• 详情 Switching to Floating Inverts Price Discovery for China's Dual Listed Stocks: High-Frequency Evidence
    This paper examines whether China’s switch back and forth from fixed to floating exchange rates in 2005 and 2008 changed the contribution to stock price discovery by foreign and domestic investors. During that time, mainland investors could only trade the RMB-denominated A-shares in the domestic Shanghai and Shenzhen markets, while the dual-listed HKD-denominated H-shares were available only to overseas investors. Using intraday data on overlapping trading hours, we find that the switch from a fixed rate to managed floating in July 2005 increased the H-shares’ contribution to price discovery; while the exchange rate regime reversal in July 2008 allowed the domestic stocks to regain their dominance in information shares. These results imply that, in a market subject to restrictions on capital flows, a flexible exchange rate regime increases the propensity of investors to trade foreign-issued stocks to speculate on the RMB exchange rate, which raises overseas investors’ contribution to price discovery.
  • 详情 Macro-Prudential Policy, Digital Transformations and Banks’ Risk-Taking
    Macro-prudential policy plays a crucial role in stabilizing the financial system and influencing banks' risk preferences and willingness to take risks. This study examines the influence of macro-prudential policies on bank risk-taking using unbalanced panel data from 126 commercial banks in China between 2010 and 2021. The difference-in-differences model is employed to analyze the data. The empirical findings demonstrate that implementing macro-prudential policies in China effectively enhances bank risk prevention measures. In other words, macro-prudential policy implementation facilitates the digital transformation of banks and subsequently reduces risk-taking behaviors. Moreover, the heterogeneity test reveals that macro-prudential policies have a more significant impact on the risk-taking behavior of commercial banks with higher capital adequacy ratios compared to those with lower ratios. Additionally, commercial banks with strong interbank dependence exhibit more pronounced effects on their risk profiles when subjected to macroprudential policies with stricter capital supervision requirements. Therefore, this study proposes policy recommendations for strengthening bank capital supervision through differentiated approaches, serving as a valuable reference for the regulatory authorities.
  • 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 China’s Pursuit of Central Bank Digital Currency: Reasons, Prospects and Implications
    Amongst major economies, China has been taking a lead in the development of central bank digital currency (CBDC), which has generated widespread interest and impact around the globe. China’s CBDC, commonly known as e-CNY, is designed with several distinctive features, enabling it to compare favorably to other payment methods such as credit cards, mobile payment, unbacked cryptocurrency, and stablecoins. A variety of social, economic, political, and regulatory reasons can be identified to help explain China’s active pursuit of CBDC. However, the prospect of success will be affected by many factors and may vary between the domestic and international markets. This paper argues that the adoption of eCNY will likely succeed domestically, but may face more challenges in the international markets. The development of e-CNY seems to have created a catfish effect on other major economies in the race for CBDC. It is not fully clear, however, that the CBDC race will be better explained by the first-mover or the late-mover advantage theory. The CBDC project will have both public and private law implications, and several legal issues warrant particular attention in relation to the legal status of CBCD, the role and responsibility of the central bank, legal remedies for losses suffered by CBDC users from cybersecurity issues and operational problems, and the issue of data privacy and protection.
  • 详情 Monitoring Fintech Firms: Evidence from the Collapse of Peer-to-Peer Lending Platforms
    In recent years, numerous Chinese peer-to-peer (P2P) lending platforms have collapsed, prompting us to investigate the regulation and monitoring of the fintech industry. Using a unique dataset of P2P lending platforms in China, we examine the effect of government monitoring on platform collapses. Exploiting platforms’ locational proximity to regulatory offices as a proxy for government monitoring, we show that greater geographical distance results in a higher likelihood of platform collapse. Specifically, for every 10% increase in the driving distance from the platform to the local regulatory office, the likelihood of collapse increases by 10.2%. To establish causality, we conduct a differencein-differencesanalysis that exploits two exogenous shocks: government office relocation and subway station openings. We further explore two underlying channels: the information channel through which greater regulatory distance reduces the likelihood of regulators’ onsite visits and the resource constraint channel, through which greater regulatory distance significantly increases the local regulatory office’s monitoring costs. Overall, this study highlights the importance of onsite regulatory monitoring to ensure the viability of online lending platforms.
