best Paper Award by the Production and Operations Management Society in 2014. In 2003, he received the Harold Lardner Prize for International Distinction in Operations Research, Canadian Operations Research Society.  Professor Lee obtained his B.Soc.Sc. degree in Economics and Statistics from the University of Hong Kong, his M.Sc. degree in Operational Research from the London School of Economics, and his M.S. and Ph.D. degrees in Operations Research from the Wharton School of the University of Pennsylvania.  He was awarded an Honorary Doctor of Engineering degree by the Hong Kong University of Science and Technology, and an Honorary Doctorate from the Erasmus University of Rotterdam.

 


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This event is part of the 2021 Winter/Spring Colloquia series, Biden’s America, Xi’s China: What’s Now & What’s Next?, sponsored by APARC's China Program.

 

Via Zoom Webinar. Register at: https://bit.ly/35bMWQx

Hau L. Lee Thoma Professor of Operations, Information and Technology, Stanford Graduate School of Business
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Callista Wells
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The China Program at Shorenstein APARC had the pleasure of hosting Professor Min Ye of Boston University’s Pardee School of Global Studies on October 14, 2020. Her program, moderated by China Program Director Jean Oi, focused on the much-discussed but poorly-understood Belt and Road Initiative (BRI), announced in 2013 by President Xi Jinping. While it is not widely known exactly what the BRI is or what Beijing hopes it will accomplish, it has been described as something of a modern silk road, connecting China to dozens of other countries through trade and extensive infrastructure projects. Based on research conducted for her recently published book, The Belt Road and Beyond: State-Mobilized Globalization in China: 1998-2018, Professor Ye enlightened the audience on a surprisingly critical element of this global program: the domestic component.

While Ye began her research with the assumption that many hold about the BRI—that it is primarily a global, internationally-focused initiative—as she continued her research, she found that many, if not most, BRI projects are either entirely domestic or have strong ties to domestic programs. To this end, she posed three questions during her program: Why did Chinese leadership launch the BRI in 2013? How did the Chinese state and businesses implement the BRI? and, What are the internal and external outcomes of the BRI?

To answer these questions, Ye explained the theoretical frameworks she used to understand both the BRI and China's "state-mobilized globalization." Firstly, Ye's "Chinese-State Framework" breaks the Chinese governmental system into three parts: Party Leadership, State Bureaucracy, and Subnational Actors. Each of these elements affect the others, as well as policy surrounding the BRI. However, this division also creates fragmentation in authority and ideology. Secondly, her “State-Mobilized Globalization” framework explains the process surrounding Chinese national strategy. Ye posits that national strategies are generally prompted by crises faced at lower levels of government, particularly when a lack of efficiency or communication is causing “state paralysis.” Once the strategy is announced in order to coordinate efforts and solve the crisis, it enters a feedback loop in which plans are adjusted and changed according to ground-level conditions. These frameworks informed the empirical studies used to answer Ye’s research questions.

The drivers of the BRI, argues Ye, were threefold: strategic, diplomatic, and economic. It was believed by interested parties within China that such an international initiative could ease tensions related to the United States and maritime Asia, as well as generally improve diplomatic relations for the country. China’s industries were also facing problems related to overcapacity, and economic and financial groups wished to use their excess capital to invest abroad. Actors from several different levels in China, including national agencies, local governments, and private entrepreneurs, were involved in executing BRI projects intended to alleviate these tensions. Different cities saw different sides of this implementation: Chongqing, one of China’s largest cities, is heavily dominated by state capital, with its main BRI actors being State-Owned Enterprises (SOEs). Wenzhou, a port city in Zhejiang province, is by contrast dominated by private entrepreneurs.

With diverse implementation comes diverse outcomes. Ye argues that some BRI projects have been helpful in reforming cities’ structural economy, while others have helped upgrade industry. The BRI has managed to alleviate some of the tensions listed above, but at the same time, it has created its own problems. While there has been a massive internal mobilization effort for BRI projects, there exists a disconnect between the domestic situation and demands for transparency from outside actors.

