• 详情 Crisis Control in Top-down Bureaucracy: Evidence from China's Zero-Covid Policy
    This study investigates the compliance of local Chinese officials with the zero-Covid policy throughout the COVID-19 pandemic. By examining biographical data from political elites and using a prefecture-day data set on risk levels – an indicator reffecting the status of zero-Covid policy - we discover a significant impact of prefecture leaders’ promotion incentives on their response to COVID-19 outbreaks. Our empirical analysis reveals that leaders with stronger promotion incentives tend to exhibit increased reactions to emerging cases. Evidence shows that such a phenomenon is driven by the different choices of the prefecture leaders facing relatively larger-scale COVID-19 outbreaks. Furthermore, local governors whose jurisdictions are more economically developed tend to enforce more stringent mobility restrictions. However, for prefecture leaders who oversee more developed regions and possess strong promotion incentives, the combined effects of these two factors tend to balance each other out in terms of pandemic response. These results suggest a natural tension between demands for crisis management during the pandemic and routine performance in economic development within the political framework of China.
  • 详情 When Local and Foreign Investors Meet Chinese Government's Risk Perception About Covid-19
    This paper examines the different responses of local and foreign investors to host government risk perceptions in the context of extreme events. We develop COVID-19 attention indices that capture attention related to COVID-19 according to China Central Television (CCTV) news program and further construct the government’s risk perception (GRPC) measure about COVID-19. Given the cross-listed AH-shares in China, we find that GRPC caused the extreme movement of stock markets by applying the multi-quantile VaR Granger causality approach. The results show that the reaction of cross-listed stocks in the A-share market is more inflexible than that in the H-share market during the outbreak period of the pandemic, foreign investors follow GRPC as a weather vane than local investors, and both types of investors are more concerned about the pessimism of GRPC. In the period of epidemic normalization, local and foreign investors prefer the optimistic attitude conveyed by the Chinese government.
  • 详情 The Political Economy of COVID-19 in China
    This research analyses the ramifications of the COVID-19 pandemic on China's economy, examining the divergent epidemic prevention policies used by local governments. Empirical evidence highlights that the emergence of COVID-19 cases correlates with a 1.13% reduction in quarterly GDP growth. However, when a city's secretary maintains an informal ties with the provincial secretary, GDP growth remains resilient. Analyzing micro-level data, we observe that city secretaries with informal ties tend to enact flexible anti-contagion measures. This flexibility stems from a decreased likelihood of reprimand for virus transmission. Such shields exclusively manifests when incumbent provincial secretaries share informal ties with central leadership. This underscores the interplay of political networks in shaping localized economic responses.
  • 详情 The Performance of Hedge Fund Industry during the Covid-19 Crisis – Theoretical Characteristics and Empirical Aspects
    The study reveals that the COVID-19 crisis has had a strong but one-off negative impact on the hedge fund industry. It also shows that during the new coronavirus pandemic, the main components of the hedge fund industry achieved only partially their main investment goal, i.e. they as a whole provided a hedge of the investment risk but did not produce higher than the market return in the conditions of a growing capital market. In this situation, due to the relatively stable М&A market, the Event-Driven Risk Arbitrage strategy was undoubtedly most successful, followed by the Emerging Markets, the Global Macro and the Long/Short Equity strategies. The worst performance was reported for the Fixed Income Arbitrage strategy due to the currently overvalued bond markets and to the expectations for higher inflation rates in the countries with developed capital markets.
  • 详情 Liquidity, Volatility, and Their Spillover in Stock Market
    This work models the spillover of liquidity and volatility and their joint dynamics in the Chinese stock market. Methodologically, we implement a copula-based vector multiplicative error model for sectors. Utilizing intraday data from 2014 to 2022, our empirical analysis reveals strong interdependence between liquidity and volatility at the sectoral level. Moreover, different sectors dominate the transmission of liquidity and volatility shocks at different times. In normal times, sector volatilities transmit shocks notably (though not always dominantly), while in turbulent times, illiquidity is the key channel through which shocks spread. We also pay special attention to how two catastrophic events impacted the Chinese stock market: the 2015/16 stock market crash and the COVID-19 pandemic. Our ffndings are useful for policymakers monitoring and making policy at the sectoral level, as well as for institutional and private investors making investment decisions.
  • 详情 Analysis of Tail Risk Contagion Among Industry Sectors in the Chinese Stock Market During the Covid-19 Pandemic
    The COVID-19 pandemic has inflicted substantial impacts on global financial markets and the economy. This study explores the impact of two pandemic outbreaks in China on its stock market industries. It employs the Conditional Autoregressive Value at Risk (CAViaR) model to compute tail risks across 16 selected industry sectors. Additionally, risk correlation networks are constructed to illustrate the risk correlations among industry sectors during different phases of the two outbreaks. Furthermore, risk contagion networks are built based on the Granger causality test to examine the similarities and differences in the contagion mechanisms between the two outbreaks. The findings of this study show that (i) the two outbreaks of COVID-19 have resulted in tail risks for most industries in the Chinese stock market. (ii) The risk correlation network became more compact because of both outbreaks. The impact of the second outbreak on the network was less severe than that of the first outbreak. (iii) During the first outbreak of COVID-19, the financial industry was the primary source of risk output; during the second outbreak, the concentrated outbreak in Shanghai led the industries closely related to the city's economy and trade to become the most significant risk industries. These findings have practical implications for researchers and decision-makers in terms of risk contagion among stock market industries under major public emergencies.
