“Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market”

“Learning Chinese? The changing investment behavior of foreign institutions in the Chinese stock market”

Timo Korkeamäki, Nader Virk, Haizhi Wang & Peng Wang

BOFIT Discussion Papers 19/ 2018

Korkeamäki et al. analyze preferences of foreign institutional investors in the Chinese stock market in a sample that covers 2003 to 2014. They find foreign investors changed their investment behavior during the sample period from generic patterns found in much of the world to China-specific patterns. The results suggest that foreign institutions learned to adjust their investment behavior to account for unique features of the Chinese market.

“Macroeconomic Effects of China’s Financial Policies”

“Macroeconomic Effects of China’s Financial Policies”

Kaiji Chen, Tao Zha

NBER Working Paper No. 25222

The Chinese economy has undergone three major phases: the 1978-1997 period marked as the SOE-led economy, the 1998-2015 phase as the investment-driven economy, and the new normal economy since 2016. All three economies have been shaped by the government’s financial policies, defined as a set of credit policy, monetary policy, and regulatory policy. Chen and Zha analyze the macroeconomic effects of these financial policies throughout the three phases and provide the stylized facts to substantiate our analysis. The stylized facts differ qualitatively across different phases or economies. They argue that the impacts of China’s financial policies work through transmission channels different from those in developed economies and that a regime switch from one economy to another was driven mainly by regime changes in financial policies.

“China’s Rebalancing: Recent Progress, Prospects and Policies”

“China’s Rebalancing: Recent Progress, Prospects and Policies”

Rui Mano & Jiayi Zhang

IMF Working Paper No. 18/243

While China’s growth gathered momentum in 2017, rebalancing was uneven and decelerated along many dimensions reflecting the temporary factors behind the growth pickup. Going forward, rebalancing is expected to proceed as these temporary factors recede, but elevated income inequality and leverage will remain a challenge. The authorities are already pursuing several pro-rebalancing policies which could be expanded to support each dimension of rebalancing while reducing trade-offs between them.

“Human Capital, Technology Adoption and Firm Performance: Impacts of China’s Higher Education Expansion in the Late 1990s”

“Human Capital, Technology Adoption and Firm Performance: Impacts of China’s Higher Education Expansion in the Late 1990s”

Yi Che & Lei Zhang

In: The Economic Journal, Vol. 126, Issue 614, Sep 2018, pp 2282-2320

Che and Zhang exploit a policy‐induced exogenous surge in China’s college‐educated workforce that started in 2003 to identify the impact of human capital on productivity. Using a difference‐in‐differences estimation strategy, they find that industries using more human‐capital intensive technologies experienced a larger gain in total factor productivity after 2003 than they did in prior years. Exploring the pathways from human capital increases to TFP growth, they find that these industries also accelerated new technology adoption, as reflected in the importation of advanced capital goods, R&D expenditure and capital intensity, as well as employment of more highly skilled individuals. The productivity gains were weaker for domestic private firms than for foreign‐owned firms.

“The persistence of trade policy in China after WTO accession”

“The persistence of trade policy in China after WTO accession”

Jason Garred

In: Journal of International Economics, Vol. 114, Sep 2018, pp 130-142

Import tariffs have fallen steeply worldwide over the last several decades, but has trade policy persisted through a rise in the use of other instruments? Garred study this question in the context of China’s 2001 accession to the World Trade Organization, using panel data on Chinese export policies. He finds that after its entry into WTO, the distribution of China’s export restrictions across industries increasingly resembles the inverse of its pre-WTO import tariff schedule. The evidence suggests that increases in export restrictions are likely to have partly restored China’s pre-WTO trade policy.

“Tariff scares: Trade policy uncertainty and foreign market entry by Chinese firms”

“Tariff scares: Trade policy uncertainty and foreign market entry by Chinese firms”

Meredith Crowley, Ning Meng & Huasheng Song

In: Journal of International Economics, Vol. 114, Sep 2018, pp 96-115

Crowley et al. estimate how a rise in uncertainty about future tariff rates impacts firm decisions to enter into and exit from export markets. Using Chinese customs transactions between 2000 and 2009, they exploit time-variation in product-level trade policy and find that Chinese firms are less likely to enter new foreign markets and more likely to exit from established foreign markets when their products are subject to increased trade policy uncertainty.

„The Nexus of Monetary Policy and Shadow Banking in China”

„The Nexus of Monetary Policy and Shadow Banking in China”

Kaiji Chen, Jue Ren, Tao Zha

In: American Economic Review, Vol. 108, No. 12, December 2018

Based on China’s institutional arrangements, Chen et al. develop a theoretical framework to analyze how banks reallocate from bank loans to risky investments in response to monetary policy tightening. Moreover they render the empirical evidence that non-state banks, during the period 2009-2015, significantly increased their activity in promoting entrusted lending off balancing sheet. At the same time shadow banking products were brought onto the balance sheet. This behavior hampered the effectiveness of monetary policy on the total bank credit. In addition they make a contribution whether China should gradually move away from quantity-based monetary policy to interest rate monetary policy.