nep-cna New Economics Papers
on China
Issue of 2014‒10‒13
two papers chosen by
Zheng Fang
Ohio State University

  1. Environmental regulatory stringency and the market for abatement goods and services in China By Jing Lan; Alistair Munro
  2. Connecting the Markets? Recent Evidence on China's Capital Account Liberalization By Chan, Mark K.; Kwok, Simon

  1. By: Jing Lan (College of Public Administration, Nanjing Agricultural University); Alistair Munro (National Graduate Institute for Policy Studies)
    Abstract: We provide an examination of the linkage between environmental regulation stringency and the demand for and supply of abatement goods and services. To that end we construct a five-equation simultaneous model that links environmental regulation stringency to abatement output through various underlying simultaneous mechanisms. This system is then estimated using a panel of 679 eco-firms in 78 industrial Chinese cities during the implementation period of collection and use of pollution discharge fees (promulgated by the Chinese State Council) from 2003 to 2007. We find that higher fees are generally associated with higher abatement supply but for some industries – notably wastewater treatment – there is evidence of ‘output restriction’, meaning that higher charges lead to a reduction in supply for established firms.
    Date: 2014–10
  2. By: Chan, Mark K.; Kwok, Simon
    Abstract: We use longitudinal data on stock prices of cross-listed firms to investigate abnormal systematic changes in the price disparity of cross-listed stocks between the Hong Kong and Shanghai exchanges from 2002 to 2014. We identify a liberalization policy that generated an unprecedented abrupt convergence in price disparity. The policy, known as Shanghai-Hong Kong Stock Connect, serves to lower the capital control barrier of cross-market investment between both markets. In a quasi-experimental setup, we find that the announcement of the policy caused the price disparity between cross-listed shares in both markets to reduce by one-sixth. The magnitude of the effect was the largest since 2002, and was seven standard deviations away from the historical average. We also find that the convergence was asymmetric, and the convergence was driven by an upward revaluation of share prices.
    Keywords: Capital account liberalization, Chinese financial market, law of one price, cross-listed shares, natural experiment
    Date: 2014–09

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