  • 详情 China’s Shadow Banking: 2020-2022 ──In the Long Shadow of Strengthened Regulation
    This paper researches into development of China’s shadow banking during 2020-2022, a special period marked by COVID-19 and strengthened global regulation on Non-Bank Financial Intermediation (NBFI). Research focus includes balance sheet evolvement, growth dynamics, and relation with macro-finance. Its business model surprisingly resembles western peers. They both fund underserved sectors and have similar exposure to balance sheet mismatch. Massive holding of bond investment (36.6% of total asset) is funded by uninsured interbank fund and wealth management product, which makes it more closely related with banks’ balance sheet and risk contagion from NBFI to traditional commercial banks more easily. This paper then re-summarizes growth dynamics of China’s shadow banking in a “Pull-Push” framework, and proposes concept of reintermediation in respective to disintermediation. Consecutive regulation on NBFI and real estate sector kept dragging on growth of shadow banking, and rendered it in liquidity surplus, which is invested into interbank market. This paper also provides empirical evidence on relation of China’s shadow banking with macro-finance, and notes several empirical breakdowns of pre- COVID relations among economic and financial indicators. Most important breakdown is the non-functionality of monetary policy transmission channel. Besides, it continued to twist de facto financial regulatory indicators, however with fading impact.
  • 详情 SMEs Amidst the Pandemic and Reopening: Digital Edge and Transformation
    Using administrative universal business registration data as well as primary offline and online surveys of small businesses (including unregistered self-employments) in China, we examine (i) whether digitization helps small and medium enterprises (SMEs) better cope with the COVID-19 pandemic, and (ii) whether the pandemic has spurred digital technology adoption. We document significant economic benefits of digitization in increasing SMEs' resilience against such a large shock, as seen through mitigated demand decline, sustainable cash flow, ability to quickly reopen, and positive outlook for growth. Post the January 2020 lockdown, firm entries exhibited a V-shaped pattern, with entries of e-commerce firms experiencing a less pronounced immediate drop and a quicker rebound. Moreover, the pandemic has accelerated the digital transformation of existing firms and the industry in multiple dimensions (e.g., altering operation scope to include e-commerce, allowing remote work, and adopting electronic information systems). The effect persists more than one year after reopening, and is more pronounced for certain sectors, firms in industrial clusters, and areas with more digital inclusion but less financial efficiency, constituting initial evidence for the long-term impact of the pandemic and the supposedly transitory mitigation policies.
  • 详情 Cyber Income Inequality
    We study the income inequality among streamers using the administrative data of a leading Chinese live-streaming platform. The live-streaming technology enables a superstar to produce new entertainment products matched with demand and occupies a larger market share. Imagine an extreme case; the best streamer hosts live for 24 hours, earns all possible income, and leaves zero time for other streamers. Our data show that the income distribution of the highest-paid streamers follows Zipf’s Law and appears to be even more concentrated than any offline business: NBA top players, Forbes celebrities, and billionaires. Income inequality increased rapidly as the platform expanded from 2018 to 2020 — for example, the income share of the platform’s top 10 streamers increased from 14.82% to 45.15% as its revenue grew by 142%. To estimate inequality elasticity to the market size, we study four quasi-experimental shocks: potential market size proxied by economic development and Fintech coverage, quarter-end revenue spikes induced by the seasonal incentive regime, user surge induced by capital raising, and the Covid-19 lockdown in Wuhan. Gini coefficient elasticity ranges fromm1.3% to 10.6% estimated from the cross-city variations (local economic development and Covid-19 Wuhan lockdown); the time-series variations (quarter-end and user surge before capital raising) imply an elasticity ranging from 3.6% to 25.5%.
  • 详情 The Behaviour of Chinese Government Bond Yield Curve Before and During the COVID-19 Pandemic
    The aim of the study is to investigate the behaviour of the Chinese government bond yield curve before and during the COVID-19 pandemic. Its methodology comprises the techniques of time series analysis, correlation analysis and dimensionality reduction. The main empirical results show that in the pandemic period, the behaviour of the Chinese government bond yield curve differs significantly from that before the outbreak of COVID-19. This is evidenced by the weaker correlations among the analysed yields, the presence of anomalies, heterogeneous behaviour and probable arbitrage opportunities at the long-term end of the studied yield curve, as well as the significant changes in the main factors of its dynamics. The research also reveals that prior to the COVID-19 pandemic, portfolios composed of Chinese government bonds could be well protected against interest rate risk even by using traditional parallel shift immunization techniques. However, after the outbreak of the COVID-19 pandemic the use of such techniques would be relatively effective for portfolios of Chinese government bonds with maturities between 1 and 5 years, while portfolios that include Chinese government bonds with maturities greater than 7 years should be either hedged against all the three factors of the yield curve dynamics or be used only for arbitrage strategies.