Ye concluded her talk by tying her research to current developments related to COVID-19. While one might imagine that a global pandemic would be a significant inhibitor to an international trade and infrastructure project, Ye finds just the opposite. Because the BRI is, in fact, quite domestically focused, many BRI projects are continuing at a rapid pace, albeit with digital adjustments. Some projects, such as the New Infrastructure Plan, were actually fast-tracked in the wake of the pandemic outbreak. Ye predicts that as COVID-19 restrictions ease and the world returns to “normal,” these domestic and digital elements will be combined with the BRI’s original projects.

An audio recording of this program is available at the link below, and a video recording is available upon request. Please contact Callista Wells, China Program Coordinator at cvwells@stanford.edu with any inquiries.

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Rebuilding International Institutions Will be Tough but Necessary, Say Stanford Experts Thomas Fingar and Stephen Stedman

Fingar and Stedman spoke as part of the APARC program “Rebuilding International Institutions,” which examined the future of international institutions such as the United Nations (UN), World Trade Organization (WTO), and World Health Organization (WHO) in our evolving global political landscape.
Rebuilding International Institutions Will be Tough but Necessary, Say Stanford Experts Thomas Fingar and Stephen Stedman
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Thomas Fingar and Jean Oi Analyze the Choices and Challenges Facing China’s Leaders

Fingar and Oi joined the National Committee on U.S.-China Relations to discuss their edited volume, ‘Fateful Decisions: Choices that Will Shape China’s Future.’
Thomas Fingar and Jean Oi Analyze the Choices and Challenges Facing China’s Leaders
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This event is held virtually via Zoom. Please register for the webinar via the below link.

Registration Link: https://bit.ly/2SS6DpY

 

This event is co-sponsored by the Shorenstein APARC Japan Program and China Program.

Japan's economic challenge to the United States in the 1980s aroused more concern in the United States than people now realize. Japan took some very effective steps to stop it. China's challenge plays out across the economic, military, technological, and global influence spheres. China has not yet taken steps to stop it and the tensions are increasingly serious and show no signs of diminishing. Japan has also found better ways to reduce tensions with China than has the United States. While the circumstances are different between the 1980s and today, Japan’s dealings with the United States in the 1980s might offer some lessons for China today. Dr. Ezra Vogel, Professor Emeritus at Harvard University, will discuss these topics and more during this webinar. The event will conclude with an audience Q&A moderated by Japan Program Director Kiyoteru Tsutsui and China Program Director Jean Oi.

SPEAKER

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Portrait of Dr. Ezra Vogel, Professor Emeritus at Harvard University

Professor Ezra F. Vogel is Professor Emeritus at Harvard University. Vogel received his PhD at Harvard in 1958 in Sociology in the Department of Social Relations and was a professor at Harvard from 1967-2000. In 1973, he succeeded John Fairbank to become the second Director of Harvard's East Asian Research Center. At Harvard, he served as director of the US-Japan Program, director of the Fairbank Center, and as the founding director of the Asia Center. From fall 1993 to fall 1995, Vogel was the National Intelligence Officer for East Asia at the National Intelligence Council in Washington. His book Japan As Number One (1979), in Japanese translation, became a best seller in Japan, and his book Deng Xiaoping and the Transformation of China (2011), in Chinese translation, became a best seller in China. He lectures frequently in Asia, in both Chinese and Japanese. He has received numerous honors, including eleven honorary degrees.

Via Zoom Webinar.

