“Downside Risk in the Chinese Stock Market – Has it Fundamentally Changed?”

“Downside Risk in the Chinese Stock Market – Has it Fundamentally Changed?”

Eric Ghysels, Hanwei Liu

CEPR Discussion Paper 12180

The purpose of the paper by Ghysels and Liu is to characterize fundamental changes in the downside risk of the Chinese stock market and discern what the causes of these changes are. Furthermore, they provide a synopsis of several key events that took place during the sample period (June 1995 – December 2016) and present an overview of the structure of the two stock exchanges in mainland China, namely the Shanghai and Shenzhen stock exchange.

[CEAMeS DP09] – “The Changing Patterns of Investment in the PRC Economy”

CEAMeS Discussion Paper No. 9 | 2017

Carsten Holz

The investment-intensive growth model of the People’s Republic of China (PRC) is often viewed as state-driven and ultimately unsustainable. But largely unnoticed, a shift has taken place. This paper examines the changes in investment patterns since 2003 and the potential impact of industrial policies on these patterns. The point of view is macroeconomic, based on economy-wide data with various breakdown. Significant shifts in investment patterns across sectors and ownership forms have occurred over time, supporting a new growth model with a reduced role of the state, and these shifts appear driven more by market factors than by government policies.

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„Government Efficiency and Exports in China“

Antonia Reinecke & Hans-Jörg Schmerer

Forthcoming in: Journal of Chinese Economic and Business Studies 15 (2017)


This paper investigates the role of local governments’ efficiency on exports in China. We argue that firms located in provinces characterized by high governmental efficiency export more due to a positive productivity effect that lowers transaction costs. The analysis builds on NBS firm-level data that covers a representative sample of Chinese establishments. We find a positive correlation between provincial governments efficiency and Chinese firm’s exports. Moreover, we are able to show that the positive link between firm size and exports is magnified by governmental efficiency. Larger firms export more and this relationship is much stronger in provinces with more efficient provincial governments.

“The People’s Republic of China in the middle-income trap?”

Linda Glawe & Helmut Wagner

ADBI Working Paper No. 749, 2017


Over the last decade, a growing body of literature dealing with the phenomenon of the “middle-income trap” (MIT) has emerged. The term MIT usually refers to countries that have experienced rapid growth and thus reached the status of a middle-income country in a very short period, but have not been able to further catch up with the group of high-income economies. In particular, since the beginning of the growth slowdown of the economy of the People’s Republic of China (PRC) in 2011, there has been rising concern that the PRC is, or will also be, confronted with such a trap. We analyze the PRC’s MIT situation, considering both the (absolute and relative) empirical MIT definitions and MIT triggering factors identified in the literature. We survey the recent literature, make our own MIT forecasts, and analyze under which conditions the PRC could be caught in an MIT.


“How severe will the growth slowdown in China caused by the structural change be? An evaluation based on the experiences from Japan and South Korea”

Michael Murach & Helmut Wagner

in: Journal of Chinese Economic and Business Studies, Vol. 15 (3), July 2017, pp. 269-287


China’s economy has been growing at a high rate for the past three decades. However, the current process of rebalancing from an investment- and manufacturing-led growth model toward a consumption- and service-led model is associated with decreasing growth rates. We show that China’s current state of structural change in terms of sectoral employment share is similar to the historical developments in Japan and South Korea. We derive plausible scenarios for future growth rates in China and (by isolating the allocation effect, i.e. the pure effect of structural change) look at the effects of tertiarization on economic growth in China for the period 2014−2030 by applying a simple simulation study.

“The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes”

“The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes”

Zhuo Chen, Zhiguo He, Chun Liu

NBER Working Paper No. 23598

This paper links China’s recent fast-growing shadow banking activities to the four trillion stimulus package in 2009. Chen et al. zoom in on the composition shift of the liability side of China’s local governments, and show that the rollover pressure of bank loans that were taken on by local government finance vehicles in 2009 pushed them toward non-bank debt financing after 2012.

“Sterilized Intervention and Optimal Chinese Monetary Policy”

“Sterilized Inteervention and Optimal Chinese Monetary Policy”

Wukuang Cun and Jie Li

USC-INET Research Paper No. 16-29R

In this paper Cun and Ji examine the extent to which monetary sterilization can neutralize the effects of currency intervention in China. In addition, they study the optimal choice of monetary policy instruments and the optimal policy rules given China’s current external policy regimes.