A Bridge on Economic Issues between China and the World
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Foreign Business Exposure, Policy Uncertainty, and Capital Flight from Home: Evidence from China
Dongxu Li, Xiaoxue Hu, Sep 22, 2021Using 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...
Good Finance, Bad Finance, and Resource Misallocation: Evidence from China
Jiapin Deng, Qiao Liu, Apr 03, 2024The development of finance driven by Chinese local governments exacerbates the problem of resource misallocation, whereas market-driven finance significantly improves allocative efficiency. This highlights the policy implication that modern finance in China should prioritize the efficient utilization of resources rather than mere expansion in scale.
Let a Small Bank Fail: Implicit Non-guarantee and Financial Contagion
Liyuan Liu, Xianshuang Wang, Zhen Zhou, Nov 27, 2024The research findings indicate that after the failure of a small bank, regulatory authorities did not fully bail out all creditors as had been the norm, and this policy shift affected the funding costs and market confidence of banks with lower systemic importance (SU).
Interest rates and exchange rates when the money supply goes up
Saleem Bahaj, Ricardo Reis, May 21, 2025The power of monetary policy to affect interest rates and exchange rates depends on the downward slope of the demand function. This column uses the Chinese experiment with parallel currencies to study the impact of sudden increases in money supply. The authors find causal evidence that increases in money supply lead to currency depreciations, and use this to quantify the interest elasticity of reserve demand. The results can be used to understand how the People’s Bank of China maintained the peg between the mainland and parallel currencies.
Bond for Employment: Evidence from China
Yi Huang, Shu Lin, Haichun Ye, Feb 15, 2023Using the unique institutional feature of government regulations in China, we provide robust evidence that firms with a larger employment size have significantly better access to bond credit.