Registration Link: https://bit.ly/2SS6DpY

Ezra Vogel, Professor Emeritus <br>Harvard University</br>
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Room N341, Neukom Building
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Senior Fellow, by courtesy, at the Freeman Spogli Institute for International Studies
William F. Baxter-Visa International Professor of Law
Faculty Affiliate at the Walter H. Shorenstein Asia-Pacific Research Center
Faculty Affiliate at the Stanford Center on China's Economy and Institutions
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Curtis J. Milhaupt’s research and teaching interests include comparative corporate governance, the legal systems of East Asia (particularly Japan), and state capitalism. In addition to numerous scholarly articles, he has co-authored or edited seven books, including Regulating the Visible Hand? The Institutional Implications of Chinese State Capitalism (Oxford, 2016), Law and Capitalism: What Corporate Crises Reveal about Legal Systems and Economic Development Around the World (Chicago, 2008) and Transforming Corporate Governance in East Asia (Routledge, 2008). His research has been profiled in The Economist, the Financial Times, and the Wall Street Journal and has been widely translated. He is a Research Associate of the European Corporate Governance Institute and a member of the American Law Institute.

Prior to his Stanford appointment in 2018, Prof. Milhaupt held chaired professorships in comparative corporate law and Japanese law at Columbia Law School, where he served on the faculty for nearly two decades. He has held numerous visiting appointments at US and foreign universities and is the recipient of two teaching awards. He has been affiliated with think tanks such as the Bank of Japan’s Institute for Monetary and Economic Studies and has been a member of several international project teams focused on major policy issues in Asia, including one charged with designing an “institutional blueprint” for a unified Korean peninsula.

Prior to entering academia, Professor Milhaupt practiced corporate law in New York and Tokyo with a major law firm. He holds a J.D. from Columbia Law School and a B.A. from the University of Notre Dame.  He also conducted graduate studies in law and international relations at the University of Tokyo.

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Most people attribute the Belt and Road Initiative (BRI) to Beijing’s imperialist ambitions. In her talk, Professor Min Ye will go beyond top-level rhetoric, however, and investigate BRI’s origins, its implementation, and its on-the-ground effects inside China. She will unpack different local governments' approaches to the BRI by discussing how subnational entities have leveraged Beijing’s grand strategy and how the implementation of projects and programs related to the BRI facilitate local economic agendas. China’s local developmentalism, which has undergirded not only the BRI but also other national-level strategies (like the Western Development Program and China Goes Global policy), has propelled the Chinese economy from a middle power in 1998 to a superpower in 2018. The talk will conclude with a discussion of COVID-19’s impact on China’s BRI as well as preliminary findings from Professor Ye’s current research into other state-mobilized development initiatives in China.
 

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Portrait of Professor Min Ye
Min Ye is an Associate Professor at the Pardee School of Global Studies, Boston University. Her research lies in the nexus between domestic and global politics and economics and security, focusing on China, India, and regional relations. Her publications include The Belt, Road, and Beyond: State-Mobilized Globalization in China 1998 -- 2018 (Cambridge University Press, 2020), Diasporas and Foreign Direct Investment in China and India (Cambridge University Press, 2014), and The Making of Northeast Asia (with Kent Calder, Stanford University Press, 2010). She has received a Smith Richardson Foundation grant (2016-2018), the East Asia Peace, Prosperity, and Governance Fellowship (2013), Princeton-Harvard China and the World Program post-doctoral fellowship (2009-2010), and Millennium Education Scholarship in Japan (2006). In 2014-2016, Min Ye was an NCUSCR Public Intellectual Program fellow. Ye is currently the 2020 Rosenberg Scholar of East Asian Studies at Suffolk University.

Via Zoom Webinar. Register at: https://bit.ly/3kJlhM9

Min Ye Associate Professor, Pardee School of Global Studies, Boston University
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To explore how business leaders and entrepreneurs in China responded to the COVID-19 lockdown and how they’re planning for the future, the China Program conducted a survey in coordination with the Stanford Center at Peking University and Stanford Business School alumni Christopher Thomas and Xue (Xander) Wu. Though taken from a small sample, the results are one of the best samples to date of how businesses in China are responding to the uncertain geopolitical environment the pandemic and current U.S.-China relations are creating.

The survey reveals mixed progress in reopening different sectors of China's economy, but also shows that many business leaders in China are planning for some level of decoupling as access to global technology and supply chains remains uncertain.

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