Using a new case-level dataset we document a set of stylized facts on bankruptcy in China and study how the staggered introduction of specialized courts across Chi- nese cities affected insolvency resolution and the local economy. For identification, we compare bankruptcy cases handled by specialized versus traditional civil courts within the same city and filed in the same year. We find that specialized courts decrease case duration by 36% relative to traditional civil courts. We provide evi- dence consistent with court specialization increasing efficiency via selection of better trained judges and higher judicial independence from local politicians. We docu- ment that cities introducing specialized courts experience a relative reallocation of employment out of zombie firms-intensive sectors, as well as faster firm entry and a larger increase in average capital productivity.

Deregulation may increase bank stability. Employing China’s loan-to-deposit ratio (LDR) reform in 2015, we show that the deregulation of the LDR increases the stability of banks. Specifically, the deregulation of the LDR alleviates banks’ deposit competition, and decreases reliance on customer deposit funding. By doing so, it improves the loan structure among banks with a high LDR, which, in turn, increases the on-balance-sheet stability of these banks. Meanwhile, the deregulation of the LDR curbs high-LDR banks’ impulse to issue principal-floating wealth management products, a form of shadow banking, which thus increases their off-balance-sheet stability.

The inelastic markets hypothesis states that the aggregate stock market price elasticity of demand is small, implying that flows have large impacts on prices. We exploit demand shocks created as investor funds are frozen and unfrozen during Chinese IPOs to estimate the impact of demand shocks on the Chinese stock market. Using brokerage account records, we observe the selling and buying as investors raise cash to subscribe for IPOs and then reinvest the funds that supported unsuccessful subscriptions. Using an instrumental variables estimator we find that a 10 bps demand shock increases stock prices by between 30 and 48 bps.

To construct the foreign exchange market defense line, I propose the following methods: (1) Compete for market focus, improve verbal intervention and news tactics (2) Quickly create several market-leading data that is in our control (3) Update the foreign exchange regulatory strategy, replace the original routine intervention with segmented intervention. (4) Use the anchor antidote in defending The U.S. launched the exercise as early as March 2009 organized by a team composed of the U.S. Department of Defense, the Department of Commerce, the Department of Energy, the RAND Corporation, the Peterson Institute, and Wall Street people. They took China as an imaginary enemy to conduct drills as possible conflicts would happen in the derivative and foreign exchange market in the future. If we hesitate in the construction of the foreign exchange market defense line, the damage may be on the overall situation.

Using novel data from a stock forum, we analyze return extrapolation in the cross-section. Our findings indicate that extrapolators overreact to the returns but underreact to the fundamentals. The post-earnings-announcement drift (PEAD) is more pronounced among firms with a high firm-level degree-of-extrapolation (DOX). Additionally, investors ask fewer questions about high-DOX firms’ fundamental information on official online interactive platforms. Extrapolation reduces the informativeness of stocks due to investors’ inattention to fundamentals. Furthermore, extrapolators’ overreaction to returns and underreaction to fundamentals increase stock price crash risks. These findings support explanations of extrapolation based on limited asymmetric attention.

Using the staggered introduction of regional specialized debt recovery courts as a quasi-natural experiment, we estimate the causal effect of law enforcement on financing cost of corporate bonds in China. With primary market issuing data, we show that the introduction of specialized courts reduces issuers’bond financing cost by 15%. The analysis of secondary market trading data confirms the results that the yield spreads of existing bonds reduce significantly. Exploring regional-, firm- and bond-level heterogeneity, we find the effects to be much stronger when ex-ante default risk is high. Our case-level analyses further support that enforcement cost reduction in debt dispute resolution is a channel for the reduction of cost of bond. Our paper has important policy implications in light of the recent bond default wave in China, suggesting that creditors protection through highly efficient law enforcement is important for bond market development and will eventually benefit bond issuers as well.

The finance–growth nexus has been a central question in understanding the unprecedented success of the Chinese economy. With unique data on all the registered firms in China, we build extensive ownership networks, reflecting firm-to-firm equity investment relationships, and show that thesenetworks have been expanding rapidly since the 2000s, with more than five million firms in at least one network by 2017. Entering a network and increasing network centrality, both globally and locally, are associated with higher firm growth. Such positive network effects tend to be more pronounced for high productivity and privately owned firms. The RMB 4 trillion stimulus, mostly in the form of newly issued bank loans and launched by the Chinese government in November 2008 in response to the global financial crisis, partially ‘crowded out’ the positive network effects. Our analysis suggests that equity ownership networks and bank credit tend to act as substitutes for state-owned enterprises, but as complements for privately owned firms in promoting growth.

This paper studies the evolution of wealth inequality during China’s rapid economic growth since its market-oriented reforms in the early 1990s. We first document the evolution and composition of China’s wealth distribution and summarize stylized facts on aspects of the growth and reform process that are key to understanding wealth accumulation. Then we develop a heterogeneous-agent dynamic general equilibrium model that incorporates two sectors, the rural agricultural sector and the urban manufacturing sector, with endogenous migration, occupation, and durable consumption (housing) choices subject to frictions. In particular, the persistent financial market friction that entrepreneurs face plays a key role, as it ensures that the wealth brought by rapid capital accumulation is accrued predominantly to entrepreneurs.Our quantitative exercise decomposes the rising wealth inequality in China into different contributing factors.

We study the labor markets in China and the United States, the two largest economies in the world, by examining the evolution of their cross-sectional age-earnings profiles during the past thirty years. We find that, first, the peak age in the cross-sectional age earnings profiles, which we refer to as the “golden age,” stayed almost constant at around 45-50 in the U.S., but decreased sharply from 55 to around 35 in China; second, the age-specific earnings grew drastically in China, but stayed almost stagnant in the U.S.; third, the cross-sectional and life-cycle age-earnings profiles were remarkably similar in the U.S., but differed substantially in China. We propose and empirically implement a decomposition framework to infer from the repeated cross-sectional earnings data the experience effect (i.e., human capital accumulation over the life cycle), the cohort effect (i.e., inter-cohort human capital growth), and the time effect (i.e., changes in the human capital rental prices over time), under an identifying assumption that the growth of the experience effect stops at the end of one’s working career. The decomposition suggests that China has experienced a much larger inter-cohort productivity growth and higher increase in the rental price to human capital, but lower returns to experience, compared to the U.S. We also use the inferred components to revisit several important and classical applications in macroeconomics and labor economics, including growth accounting and the estimation of TFP growth, and the college wage premium and skill-biased technical change.

We develop a heterogeneous-agent model with local spatial markets to study the relationships among bank expansion, growth, and inequality. In the model, households choose their occupations, consumption, and holdings of loans and portfolio assets that vary by liquidity. Banks choose the locations of new branches, which affect the financial frictions facing households across regions. We calibrate the model using a geographic information system to evaluate the rapid bank expansion in Thailand between 1986-1996. The model quantifies the sources of growth and inequality over time and a cross space and the potential role of digital banking in substantially reducing regional heterogeneity.