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on China |
| By: | Zhe Geng; Jun Pan |
| Abstract: | We study the extent of price discovery in the onshore Chinese corporate bond market, focusing in particular on the information content of credit spreads in China. Using Merton's model of default, we construct credit measures of publicly listed firms, using information from their financial statements and stock valuation. We find that, only after the first default in 2014, do credit spreads in China become informative. Compared with the findings in the US credit market, the magnitude of price discovery in the Chinese market is rather limited. We also find that the presence of outside government support for state-owned enterprises (SOEs) in China results in a market segmentation between SOE and non-SOE issuers that is harmful to price efficiency and market stability. Since 2018, the non-SOE issuers have suffered from explosive credit spreads, unprecedented defaults, and shrinking new issuance, while the SOE issuers have remained largely intact. Meanwhile, our default measures show that the non-SOE issuers are in fact stronger in credit quality than their SOE counterparts of the same rating category. Examining the impact of this segmentation on price discovery, we find that non-SOE credit spreads become significantly more informative since 2018, as concerns over credit become front and center for the non-SOE issuers. By contrast, as investors seek safety in SOE bonds, there is no improvement in the information content of SOE credit spreads. |
| JEL: | G0 G1 G10 G12 G15 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26575&r=all |
| By: | Jie Bai (Center for International Development at Harvard University); Jiahua Liu |
| Abstract: | It is well known that various forms of non-tariff trade barriers exist within a country. Empirically, it is difficult to measure these barriers as they can take many forms. We take advantage of a nationwide VAT rebate policy reform in China as a natural experiment to identify the existence of these intranational barriers due to local protectionism and study the impact on exports and exporting firms. As a result of shifting tax rebate burden, the reform leads to a greater incentive of the provincial governments to block the domestic flow of non-local goods to local export intermediaries. We develop an open-economy heterogenous firm model that incorporates multiple domestic regions and multiple exporting technologies, including the intermediary sector. Consistent with the model’s predictions, we find that rising local protectionism leads to a reduction in interprovincial trade, more “inward-looking” sourcing behavior of local intermediaries, and a reduction in manufacturing exports. Analysis using micro firm-level data further shows that private companies with greater baseline reliance on export intermediaries are more adversely affected. |
| Keywords: | Trade barriers |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cid:wpfacu:373&r=all |
| By: | Mathilde Maurel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique); Thomas Pernet (UP1 UFR02 - Université Panthéon-Sorbonne - UFR d'Économie - UP1 - Université Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Zhao Ruili (SUIBE - Shangai University of International Business and Economics) |
| Abstract: | We study how a bank's involvement in a firm's financing may be in line with environmental policies pursued by the Chinese central government. Specifically, we evaluate the effectiveness of credit reallocation away from polluting projects when the government imposes stringent environmental policies. We combine the industries' financial dependencies with time, including cross-cities variation in policy intensity to identify the causal effect on the sulfur dioxide (SO2) emission. We find that SO2 emissions are lower in industries with high reliance on credits and stricter environmental regulations. Furthermore, our results suggest that locations with strong environmental policies lead firms to seek funding in less regulated areas, which confirms the pollution haven hypothesis. |
| Keywords: | Banks,Financial Dependency,Environmental regulation,China |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-02423350&r=all |
| By: | Howell, Anthony (Peking University) |
| Abstract: | This paper relies on recent proprietary data from the People’s Republic of China’s (PRC) poor rural minority areas to examine the importance of credit constraints on internal labor migration. Specifically, a liquidity shock via the PRC’s minimum living standard assistance (MLSA) program is decomposed into its direct and indirect parts. The institutional features of the MLSA program permit an identification strategy that relies on a set of verifiable assumptions and an instrument variable framework. The results reveal that the direct effect on migration of MLSA is negative, although the net effect is positive driven by the large indirect effects, which are twice as large for ethnic minorities compared to the Han majority. Subsequent evidence further suggests that the main mechanism behind the indirect effect is informal interpersonal lending fostered by risk-sharing strategies. The findings imply that once liquidity is injected into a village it gets circulated in the community, stimulating migration particularly within credit-constrained minority communities. |
