Most Popular

The Real Effects of the Chinese Stock Market

Itay Goldstein, Bibo Liu, Liyan Yang, Sep 29, 2021

In a 2019 survey jointly administered by the China Securities Regulatory Commission (CSRC) and the PBC School of Finance at Tsinghua University (Tsinghua PBCSF), more than 90% of Chinese public firms report that they closely monitor the stock market for the purposes of learning information to guide real investment decisions and of accessing external financing. These findings provide direct evidence for the wide existence of market feedback via a learning channel and a financing channel, suggesting that the Chinese stock market is not just a side show, but instead, affects the real economy.

Foreign Business Exposure, Policy Uncertainty, and Capital Flight from Home: Evidence from China

Dongxu Li, Xiaoxue Hu, Sep 22, 2021

Using subsidiary-level data of 3,863 Chinese nonfinancial firms from 2000 to 2019, we show that the multinationals have 5.3% higher capital expenditures than the domestic firms relative to the average. The multinational firms’ offshore investment increases with policy uncertainty about the domestic markets. Our analysis suggests that in the face of domestic uncertainty, multinational firms switch to...

Does Import Competition Harm Innovation? Evidence from Firm-level Data in China

Qing Liu, Ruosi Lu, Yi Lu, Tuan Anh Luong, Oct 06, 2021

Twenty years ago, China’s entering the World Trade Organization (WTO) was a catalyst for its economic development and propelled China into becoming one of the most important economies in the world. But massive import tariff reductions allowed more import competition, which raised concerns that innovation would be curbed. Tuan Luong, from De Montfort University, and his co-authors, Qing Liu, Ruosi Lu, and Yi Lu, discuss the impacts of import competition on domestic innovation...

Employment Protection and Corporate Cash Holdings: Evidence from China’s Labor Contract Law

Chenyu Cui, Kose John, Jiaren Pang, Haibin Wu, Oct 13, 2021

We examine whether and how employment protection influences corporate cash holdings using Chinese firm-level data. Our empirical results show that labor-intensive firms in China significantly increased their cash holdings following the enactment of China’s Labor Contract Law. Further analyses suggest that the results are generally consistent with a “labor adjustment costs” channel: employment protection...

Structural Change and the Stability of Aggregate Employment in China

Wen Yao, Xiaodong Zhu, Oct 27, 2021

In developed countries, aggregate employment has a strong positive correlation with aggregate output, and it is almost as volatile as output. In China, the correlation of aggregate employment and output is close to zero, and the volatility of aggregate employment is very low. We argue that the key to understanding the stability of aggregate employment in China is labor reallocation between the agricultural and non-agricultural sectors, and that the declining relative demand of agricultural goods with income plays an important role in determining the labor reallocation dynamics in both the long run and the short run.