Template-Type: ReDIF-Article 1.0 Author-Name: Kevin X.D. Huang Author-Email: kevin.huang@vanderbilt.edu Author-Workplace-Name: Department of Economics, Vanderbilt University, Nashville, TN 37235, USA Author-Name: Shuangjian Li Author-Email: li.shuangjian@mail.shufe.edu.cn Author-Workplace-Name: Institute for Advanced Research, Shanghai University of Finance and Economics, Shanghai 200433, China Author-Name: Guoqiang Tian Author-Email: gtian@tamu.edu Author-Workplace-Name: Institute for Advanced Research, Shanghai University of Finance and Economics, Shanghai 200433, China; Department of Economics, Texas A&M University, College Station, TX 77843, USA Title: Chinese Economy under the New ¡°Dual Circulation¡± Strategy: Challenges and Opportunities¡ªA Summary of the Annual SUFE Macroeconomic Report (2020¨C2021) Abstract: Entering year 2020, the Chinese economy was struck by the COVID-19 outbreak. The unprecedented pandemic, entangled with the already elevated complexities in the nation¡¯s internal environment and external surroundings, aggravated its economic outlook. Internal factors including severe education mismatch in China¡¯s labor force, its vanishing demographic dividend, the declined purchasing power of its middle-income groups, risen leverage ratio of households and enterprises, and soared local government debt reinforced to weaken China¡¯s domestic demand. External factors, especially uncertainty in the China-US relation in the face of the re-shaping global value chain, dragged world economic recovery and thus China¡¯s exports and imports. This summary report highlights some major challenges and opportunities faced by the nation under its new development strategy that stresses internal circulation of domestic economy aided by its interaction with the globe. Our analyses based on IAR-CMM model provide a unified framework for addressing China¡¯s short-, medium-, and long-term issues in an internally coherent manner. Looking into year 2021, our benchmark projection reports an 8.4% annual real GDP growth rate. Alternative scenario analyses and policy simulations are conducted to assess the impacts of potential downside risks and the corresponding policy options for ensuring implicit targets. Through the lens of these analyses, we conclude that a refocus on effective management of internal demand, while deepening structural reforms on supply side and advancing orderly opening up, can help smooth the internal and external circulations of the Chinese economy to achieve high-quality development. Classification-JEL: E01, E17, E27, E37, E47 Keywords: macroeconomic outlook; alternative scenario analysis; policy simulation; systemic risk; structural reforms; opening up; dual circulation Journal: Frontiers of Economics in China Pages: 1-29 Volume: 16 Issue: 1 Year: 2021 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-013-021-0001-0 File-Format: Application/pdf Handle: RePEc:fec:journl:v:16:y:2021:i:1:p:1-29 Template-Type: ReDIF-Article 1.0 Author-Name: Justin Yifu Lin Author-Email: justinlin@nsd.pku.edu.cn Author-Workplace-Name: Institute of New Structural Economics, Peking University, Beijing 100871, China; Institute of South-South Cooperation and Development, Peking University, Beijing 100871, China; National School of Development, Peking University, Beijing 100871, China Title: Dual Circulation and China¡¯s Development Abstract: In 2020, China proposed a new development paradigm centered on domestic circulation with a ¡°dual circulation¡± model in which domestic circulation and international circulation promote each other. This new paradigm reflects a clear understanding of China¡¯s development trend that saw its share of exports in the GDP declining steadily since 2006. However, the new paradigm does not necessarily mean that China should change its past policy of fully utilizing domestic and international markets and resources in economic development. Because of large economies of scale in modern manufacturing sector, China should continue to make full use of international markets. Classification-JEL: F43, F63, O20 Keywords: China; dual circulation; domestic circulation; international circulation; economic development Journal: Frontiers of Economics in China Pages: 30-34 Volume: 16 Issue: 1 Year: 2021 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-013-021-0002-7 File-Format: Application/pdf Handle: RePEc:fec:journl:v:16:y:2021:i:1:p:30-34 Template-Type: ReDIF-Article 1.0 Author-Name: Anping Chen Author-Email: tapchen@jnu.edu.cn Author-Workplace-Name: School of Economics, Jinan University, Guangzhou 510632, China Author-Name: Nicolaas Groenewold Author-Email: nic.groenewold@uwa.edu.au Author-Workplace-Name: Economics Programme, UWA Business School, University of Western Australia, Perth, WA 6009, Australia Title: China¡¯s Growth Slowdown: Labor Supply, Productivity, or What? Abstract: There has been much discussion of the sources of China¡¯s growth slowdown but little formal econometric analysis of this question. Chen and Groenewold (2019) show that the slowdown was primarily supply-driven, but they stopped short of identifying specific supply variables. This paper extends their analysis and distinguishes several potential supply components: labor supply, productivity, and capital accumulation. Our results confirm their main conclusion that supply dominates the explanation of the slowdown. A model with two supply factors (labor supply and productivity) reveals that both components contribute to the slowdown, although productivity makes the greater contribution. However, when capital stock is added to the model, the decline in the capital accumulation rate becomes an important factor in the growth slowdown, to some extent replacing the effects of both labor supply and productivity. Classification-JEL: E17, F47, O47, O53 Keywords: growth; slowdown; supply factors; labor supply; productivity; capital accumulation Journal: Frontiers of Economics in China Pages: 35-66 Volume: 16 Issue: 1 Year: 2021 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-013-021-0003-4 