Bingjing LI
Prof. Bingjing LI
Associate Professor

3917 0019

KK 905

Illuminating the effects of the US-China tariff war on China’s economy

This paper studies the impact of the US-China tariff war on China, using high-frequency night lights data and grid-level measures of tariff exposure. Exploiting within-grid variation over time and controlling extensively for grid-specific contemporaneous trends, we find that each one-percentage-point increase in exposure to the US tariffs was associated with a 0.59% reduction in night-time luminosity. This impact was highly skewed across locations: Grids with negligible direct exposure to the US tariffs accounted for 70% of China’s population. But the tail 2.5% of China’s population with the highest exposure saw an implied 2.52% (1.62%) decrease in income per capita (employment) relative to unaffected grids. These effects were moreover concentrated in locations with a high commuting openness. By contrast, we do not find significant effects from China’s retaliatory tariffs, and offer evidence of several channels through which the impact on imported inputs was mitigated. In a parallel analysis at the prefecture level, we confirm that the US tariffs had discernible negative aggregate consequences.

The Political Economy Consequences of China’s Export Slowdown

We study how adverse economic shocks influence political outcomes in strong authoritarian regimes, by examining the export slowdown in China during the mid-2010s. We first show that prefectures that experienced a more severe export slowdown witnessed a significant increase in incidents of labor strikes, using a shift-share instrumental variables strategy. The prefecture party secretary was subsequently more likely to be replaced by the central government, particularly if the rise in strikes was greater than in other prefectures that saw comparable export slowdowns. These patterns are consistent with a simple framework we develop, where the central government makes strategic use of a turnover decision to induce effort from local officials in preserving social stability, and to screen them for retention. In line with the framework’s predictions, we find a heightened emphasis by local party secretaries—particularly younger officials whose career concerns are stronger—on upholding stability following negative export shocks. This is evident in both words (from textual analysis of official speeches) and deeds (from expenditures on public security and social spending).

Did US Politicians Expect the China Shock?

Information sets, expectations, and preferences of politicians are fundamental, but unobserved determinants of their policy choices. Employing repeated votes in the US House of Representatives on China's normal trade relations (NTR) status during the two decades straddling China's World Trade Organization (WTO) accession, we apply a moment inequality approach designed to deliver consistent estimates under weak informational assumptions on the information sets of members of Congress. This methodology offers a robust way to test hypotheses about what information politicians have at the time of their decision and to estimate the weight that constituents, ideology, and other factors have in policy making and voting.