  • 详情 Do Anticipated Government Environmental Audits Improve Firm Productivity?Evidence from China
    We investigate the impacts of anticipated government environmental audits (GEAs) on firm productivity. We use a 2009 policy set forth by China’s National Audit Office that required GEAs of local governments as an exogenous event to examine the effect of the policy announcement on firms’ total factor productivity (TFP). Our difference-in-differences tests indicate that TFP in heavily polluting firms improved more than other firms’ TFP after the announcement of the policy. We also find that to raise TFP, firms engage in green invention patents or receive government environmental subsidies. In addition, our cross-sectional analysis suggests that firms in regions where governments have strong environmental enforcement or that are in the eastern regions of China increase TFP more.
  • 详情 Minimum Wage and Strikes: Evidence from China
    This study examines whether and how minimum wage hikes affect workers’ strikes in the context of China. We show that minimum wage significantly increases strikes at the city-level, and this effect is mainly motivated by demands for unpaid wages and severance pay. Mechanism analysis reveals that workers’ strikes are caused by inevitable involuntary unemployment arising from wage hikes. In addition, the increase in workers’ strike activities is more significant in tertiary industries, which require a larger share of low-wage workers and in regions with a higher degree of digital economy and innovation. Our findings provide clear policy implications for policymakers concerned with minimum wage and unemployment.
  • 详情 Environmental Protection Experience of Secretaries and Cod Regulation: Firm-Level Evidence from China
    Using the firm-level data of the Chinese industrial sector from 1998 to 2010, this study investigates the impact of the previous environmental protection experience of prefecture-level Communist Party secretaries on the COD regulation within the secretaries’ respective jurisdictions. The study finds that the secretaries’ previous environmental protection experience has reduced the COD discharge intensity. The duration of the previous environmental protection experience is selected as an instrumental variable and the endogeneity is further addressed; the research conclusion remains unchanged. However, this negative impact only lasts for two years and presents an unclear long-term impact. The negative effect on COD discharge intensity caused by the previous environmental protection experience is affected by the mandatory regulation pressure from the central government and the overall polluting density of the sub-sectors. Secretaries with previous environmental protection experience do not reduce the COD discharge intensity by using the punishment mechanism of increasing sewage charges. The secretaries, instead, encourage enterprises to use clean production technology, save water resources, and reduce the produced COD level. Also, the secretaries place an emphasis on the treatment of wastewater pollutants, thus reducing the COD discharge intensity. The conclusions of this study can provide decisionmaking reference for the selection and training of local officials, with the goal of environmental regulation.
  • 详情 Politically Smart: Political Sentiment Signaling of Private Enterprises
    We examine communication of political connections in corporate China, and show that politically inclined positive words—words in connotation of political sentiment—serve as a distinct and effective signaling device for corporate political connections. Using a large sample of corporate news, we find that news’ political sentiment, instead of orthodox political measures such as occurrences of political nouns and political entities, reflects executives’ political connections for private enterprises, and is related to rent-seeking benefits in government subsidy, tax refund, financing constraints and political risk. Our results demonstrate that political sentiment is an effective way to decode subtle corporate political connections in modern China’s “Mind Politics” environment that infiltrates into private corporations.
  • 详情 I Am Who I Am, Share Repurchases Under Economic Policy Uncertainty: Evidence from China
    Using sample of Chinese listed firms from Q1 2017 to Q4 2022, this article examines the impact of economic policy uncertainty on share repurchases. We find that economic policy uncertainty significantly increases the probability and scale of open market share repurchases. Private enterprises, government-supported enterprises, innovative enterprises, and investment hotspot enterprises repurchased more shares during periods of high economic policy uncertainty. Additionally, the market value of repurchase programs issued during periods of high economic policy uncertainty is larger. We also discover that economic policy uncertainty substantially influences the characteristics, timing, and outcomes of the repurchase programs. Lastly, this article confirms that share repurchase behavior has a similar effect to voluntary disclosures and can alleviate the information asymmetry triggered by economic policy uncertainty. In summary, Chinese listed firms have resorted to more share repurchases during periods of high economic policy uncertainty to convey their actual value and boost investor confidence, aligning with the signaling motive. Open market share repurchases surface as an efficacious instrument to cope with the risk from economic policy uncertainty.