Professors Hao Wang and Hao Zhou, both of Tsinghua University, Honglin Wang formerly of Hong Kong Institute for Monetary Research (HKIMR) and Lisheng Wang of Chinese University of Hong Kong, argue that the shadow banking explosion in China may constitute a dual-track reform mechanism to liberalize the country's rigid interest rate policy.
Convergence forces suggest that China’s per capita GDP growth rate will decline gradually from around 7% per year to the world’s historical average of 2%. In the past, this convergence tendency was more than offset by China’s opening to markets, improved legal institutions and business regulations, increased investment rates, higher life expectancy, and reduced fertility—but the convergence force will ultimately dominate.
The shadow banking activities in China surged in 2012-2013. Prof. Zhuo Chen and Prof. Chun Liu from Tsinghua University, Prof. Zhiguo He from Chicago Booth and Prof. Jinyu Liu from the University of International Business and Economics provide empirical evidence showing that the “barbarian growth” of China’s shadow banking during this period constitute a “hangover effect” from the four trillion RMB stimulus package in 2009.
Understanding corporate China and its future dynamics is the key to understanding the Chinese economy and its undergoing transformation. The intellectual framework proposed in this work can be summarized by a simple identity: Growth Rate = Return on Invested Capital (ROIC) X Investment Rate. To successfully achieve China’s economic transition without losing a lot of growth at the same time, China needs to improve ROIC at the aggregate level.
Using a unique Chinese data set capturing the trading behavior of particularly aggressive investors, we provide new evidence that is consistent with the presence of informational advantages. Critically, an advantage of our data is that we can also directly identify several plausible channels through which such an informational advantage could arise. Specifically, return predictability around key value-relevant events is most pronounced in the presence of aggressive traders who share the same geographic location as the firms in which they trade.