This paper studies the effect of housing wealth shocks on workplace shirking. We use the type and actual time stamps of credit card transactions to detect non-work-related behavior during work hours. After positive shocks to house prices, affected homeowners experienced a fast and persistent increase (by 19% per month) in their propensity to use work hours to attend to personal needs. The post-shock response is more pronounced among homeowners with a greater wealth increase, with poorer career potential, or for occupations with higher monitoring costs. Our estimate implies an elasticity of shirking propensity with respect to house price of 3.8.

Using proprietary individual level loan data, this paper explores the economic consequences of the 2009 bank entry deregulation in China. Such deregulation leads to higher screening standards, lower interest rates, and lower delinquency rates for corporate loans from entrant banks. Consequently, in deregulated cities, private firms with bank credit access increase asset investments, employment, net income, and ROA. In contrast, the performance of state-owned enterprises (SOEs) does not improve following deregulation. Deregulation also amplifies bank credit from productive private firms to inefficient SOEs due mainly to SOEs’ soft budget constraints. This adverse effect accounts for 0.31% annual GDP losses.

We document that monetary policy has asymmetric effects on investments by large and small firms in China. Large firms’ investment are highly responsive to monetary expansions, but less affected by monetary contractions. In contrast, small firms’ investments are less responsive to monetary expansions, but significantly affected by monetary contractions. We argue that this asymmetric responses of large and small firms stem from their differential access to credits in a two-tiered banking system. Large firms borrow from the big state-owned banks, which have a strong depositor base, whereas small firms borrow mainly from small banks which does not have a large depositor base and therefore rely heavily on the inter-bank market for financing their loans to small firms. We build a DSGE model with heterogeneous banks, heterogeneous firms, and an inter-bank market that is calibrated to the Chinese data. We show that the model’s quantitative predictions about the effects of monetary policy on large and small firms are consistent with the facts we documented.

We study the causes and consequences of growth in shadow banking by examining the Chinese banks’ issuance of Wealth Management Products (WMPs), which are short-maturity off-balance-sheet substitutes for deposits. Using branching overlap data, we instrument deposit availability with banks’ exposure to competition from a large state-owned bank, which substantially increased loan supply to support the fiscal stimulus during the Global Financial Crisis and competed more aggressively for deposits thereafter. We show that deposit market competition has a causal effect on smaller banks’ reliance on shadow banking: exposed banks increased the issuance of WMPs sharply, creating rollover risk for these banks.

Based on a DSGE model embedded with a stock market, we inspect interconnection between China's financial markets and macroeconomic cycles. We find consumption, investment and capacity utilization display significant and positive responses to stock market booms triggered by financial and confidence shocks, however, inflation responds insignificantly. We perceive a counteractive and significant reaction of China's monetary policy rule to credit-to-GDP gap at business cycle frequency. We decompose stock price into fundamental value influenced by the financial shock and speculative bubble driven by the confidence shock, and the confidence shock's contribution to stock price fluctuations is estimated to be about 14.8%. Model validation based on the DSGE-VAR framework indicates no serious structural model misspecification.

Using a unique FinTech data containing monthly individual-level consumption, investments, and payments, we examine how FinTech can lower investment barriers and improve risk-taking. Seizing on the rapid expansion of offline usages of Alipay in China, we measure individuals’ FinTech adoption by the speed and intensity with which they adopt the new technology. Our hypothesis is that individuals with high FinTech adoption, through repeated usages of the Alipay app, would build familiarity and trust, reducing the psychological barriers against investing in risky assets. Measuring risk-taking by individuals’ mutual-fund investments on the FinTech platform, we find that higher FinTech adoption results in higher participation and more risk-taking. Using the distance to Hangzhou as an instrument variable to capture the exogenous variation in FinTech adoption yields results of similar economic and statistical significance. Focusing on the welfare-improving aspect of FinTech inclusion, we find that individuals with high risk tolerance, hence more risk-taking capacity, and those living in under-banked cities stand to benefit more from the advent of FinTech.

This paper studies the trading behavior of investors facing a large number of firm-initiated stock trading suspension events during the Chinese stock market crisis in July of 2015. Using account-level trading data from the Shanghai Stock Exchange, we find that investors with a higher fraction of holding value in suspension sell less (or purchase more) of non-suspended stocks. Consequently, non-suspended stocks whose shareholders having high average account level suspension fraction experience a relative price appreciation, which subsequently reverses. These evidences indicate that trading suspension can calm down investors and therefore helps to stabilize the volatile market in crisis time.

Using comprehensive account-level data from 2016 to 2019, we examine retail investor trading behavior in the Chinese stock market. We separate millions of retail investors into five groups by their account sizes and document strong heterogeneity in their trading dynamics and performance. Retail investors with smaller account sizes cannot predict future price movements correctly, in the sense that they buy future losers and sell future winners. These investors fail to process public news and display behavioral biases such as overconfidence and gambling preferences. In sharp contrast, retail investors with larger account balances predict future returns correctly, incorporate public news in their trading, and gain more in stocks which are more attractive to investors with behavioral biases. For liquidity provision, the smaller retail investors follow daily momentum strategies, demanding immediate liquidity, while they become contrarian over weekly horizons, and they contribute positively towards firm-level liquidity. On the contrary, larger retail investors ae contrarian at daily horizons, providing immediate liquidity, but their potentially informed trades demand liquidity over longer terms.

no abstract

This article provides a detailed introduction to China’s launching of a digital currency. We conduct a comparative analysis concerning whether digital currency is a more stable and reliable currency than cryptocurrency and investigate whether a digital renminbi (or yuan) could replace the US dollar as a medium of exchange in international transactions. China has gained a first-mover advantage by rolling out a central bank digital currency (CBDC). But the outcome will depend on the US response as well as the future evolution of the US and Chinese economies. Most other articles on this topic focus on domestic use of the Chinese CBDC. But this study is unique in analyzing the prospects of a digital renminbi as a replacement for the US dollar in international commerce.