Utilizing a national online survey we conducted in China, we examine the impact of COVID-19 on individuals’ willingness to take risks, willingness to trust other people, and mental health measured by the Center for Epidemiological Studies-Depression (CES-D) scale. Our findings suggest that people who live in the neighborhood with a higher number of confirmed cases became more risk-averse, less likely to trust others, and more depressed. Interestingly, the effects on risk preferences and trust attitudes are statistically significant only for men, and the effects on depression are statistically significant only for women. Furthermore, the impact of COVID-19 on financial decisions, such as buying new commercial insurance and making a risky investment, is also statistically significant only for men, which is consistent with our findings on risk preferences. Attitudes towards cadres and doctors mainly drive the results on trust attitudes. The change in employment status does not drive these effects.

We study the equilibrium effects of introducing competitive bidding in drug procurement. In 2019, China introduced a competitive bidding program in which drug companies bid for a prespecified procurement quantity in nine provinces. Using a difference-in-differences design, we show that the program reduced average drug prices by 47.4%. Generic drug firms won most bids and cut prices by 59.4%. We develop a model of demand and supply to quantify the trade-off between lower prices and potential choice distortions. Competitive bidding increases consumer welfare if policymakers consider brand preferences welfare irrelevant. The program also reduced government expenditures on insurance by 27.5%.

Numerous countries cut payroll taxes in response to COVID-19, including China, which reduced employer contributions by up to 21 percentage points. We use administrative data on more than 800,000 Chinese firms to evaluate payroll tax cuts as a business relief measure. We estimate that the tax cuts cover 31.5% of the decline in business cash flow, but labor informality causes 53% of registered firms—24% of aggregate economic activity—to receive no benefits at all. We quantify the targeting of the policy in terms of how much benefits flow to small firms less able to access external finance and to sectors worse hit by COVID-19. We find that (1) small firms and vulnerable industries are comparatively more labor intensive, which leads to desirable targeting; (2) labor informality worsens, but does not eliminate, targeting by firm size; and (3) labor informality is uncorrelated with the COVID-19 shock, and therefore does not affect targeting by sector.

Developing countries are characterized by frictions that impede the mobility of workers across occupations and space. We disentangle the role of insecure property rights from other labor mobility frictions for the reallocation of labor from agriculture to non-agriculture and from rural to urban areas. We combine rich household and individual-level panel data from China and an equilibrium quantitative framework that features the sorting of workers across locations and occupations. We explicitly model the farming household and the endogenous decisions of who operates the family farm and who potentially migrates, capturing an additional channel of selection within the household. We find that land insecurity has substantial negative effects on agricultural productivity and structural change, raising the share of households operating farms by almost 30 percentage points and depressing agricultural productivity by more than 10 percent. Quantitatively, land insecurity is as important as all other labor mobility frictions. We measure a sharp reduction in overall labor mobility barriers over 2004-2018 in the Chinese economy, all of which can be accounted for by improved land security, consistent with reforms covering rural land in China during the period.

China’s land market features a substantial industrial discount: industrial-zoned land is an order of magnitude cheaper than residential land. In contrast to explanations centered on subsidies to industry, we find that a primary determinant of this price gap is local public finance. Under the "land finance" system, land sales are an important source of revenues for Chinese local governments. We show that local governments, who serve as monopolistic land sellers in China, face a trade-off between supplying residential or industrial land that is determined by the different time profiles of revenues from industrial and residential land sales, local governments’ financial constraints, and the extent of local governments’ tax revenue sharing with other levels of government.

We investigate whether suppliers value their clients’ ESG profiles in China, the largest emerging market featured with low ESG awareness and severe agency problems. We find a robust and negative impact of Chinese firms’ ESG scores on their access to trade credit. The 2SLS regression results based on the instrumental variable indicate that the impact is casual. Additionally, the impact is more pronounced for firms with higher agency costs, greater information asymmetry, and worse financial performance. These results suggest that suppliers in China view clients’ ESG engagement as costly investments caused by agency problems. Finally, we highlight the economic importance of the impact by showing that trade credit access helps Chinese firms decrease debt costs, increase trade credit supply to downstream firms, and promote R&D inputs.

In this paper, we use a distinct quasi-natural experiments to examine the effect of liberalization of the stock market on corporate environmental, social, and governance(ESG) disclosure quality. We find that the liberation of the opening of Shanghai(Shenzhen)-Hong Kong Stock Connect (SHSC) significantly and consistently improves ESG disclosure quality of listed companies, and this effect is most evident in environmental information disclosure. We then find that the SHSC can improve the quality of ESG disclosure of listed companies through “voting with feet” and “external supervision” effect. Furthermore, the effect is stronger in firms that are Non-SOEs and with low equity concentrations. Overall, our results suggest that the liberalization of stock market can improve the quality of companies’ ESG disclosure quality.

This study examines the effect of mandatory corporate social responsibility (CSR) on firm excess perks by exploiting China’s 2008 mandate requiring firms to disclose CSR activities with a difference-in-differences design. We find that firms mandated to report CSR experience a decrease in excess perks subsequent to the mandate. Our empirical results also reveal that the decrease in abnormal perks is more pronounced for firms with worse information environments and lower CSR disclosure quality, suggesting that mandatory CSR disclosure significantly reduces executive abnormal perks and restricts managers’ unethical behavior by improving the quality of the information environment for investors. Our main finding does not change using the subsample before 2012, indicating that the reduction of abnormal perks is driven by the enaction of mandatory CSR rather than the anti-corruption campaign started in 2012. The last but not the least, the reductions of excess perk consumption are primarily driven by non-SOE firms and competitive industries, and mandatory CSR firms are subject to a significant and stronger pay-to-performance, which again confirm the well-governed view of corporate social responsibility.

This paper finds that Chinese stocks rise in February instead of January. Further analysis shows that the February premium is attributed to the Chinese New Year. We propose an alternative explanation for this premium based on liquidity preference, i.e., investors prefer holding liquid assets before the holiday and illiquid assets after the holiday. We find a substantial decrease in monetary base and increase in market activity after the Chinese New Year. The empirical fact that the Chinese New Year effect is particularly strong for stocks with low institutional holdings also supports this hypothesis.

Using daily news tone data between 2017 and 2020, we examine whether news tones can predict stock returns in Chinese A-share market. We first document that the news tones significantly and positively predict the cross-sectional stock returns over next day and over the next 12-weeks. When we separate the news into online news and paper news, the online news exhibit strong predictive power for future returns, while the printed news only displays marginal predictive power. We hypothesize that the online news is more related to firm fundamentals, while the paper news is more linked to political aspects of firm information. Our results using earnings surprises and SOE subsamples provide supportive evidence for the hypothesis.