File-Format: Application/pdf Handle: RePEc:fec:journl:v:16:y:2021:i:1:p:35-66 Template-Type: ReDIF-Article 1.0 Author-Name: Shangao Wang Author-Email: 1551927977@qq.com Author-Workplace-Name: College of Economics and Management, Nanjing Agricultural University, Nanjing 210095, China Author-Name: Xu Tian Author-Email: tianxu@cau.edu.cn Author-Workplace-Name: College of Economics and Management, China Agricultural University, Beijing 100083, China Author-Name: Yingheng Zhou Author-Email: zhouyh@njau.edu.cn Author-Workplace-Name:School of Economics, Jiangxi University of Finance and Economics, Nanchang 330013, China Title: The Trade-Off between Quantity and Quality in Family Fertility Decision: Evidence from China¡¯s Family Planning Policy Abstract: Based on the Chinese General Social Survey 2006 and 2008 data, this paper assesses the influence of the family planning policy on the qualitative development of children using education attainment and individual income of only children versus children with siblings as parameters. Our results show the following: (1) only children are better-educated than their counterparts with siblings; (2) only children earn higher income in comparison to their counterparts with siblings; (3) the income and education gaps between girls with and without siblings are greater than those between boys; (4) the education gaps between only children and children with siblings are greater for those born in the 1970s, but the income difference between only children and children with siblings is only significant for those born in the 1980s; and (5) the income and education gaps between only children and children with siblings are higher in urban regions. Results indicate that families with only one child invest more resources in children¡¯s quality under the family planning policy, which is consistent with the ¡°quantity¨Cquality trade-off¡± theory proposed by Gary Becker. Classification-JEL: J13, I24, O11 Keywords: family planning policy; quantity¨Cquality trade-off; only child, child with siblings; education attainment; personal income Journal: Frontiers of Economics in China Pages: 67-104 Volume: 16 Issue: 1 Year: 2021 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-013-021-0004-1 File-Format: Application/pdf Handle: RePEc:fec:journl:v:16:y:2021:i:1:p:67-104 Template-Type: ReDIF-Article 1.0 Author-Name: Tianxu Chen Author-Email: tianxu.chen@uconn.edu Author-Workplace-Name: Department of Economics, University of Connecticut, Storrs, CT 06269, USA Title: Can Health Savings Accounts Reduce Health Spending? Evidence from China Abstract: Health care costs are high and continue to rise in most major economies, and the health savings account (HSA) is often viewed as an appealing way to contain health care costs because it can potentially solve the moral hazard spending caused by traditional health insurance. This study uses data from the China Household Finance Survey (CHFS) to empirically examine the effectiveness of HSAs in containing medical expenses and reducing moral hazard. The findings show that HSAs that restrict the use of funds may lead enrollees to discount the value and thus spend more on health care. In addition, the positive effect of HSAs on medical expenses is larger for the relatively healthier group, which may suggest that moral hazard exists regarding the use of HSA funds. The empirical estimates of the HSA effect on medical expenses are robust when a set of covariates are controlled, and HSA balances are instrumented using housing savings account balances. Classification-JEL: I13, I12, I18, I14, J1 Keywords: health savings accounts (HSAs); medical expenses; risk behavior; China Journal: Frontiers of Economics in China Pages: 105-123 Volume: 16 Issue: 1 Year: 2021 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-013-021-0005-8 File-Format: Application/pdf Handle: RePEc:fec:journl:v:16:y:2021:i:1:p:105-123 Template-Type: ReDIF-Article 1.0 Author-Name: Li Zhang Author-Email: lzhague@yahoo.com Author-Workplace-Name: Department of Economics, School of Humanities and Social Sciences, Beihang University, Beijing 100191, China Title: Why the Industrial Revolution Started in 18th Century Britain, Not China, from the Perspective of Globalization Abstract: The research examines the role of market expansion and international labor division in the British Industrial Revolution from the perspective of globalization. The research shows that British cotton textile output in pieces grew 275 times from the 1770s to the mid-1850s and documents that such growth would never have happened without a vast overseas market for the supply of raw cotton and the sale of products. The paper argues that the continuous and dramatic expansion of overseas markets allowed the British cotton industry to expand greatly without hitting the ceiling of marginal returns, leading not only to the great expansion of production, but also to technological and institutional innovations, and that international labor division made it possible for the industry to import ample amounts of raw cotton and export large amounts of cotton textiles. In contrast, foreign demand for Chinese cotton textiles increased significantly in the late 18th and early 19th centuries, but accounted for only 0.3% of production capacity, which was too little to lift the law of diminishing marginal returns and to induce either technological or institutional changes. As a result, only Smithian growths could be achieved through optimal resource utilization and specialization in production. Classification-JEL: B15, B25, N00, N10, N40, N50, N70 Keywords: market expansion; international labor division; Industrial Revolution; Smithian growth; Britain; China; India; US; raw cotton; cotton textile Journal: Frontiers of Economics in China Pages: 124-169 Volume: 16 Issue: 1 Year: 2021 Month: March File-URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-013-021-0006-5 File-Format: Application/pdf Handle: RePEc:fec:journl:v:16:y:2021:i:1:p:124-169