A Bridge on Economic Issues between China and the World
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Carry Trade with Chinese Characteristics
Yi Huang, Ugo Panizza, Richard Portes, Jun 13, 2018International borrowing by Chinese nationals has increased rapidly over the past 10 years. Some of this borrowing seems to be motivated by carry trade activities. Regulatory arbitrage may have played a role in this trend.
Corporate Innovation and IPO Interventions
Lin William Cong, Sabrina T. Howell, May 20, 2020The Chinese government has occasionally suspended IPOs, exogenously creating uncertainty about access to public markets for firms already approved to list. We show that suspension-induced delay reduces corporate innovation activity both during the delay and for years after listing.
The Mandarin Model of Growth
Wei Xiong, Feb 13, 2019The Mandarin model is defined by two key features of the Chinese economy. First, the government takes a central role in driving the economy through its active investment in infrastructure. Second, the agency problems between the central and local governments can lead to a rich set of phenomena in the Chinese economy--not only rapid economic growth propelled by the tournament among local governors, but also short-termist behaviors of local governors that directly affect China’s economic and financial stability.
Tax Policy and Lumpy Investment Behavior: Evidence from China’s VAT Reform
Zhao Chen, Xian Jiang, Zhikuo Liu, Juan Carlos Suárez Serrato, Daniel Yi Xu, Apr 01, 2020To stimulate investment and promote production efficiency, the Chinese government has undertaken a series of value-added tax (VAT) reforms. One of those reforms, in 2009, reduced not only the purchasing price of equipment, but also investment frictions, i.e., the price gap imposed by the pre-reform VAT system between new and used equipment. We find that this reform increased equipment investment by 36%...
Overpricing in China’s Corporate Bond Market
Yi Ding, Wei Xiong, Jeffrey (Jinfan) Chang, Nov 27, 2019In China’s corporate bond market, the yield spread of newly issued bonds at their first secondary-market trade is on average 5.35 bps higher than the issuance spread. This overpricing is robust across bond issuances with different credit ratings, maturities, issuance types, and issuer status. Evidence suggests that competition among underwriters drives this overpricing through two specific channels—either through rebates to participants in issuance auctions or through direct auction bidding by the underwriters for themselves or their clients.
