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When Cash Unlocks Mobility: China’s Shantytown Renovation Program and the Housing Markets
Zhiguo He, Zehao Liu, Xinle Pang, Yang Su, Kunru Zou, Jul 08, 2026The household finance literature typically ignores household migration decisions and how such decisions interact with financial conditions. We find that a relaxation of borrowing constraints can facilitate household migration to higher-tier cities where borrowing constraints are more binding than in cities of origin. Such endogenous location upgrading amplifies the increase in household housing expenditures following the relaxation of borrowing constraints, as well as intercity home price disparities.
Do Industrial Policies Improve Efficiency? Evidence From China's Credit Policies
Kaiji Chen, Yuxuan Huang, Xuewen Liu, Zhikun Lu, Yong Wang, Jul 14, 2026Are industrial policies distorting the economy, or correcting underlying distortions? Using Chinese firm-level data and a quantitative model, this article shows that preferential credit is directed toward high-markup (high-return) sectors, reallocating resources toward underfunded activities. While such policies weaken firm selection, they improve aggregate efficiency: removing them would nearly double productivity losses. The results suggest that, in a second-best environment, well-targeted industrial policies can enhance rather than reduce overall efficiency.
When Forward-Looking Accounting Meets an Unexpected Crisis: Does the Expected Credit Loss Model Amplify Economic Downturns?
Chen Chen, Difang Huang, Jun 24, 2026This article examines whether the expected credit loss (ECL) model, introduced to make bank provisioning more forward-looking, can inadvertently amplify downturns when a crisis arrives without warning. Using China’s staggered ECL adoption and granular loan-level data from the COVID-19 period, we show that ECL banks cut lending more sharply, raised spreads, and became more selective than incurred credit loss banks serving the same borrowers, with persistent consequences for firms.
From Heat to High-Tech: How Innovation Responds to Climate Change
Xianling Long, Zhiqiang Wang, Jul 01, 2026Climate change is driving firms to innovate—not just where heat strikes, but through shifting demand across the economy. Evidence from China shows that rising temperatures stimulate both adaptation and mitigation technologies. As households, firms, and governments respond to climate risks, new market signals travel through product markets and supply chains, encouraging higher-quality climate-related innovation across sectors.
From Free Rider to Innovator: How China Became a Global Pharmaceutical Powerhouse
Panle Jia Barwick, Hongyuan Xia, Tianli Xia, Jul 22, 2026China has become a serious contender at the frontier of pharmaceutical innovation. A key policy change was the 2016 National Reimbursement Drug List, whereby the government negotiated steep price cuts in exchange for guaranteed coverage and near-universal patient access. This column shows that the reform generated both static gains from expanding patient access to existing innovative drugs, and dynamic gains from stimulating the development of the next generation of therapies. The reform policy offers rare evidence that a well-designed insurance policy can help reconcile the tension between affordability and innovation incentives.
