China Economic Quarterly International (CEQI)

Volume 2, Number 1

March 2022

Regulatory arbitrage, bank opacity and risk taking in Chinese shadow banking from the perspective of wealth management products

Yeni Huang, Bian Zhou, Liya Liu

 

Natural calamity and cultural formation: A study on Yellow River flooding region

Ruobing Liang

 

Does corporate donation lead to more tax aggressiveness?

Cheng Yuan, Yue Li, Tao Hu

 

Innovation spillovers in production networks: Evidence from the establishment of national high-tech zones

Shenglan Chen, Xiaoling Liu

 

How transportation infrastructure affects firm Productivity? Evidence from China

Ming Xu, Yuan Feng

 

Real estate expansion and manufacturing wage increase in China: From the perspective of labor reallocation

Rukai Gong, Wenchun Wang, Zhao Rong, Rudai Yang

 

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Regulatory arbitrage, bank opacity and risk taking in Chinese shadow banking from the perspective of wealth management products

Yeni Huang, Bian Zhou, Liya Liu

Abstract

We set up a general equilibrium model of Chinese wealth management products (WMPs), which are deeply rooted in traditional Chinese commercial banks. According to this model, we proposed two hypotheses, namely, the regulatory arbitrage and information asymmetry hypotheses. We tested the hypotheses by using data on Chinese WMPs during the 2006–2015 period. We found that regulatory arbitrage was the main driver of WMPs’ rapid expansion. The greater the pressure from regulation was, the greater the incentive for commercial banks to issue off-balance sheet WMPs and take risks. When the regulatory standard became strict or loose, the effect of regulatory arbitrage on marginal risk-taking behavior became reinforced or reduced, respectively. We also argue that transparency can moderate drive-up behavior. Some relevant suggestions are provided for solving the problems of overexpansion and risk-taking behavior according to the results.

 

Natural calamity and cultural formation: A study on Yellow River flooding region

Ruobing Liang

Abstract

Traditional culture is usually regarded as the response to environmental change. In this paper, we tried to investigate the impact of natural calamity on the cultural formation by a case study of Yellow River flooding region (YRFR). Using national population censuses and Chinese General Social Survey data and the regression discontinuity design, we estimated the influence of YRFR on the formation of cultures, including gender norms, religious beliefs, and trust. The results suggested that inner YRFR residents preferred boys than girls, believed in religions but repelled foreign religions, and lacked the trust in others in spite of their more trust on governmental organizations. Finally, we conducted robustness checks and discussed the possible influencing paths.

 

Does corporate donation lead to more tax aggressiveness?

Cheng Yuan, Yue Li, Tao Hu

Abstract

With regard to the supply of public goods, existing literature mainly focuses on the crowding out effect of public provision of public goods on private provision, while the adverse effect has been largely neglected. In this paper, building on the perspective of private provision's impact on public provision, we attempt to investigate the causal effect of corporate donation on firms' tax aggressiveness. We use the IV method to address potential endogeneity and find that corporate donation does not lead to more tax aggressiveness. We propose a supervision mechanism to explain the results. We empirically demonstrate the effect of supervision by including the local workforce of media business in the regression.

 

Innovation spillovers in production networks: Evidence from the establishment of national high-tech zones

Shenglan Chen, Xiaoling Liu

Abstract

Based on a novel dataset constructed with the supplier-consumer paired sample, this paper uses a difference-in-differences approach to evaluate the impact of national high-tech zones on firm performance. We find that the supplier's sales growth rate increased by about 61.35% after the approval of the national high-tech zone in the place where its largest customer was located. This spillover effect transmitted from the consumer to the supplier could be due to either knowledge spillover or demand expansion. Further study finds that the innovation spillover effect is stronger when the consumer company has a higher switching cost, when the supplier company has a stronger absorption capacity, and when the relationship between the supplier and the consumer is closer. Our paper suggests that the innovation policy effect would be amplified through the supply chain network.

 

How transportation infrastructure affects firm Productivity?Evidence from China

Ming Xu, Yuan Feng

Abstract

The national trunk highway system (NTHS), consisting of five vertical and seven horizontal national trunk highways, is taken as a natural experiment to study the impact of transportation infrastructure on firm productivity. It is found that the NTHS has led to the agglomeration of production resources of county-level enterprises along the system to large cities, and the degree of agglomeration has industry-level heterogeneity. Although the NTHS has promoted the division of labor among county-level enterprises, it is difficult for these enterprises to compete with those in big cities and share efficiency and economic benefits from the deepening of the division of labor.

 

Real estate expansion and manufacturing wage increase in China: From the perspective of labor reallocation

Rukai Gong, Wenchun Wang, Zhao Rong, Rudai Yang

Abstract

The massive expansion of China's real estate sector has raised manufacturing wage through the channel of reallocating low-skilled labor from manufacturing sectors to the real estate sector. Using data of manufacturing firms in 35 major cities from 2000–2007, we find that the expansion of the real estate sector resulted in higher manufacturing wage. Additionally, we find that this positive effect was more pronounced among labor-intensive firms, among non-SOEs, and among firms in cities with a low development level of the labor market. By investigating the occupation choice of rural-to-urban migrant workers, we find that real estate expansion made migrant workers less likely to choose manufacturing jobs while more likely to choose construction jobs, which further confirms the labor reallocation story.