A Bridge on Economic Issues between China and the World
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Industry/Policy View China’s High Savings: Drivers, Prospects, and Policies
Longmei Zhang, Ding Ding, Hui He, Rui C. Mano, Apr 17, 2019China’s high national savings rate—one of the highest in the world—is at the heart of its external/internal imbalances. High savings finance elevated investment when held domestically, and lead to external imbalances when they flow abroad. Today, China’s higher savings, compared to the global average, mostly emanate from the household sector, due to demographic...
Industry/Policy View The US-China Trade War Is Based on Misleading Statistics
Zhiwei Zhang, Yi Xiong, Xinyu Ji, Jul 11, 2018General Motors and Apple sold more cars and iPhones in China than in the US, but their sales were not counted as US exports to China, as these were made and sold in China. Policymakers should look at both trade and local sales by foreign firms (the FDI channel) to gauge bilateral economic balance. We estimate that US firms sold more goods and services to China than Chinese firms sold to the US in 2017, once the FDI channel is taken into account.
Notching R&D Investment with Corporate Income Tax Cuts in China
Zhao Chen, Zhikuo Liu, Juan Carlos Suárez Serrato, Daniel Yi Xu, Aug 16, 2017To 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.
Industry/Policy View China’s Digital Economy: Opportunities and Risks
Longmei Zhang, Sally Chen, Aug 28, 2019China’s digital economy has expanded rapidly in recent years, including both the emergence of new digital industries and the digitalization of traditional sectors. This brings significant opportunities but also potential risks. The blog discusses the pros and cons of digitalization and how the government can do better in maximizing the benefit while minimizing the risks.
Chinese Corporate Credit Ratings: Comparing Global and Domestic Agencies
Xianfeng Jiang, Frank Packer, Dec 06, 2017When comparing the credit ratings of domestic and global agencies on Chinese corporations, because of the differences in ratings scales, it is best to focus on the domestic and global agency orderings of relative credit risk. Testing for differences in the determinants of ratings, we find that asset size is weighed more heavily as a positive factor by domestic agencies, while profitability and state-ownership are weighed more positively by global rating agencies, which also weigh leverage more heavily as a negative factor. In spite of these differences, both domestic and global ratings appear to be priced into the market values of rated bonds.