| Keywords: | ethnicity; indirect effect; liquidity constraints; migration; risk-sharing mechanisms; targeted cash transfers |
| JEL: | C21 J18 J61 R23 |
| Date: | 2019–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0575&r=all |
| By: | Chen, Xi (Yale University); Hu, Lipeng (Peking University); Sindelar, Jody L. (Yale University) |
| Abstract: | China's recently implemented New Rural Pension Scheme (NRPS), the largest social pension program in the world, was designed to provide financial protection for its rural population and reduce economic inequities. Yet the impact of this program is mitigated if those eligible fail to enroll. This paper examines the extent to which pension-eligible individuals, and their families, make optimal pension decisions. Families are involved in the NRPS decisions because, in most cases, adult children need to enroll as a prerequisite of their parents' receipt of benefits. We examine the decisions of both those eligible for pension benefits (i.e. over 60 years old) and their adult children. We use the rural sample of the 2012 China Family Panel Studies to study determinants of the decision to enroll in NRPS, premiums paid, and time taken to enroll.We find evidence of low and suboptimal pension enrollment by eligible individuals and their families. Suboptimal enrollment takes various forms including failure to switch from the dominated default pension program to NRPS and evidence that families do not make mutually beneficial intra-family decisions. For the older cohort, few individual and family characteristics are significant in enrollment decisions, but village characteristics play an important role. For the younger cohort, more individual-level characteristics are significant, including own and children's education. Village characteristics are important but not as much as for the older cohort. Our finding of suboptimal enrollment is important as it highlights the need for policies to improve enrollment. This paper provides needed information on the extent of the factors relating to suboptimal enrollment. |
| Keywords: | social pension, suboptimal choices, intra-family decisions, intergenerational arrangements, Family Binding Policy, default option |
| JEL: | J14 J18 R23 R28 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12843&r=all |
| By: | Lu, Haiyang; Nie, Peng (Xi’an Jiaotong University); Sousa-Poza, Alfonso (University of Hohenheim) |
| Abstract: | Although the strong positive correlation between parental educational expectations (PEE) and child academic achievement is widely documented, little is known about PEE's effects on child psychological outcomes and the mechanisms through which it may work. Hence, in this paper, using nationally representative data from the 2013-2014 and 2014-2015 waves of the China Education Panel Survey, we investigate PEE's causal impact on adolescent subjective well-being (SWB) and the moderating role of the academic pressures that these adolescents perceive. Even though we find robust evidence for a positive causal relation between PEE and adolescent SWB, its moderation by adolescent-perceived academic pressure is negative. In addition, the facts that the benefits of PEE are greater for female adolescents and those from immigrant, one-child, and nonpoor families suggests that it may operate on adolescent SWB through increased family resources, improved family relationships, and higher adolescent aspirations linked to higher PEE. |
| Keywords: | China, parental educational expectations, adolescents, subjective well-being |
| JEL: | I21 I30 J13 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12832&r=all |
| By: | Xubei Luo; Nong Zhu |
| Abstract: | The hub-periphery development pattern of the Guangdong economy, to some extent, is a miniature of that of the Chinese economy. The Pearl River Delta, drawing from its first-nature comparative advantages in factor endowments and proximity to Hong Kong SAR, China, and Macau SAR, China, and the second-nature advantages as first-movers in the reforms in attracting and retaining domestic and foreign resources, has developed into a regional economic center. This paper examines the pattern of inter- and intra-provincial migration and that of the concentration of production, to explore the challenges and opportunities for the success of “double transfer.” The paper suggests a four-prong approach, to improve the business environment, support the realization of latent comparative advantages, increase the skill level of the labor force to support the upgrade of the production structure, and protect the vulnerable, to support the inclusive growth of the economy in Guangdong in a sustainable manner. |
| Keywords: | Migration,China, |
| JEL: | J61 O11 R12 |
| Date: | 2019–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2019s-39&r=all |