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Evaluating Risk across Chinese Housing Markets

Yongheng Deng, Joseph Gyourko, Jing Wu, Aug 02, 2017

We bring new Chinese housing market data and analysis to the study of supply and demand conditions. There is substantial variation in supply–demand balances across markets. Bigger inventory overhangs predict lower house price growth the next year.

China’s Great Housing Boom

Kaiji Chen, Yi Wen, Oct 11, 2017

We provide a theory to explain China’s excessive housing price growth in the most recent decades, despite a high vacancy rate and a high rate of return to capital. We argue that China’s housing prices contain a significant and rapidly growing bubble component. This growing housing bubble generates a substantial degree of welfare losses and resource misallocation in the capital market, which are prolonging economic transition and hindering aggregate economic growth.

Notching R&D Investment with Corporate Income Tax Cuts in China

Zhao Chen, Zhikuo Liu, Juan Carlos Suárez Serrato, Daniel Yi Xu, Aug 16, 2017

To encourage innovation, the Chinese government gave tax incentives to firms whose R&D intensity (as measured by the ratio of R&D expenditures over total sales) exceeds a threshold that varies by their total sales. Using a major corporate tax reform in 2008, Professor Daniel Yi Xu from Duke University and his coauthors provide empirical evidence for some "strategic" behavior — including some relabeling of administrative expenditures as R&D — by the firms to take advantage of the tax incentives.

A New Perspective on China’s Credit Boom

Kinda Hachem, Michael Zheng Song, Jun 20, 2017

What caused the enormous credit boom in China? This column by Kinda Hachem and Michael Song offers an unexpected explanation of stricter liquidity regulations on banks leading to a credit boom through competition between small and big banks and their heavy use of shadow banking investment instruments.

China’s Shadow Banking Sector: Wealth Management Products and Issuing Banks

Viral V. Acharya, Jun Qian, Zhishu Yang, Aug 09, 2017

The issuance of Wealth Management Products (WMPs) is an important form of shadow banking activities in China, especially after 2011. Viral Acharya, Deputy Governor of the Reserve Bank of India, Prof. Jun “QJ” Qian of Fanhai International School of Finance, Fudan University and Prof. Zhishu Yang of Tsinghua University examine the causes, main players and impacts on the banking system of China’s rising WMPs. They also compare the differences between the U.S. shadow banking sector and its counterpart in China.