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The Two-Pillar Policy for the RMB from December 2015 to May 2017
Urban J. Jermann, Bin Wei, Vivian Yue, Aug 16, 2017We document that since December 2015 the People’s Bank of China (PBC) has followed a “two-pillar” exchange rate policy that aims to achieve both stability and flexibility. Based on a no-arbitrage model and options price data we estimate the credibility of the policy as well as its impact on the RMB/USD exchange rate. The model was able to correctly forecast the end of the two-pillar policy in May 2017.
Stabilizing China’s Housing Market
Richard Koss, Xinrui Shi, Jul 25, 2018The sharp rise of house prices in China’s Tier-1 cities has fostered a great deal of commentary about the possibility of bubbles forming there. However, China’s unique housing market characteristics make it difficult to assess the macroeconomic severity of bursting bubbles, even if they exist. These characteristics include the setting of land supply and prices by the government, among many others. This paper looks at proposals to shore up the mortgage underwriting and legal infrastructure to help China withstand the impact of falling prices, should this occur.
Shadow Banking in a Crisis: Evidence from Fintech During COVID-19
Zhengyang Bao, Difang Huang, Jul 14, 2021We evaluate the performance of Chinese fintech and bank credit providers during COVID-19. Comparing samples of fintech and bank loan records across the pandemic outbreak, we find that fintech companies are more likely to expand credit access to new and financially constrained borrowers after the start of the pandemic. However, the delinquency rate of fintech loans triples after the outbreak, but there is no significant...
How Do Zombie Firms Affect Innovation? Evidence from China’s Industrial Firms
Yun Dai, Wei Li, Yongqin Wang, May 08, 2019Zombie firms are insolvent firms that continue to operate due to continued access to financing at extremely low costs. Nie et al. (2016) find that in the year 2013 about 14 percent of Chinese-listed firms and 7.5 percent of Chinese manufacturing firms are defined as zombie firms. The large amount of financing subsidies distributed to insolvent zombie firms...
The Chinese Saving Rate: Long-Term Care Risks, Family Insurance, and Demographics
Ayşe İmrohoroğlu, Kai Zhao, Sep 13, 2017In this paper, we show that a general equilibrium model that properly captures the risks in old age, the role of family insurance, changes in demographics, and the productivity growth rate is capable of generating changes in the national saving rate in China that mimic the data well. Our findings suggest that the combination of the risks faced by the elderly and the deterioration of family insurance due to the one-child policy may account for approximately half of the increase in the saving rate between 1980 and 2010. We also show that changes in total factor productivity growth account for the fluctuations in the saving rate during this period.
