China Economic Quarterly International (CEQI)

Volume 2, Number 2

June 2022

 

The effect of state capital injection on private firms’ performance: Evidence from Chinese industrial firms

Yan Dong, Peizhong Liu

 

Stabilizing economic growth: Growth target and government expenditure since World War II

Qiuhui Chen, Xianxiang Xu

 

Aid and conflict: Evidence from Chinese aid

Jianan Li, Xiaoning Long, Qi Jiang

 

Trade shock, refugee, and the rise of right-wing populism: Evidence from European Parliament elections

Yuchen Lin, Tianyang Xi

 

Targeting more effective industrial policies: Evidence from massive media data on R&D manipulation

Guochao Yang, Lina Zhang

 

Financial repression, SOE reform and fiscal-monetary policy coordination

Huabin Wu, Zhenyang Xu, Ping Yan

 

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The effect of state capital injection on private firms’ performance: Evidence from Chinese industrial firms

Yan Dong, Peizhong Liu

Abstract

Based on Chinese industrial firms’ data, this study found that state capital injection weakened the technological progress and management efficiency of private firms, which led to a reduction in enterprises’ total factor productivity. State capital injection also increased the labor cost and investment in fixed assets, and lowered the profitability of firms. Furthermore, the state capital did not have a significant negative impact on firms in technology-intensive and monopoly industries. This study has shed some lights on the reform of the state-owned assets management system and the development of a mixed ownership economy.

 

Stabilizing economic growth: Growth target and government expenditure since World War II

Qiuhui Chen, Xianxiang Xu

Abstract

This paper investigates how the government stabilizes economic growth from the perspective of government expenditure. We contribute a method to identify the government expenditure aimed at stabilizing growth and empirically examine it using a dataset of economic growth targets. We find that when the economy encounters adverse shocks, government expenditure increases significantly by 1.1 percentage points on average for every one percentage point increase in the growth target. We document the following patterns of stabilizing growth: (1) government increases expenditure on economic affairs rather than on other functions; (2) government expenditure is financed by current revenue; and (3) it is a temporary behavior to stabilize growth. This paper also suggests that stabilizing growth by increasing government expenditure is a global phenomenon.

 

 

Aid and conflict: Evidence from Chinese aid

Jianan Li, Xiaoning Long, Qi Jiang

Abstract

Using data from AidData and the conflict report from Uppsala Conflict Data Program (UCDP) from 2000 to 2014, we find that China's other official flows (OOF) aid can significantly reduce the frequency of conflicts. To deal with the endogeneity, we use China's competitive capacity as the instrumental variable. Our results are robust when considering the possible sample selection bias and different types of international aid. We find that increasing the local infrastructure investment and employment is the main mechanism, which increases the opportunity cost of engaging in conflicts. Our results provide evidence on the effectiveness of China's aid mode and the importance of infrastructure investment in developing countries.

 

Trade shock, refugee, and the rise of right-wing populism: Evidence from European Parliament elections

Yuchen Lin, Tianyang Xi

Abstract

Recent years have witnessed the rising support for right-wing populism in European politics. We rely on the outcomes of the 2014 European Parliament elections to empirically examine the economic and cultural mechanisms that fuel this trend. Using import competition to measure economic shocks and regional-level refugee shocks, we find that regions exposed to more intense trade shocks are more likely to vote for right-wing parties. We further show the increasing support for economically far-right parties is mainly caused by trade shocks, and the electoral support for culturally far-right parties stems mainly from refugee shocks.

 

Targeting more effective industrial policies: Evidence from massive media data on R&D manipulation

Guochao Yang, Lina Zhang

Abstract

R&D manipulation prevails in firms' application for high-tech enterprise certification. This paper provides evidence on how media coverage significantly inhibits firms' R&D manipulation behaviour by increasing citizens' concerns. Among all the media reports, original reports and in-depth reports serve the strongest purpose in alleviating R&D manipulation. Among all types of media, online media and authoritative media play a stronger role. We also find a more pronounced supervision role of media for enterprises that are owned by private entities, covered by more analysts, administrated by more capable governments or located in regions with a higher marketization level. We also provide evidence on the enhancement of firms’ R&D performance due to media coverage.

 

 

Financial repression, SOE reform and fiscal-monetary policy coordination

Huabin Wu, Zhenyang Xu, Ping Yan

Abstract

We build a dynamic stochastic general equilibrium (DSGE) model with financial repression and conduct estimation and simulation with it using aggregate data. We discuss the interaction and optimal combination of fiscal and monetary policies when the model features SOE monopoly and financial repression. We find that under current situation, fiscal policy should play a bigger role in stabilizing output, while monetary policy ought to pay more attention to combatting inflation. Although private firms' limited access to credit can be attributed to financial repression and SOE monopoly, financial repression is a second-best policy, in that it promotes SOE's output via cheap credit when SOEs behave like monopolists. This offsets the efficiency loss associated with monopoly. Moreover, our policy experiments show that the optimal fiscal policy can respond less to output fluctuations, when SOE reforms dampen the significance of financial repression.