China Economic Quarterly International (CEQI)

 

Volume 5, Number 4

December 2025

 

Does judicial improvement promote corporate trade credit financing? Evidence from the establishment of circuit courts in China

Lu Yao, Yifei Liang, Mengde Liu

 

Does distance promote consumption: The role of city shape

Chunzhi Li, Wenhan Liu

 

Does the housing provident fund crowd out the households’ non-housing consumption? Evidence from Chinese micro data

Anquan Zhang, Jiaxin Xiong, Lu Liu

 

Firm's basic research and breakthrough innovation-- from the perspective of resource-based view

Mingnian Liu, Lin Huang, Yu Shen

 

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Does judicial improvement promote corporate trade credit financing? Evidence from the establishment of circuit courts in China

Lu Yao, Yifei Liang, Mengde Liu

Abstract

The establishment of circuit courts is an important measure to enhance judicial impartiality and independence, and thus improve the local judicial environment. This paper takes the establishment of circuit court as a quasi-natural experiment of judicial improvement, and empirically examines the impact of judicial improvement on trade credit financing by using a staggered difference-in-differences (DID) model with Chinese firms from 2009 to 2023 as the research sample. It is found that the trade credit financing of enterprises after the establishment of the circuit court increases significantly. The mechanism test indicates that improving local judicial efficiency, alleviating local protectionism and reducing corporate defaults are important channels through which the establishment of circuit courts promotes corporate trade credit financing. Heterogeneity tests indicate that the positive effect of circuit court establishment on trade credit financing is systematically stronger for a state-owned enterprises, firms without political connections, and those exhibiting higher gross profit margins, smaller size, or weaker pre-existing financing capacity. This paper provides empirical evidence that the legal environment improvement is conductive to the financial market development.

 

Does distance promote consumption: The role of city shape

Chunzhi Li, Wenhan Liu

Abstract

Recently, studies have emphasized the consumption amenities of cities, which are as important as city morphology. This study provides empirical evidence that addresses questions regarding the impact of city shape on consumption in China. This study uses night-light data to quantify the compactness of city shapes of Chinese cities. Four indices of city shape were calculated to reflect the different morphological properties of each city. IVs are constructed to mitigate endogeneity problems derived from time-varying historical features and non-time-varying geographical characteristics. The results indicate that higher compactness induces higher consumption by increasing intra-city travel frequency and disposable income. Transforming the samples and empirical equations did not affect the robustness of the results. Heterogeneity exists among households, with high-income households and households with young heads being less sensitive to changes in city-shape compactness. City shape does not affect marginal propensity to consume. This study emphasizes the importance of maintaining a compact city shape, and policies improving the intra-city transportation infrastructure can alleviate the negative consumption impact of non-compact city shapes.

 

Does the housing provident fund crowd out the households’ non-housing consumption? Evidence from Chinese micro data

Anquan Zhang, Jiaxin Xiong, Lu Liu

Abstract

This study investigates the causal effect of mandatory housing provident fund (HPF) contributions on non-housing consumption patterns among urban Chinese households. Leveraging cross-sectional data from the 2017 China Household Finance Survey (CHFS), we employ instrumental variable estimation to address endogeneity arising from reverse causality and omitted variable bias. Results reveal a statistically significant negative association between HPF contributions and discretionary spending: An RMB 1 increase in per capita HPF outlays corresponds to an RMB 0.843 decline in non-housing consumption. Strikingly, this crowd-out effect intensifies among households that refrain from utilizing HPF for residential purposes—exhibiting a marginal propensity to consume reduction of RMB 1.492 per yuan contributed. Heterogeneity analyses further demonstrate that low-income families, who exhibit lower HPF withdrawal probabilities, bear the inhibitory effect: Their non-housing expenditures decrease more relative to higher-income counterparts under equivalent contribution levels. In both the theoretical and empirical models, the results suggest that whether a household has an HPF does matter, but it is more important for the household to take advantage of its lending capacity to mitigate liquidity constraints, rather than merely participate in it.

 

Firm's basic research and breakthrough innovation-- from the perspective of resource-based view

Mingnian Liu, Lin Huang, Yu Shen

Abstract

With intensifying global competition and rapid technological advancement, breakthrough innovation has become a critical avenue for firms to build sustainable competitive advantages. Based on a resource-based view, we provide a theoretical foundation to explain that high-quality basic research plays a fundamental role to achieve firms’ breakthrough innovation. By using Chinese dataset, we find that firms with strong basic research capabilities can boost their breakthrough innovation. Further analyses show that basic research facilitates breakthrough innovation through three mechanisms: enhancing knowledge diversity, increasing access to government R&D subsidies, and strengthening R&D collaboration. Heterogeneity analyses reveal that the effect of basic research is more pronounced for firms with higher absorptive capacity, larger firm size, and in technology-intensive sectors. Moreover, the positive impact of basic research on breakthrough innovation is stronger in more competitive industries. These findings have important implications for understanding the role of corporate basic research in fostering breakthrough innovation, particularly under increasing external technological constraints.