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Hayek, Local Information, and the Decentralization of Chinese State-owned Enterprises
Lixin Colin Xu, May 23, 2018Hayek (1945) predicts that where local information is important, the organization of production should be decentralized. This prediction is tested and supported in the context of the decentralization of Chinese state-owned enterprises (SOEs). SOEs are more likely to decentralize with increasing distance from the seat of the oversight government. This likelihood is especially strong when performance heterogeneity is greater and/or transportation costs are higher.
The Role of Punctuation in the P2P Lending Market
Xiao Chen, Bihong Huang, Dezhu Ye, Apr 04, 2018Using data from Renrendai, one of the largest P2P lending platforms in China, we investigate how the amount of punctuation used in loan descriptions influences the funding probability, borrowing rate, and default. The empirical evidence shows that the amount of punctuation is negatively associated with the funding probability and borrowing rate. We propose that the usage of punctuation affects the readability of a loan description and reflects borrowers’ self-control and cognitive ability.
Building Tall, Falling Short: An Empirical Assessment of Chinese Skyscrapers
Ziyang Chen, Ting Chen, Yatang Lin, Jin Wang, Jun 04, 2025Amid debates around state-led urbanization in developing countries, we analyze the causes and consequences of China’s skyscraper boom. We find that local governments often subsidize these projects through discounted land prices, motivated by political incentives. However, we find that such subsidies offer minimal long-term benefits, largely due to a mismatch with local conditions.
Industrial Clusters, Networks, and Resilience of Firms to the Covid-19 Shock in China
Ruochen Dai, Dilip Mookherjee, Yingyue Quan, Xiaobo Zhang, Jan 06, 2021Both entry of new firms and performance of incumbents were less adversely affected by the Covid-19 shock in Chinese counties with a greater presence of industrial clusters. To explain these results, we find evidence of the role of two specific attributes of clusters: reliance on informal hometown-based entrepreneur networks and spatial proximity to suppliers and customers.
Can Credit Still Prop Up the Chinese Economy?
Sophia Chen, Lev Ratnovski, Feb 28, 2018Recent IMF research explores the effectiveness of credit in supporting the Chinese economy, and compares it with the effectiveness of fiscal stimulus. The study finds that credit contributed positively to output growth in China in the early 2000s, but the effect fell to almost zero post-2010. This suggests that, at present, credit cannot effectively support further growth of the Chinese economy. In contrast, the estimated fiscal multiplier is 1.4 post-2010, which is high in international and historic comparisons. Therefore, a targeted fiscal stimulus can cushion the adjustment of the Chinese economy to lower credit growth.
