A Bridge on Economic Issues between China and the World
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China’s Rebalancing: Recent Progress, Prospects, and Policies
Rui C. Mano, Jiayi Zhang, Mar 20, 2019While China’s growth gathered momentum in 2017, rebalancing was uneven and decelerated along many dimensions reflecting the temporary factors behind the growth pickup. Going forward, rebalancing is expected to proceed as these temporary factors recede, but elevated income inequality and leverage will remain a challenge. The authorities are...
Is the Wife A Risk Mitigator? Evidence from Family Firms in China
Yue Pan, Jinli Xiao, Vincent W. Yao, Jian Zhang, Jun 06, 2018Firm-level decisions are largely made by corporate executives whose preferences and attitudes can be shaped by historical traits and what is happening inside their households. We investigate how the involvement of a founder’s wife through marital ownership influences the family firm’s level of risk-taking and explore the underlying mechanisms.
The “Trusted-assistant” Loan in Nineteenth Century China
Meng Miao, Guanjie Niu, Thomas Noe, Nov 08, 2017In this paper, we analyze “trusted-assistant loans,” which were loans issued (typically) by Shanxi Banks during the Qing period to finance newly appointed scholar-officials. Even though creditors lacked legal rights and, in fact, lacked every repayment enforcement mechanism advanced by economic contract theory, repayment rates on these loans were relatively high and they constituted a large and profitable portion of many banks’ loan portfolios. This paper develops a theory of “resource-based” debt contract enforcement that rationalizes repayment and tests the hypothesis of this theory using data from scholar-officials’ diaries and nineteenth century Chinese bank records.
Monetary Policy in China: A Trade-Off Between Transmission and Stability?
Kaiji Chen, Yiqing Xiao, Tao Zha, Sep 24, 2025We explore how China’s shift toward interest-rate-based monetary policy faces an inherent trade-off. When non-state banks turn to wholesale funding, monetary policy easing is transmitted more effectively to productive firms, but the banking system also becomes more fragile in economic downturns. Our findings suggest that China’s regulators must strike a careful balance between achieving policy effectiveness and safeguarding financial stability.
Industrial Policy in China: Some Intended or Unintended Consequences?
Jing Cai, Ann E. Harrison, May 30, 2018We explore the consequences of a 2004 tax change in China that reduced the value-added tax (VAT) on equipment investment. While the goal was to encourage technology upgrades, we find little evidence that the reform achieved its intended results. Although firms shifted the composition of investment toward machinery, actual investment rates were unaffected. Firms replaced labor with machinery, leading employment to fall significantly in the treated provinces and sectors. Our results suggest that the primary impact of the policy was to induce labor-saving investment.
