|
on China |
| By: | Cull, Robert; Li, Wei; Sun, Bo (Board of Governors of the Federal Reserve System (U.S.)); Xu, Lixin Colin (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | We examine the role of firms' government connections, defined by government intervention in CEO appointment and the status of state ownership, in determining the severity of financial constraints faced by Chinese firms. We demonstrate that government connections are associated with substantially less severe financial constraints (i.e., less reliance on internal cash flows to fund investment), and that the sensitivity of investment to internal cash flows is higher for firms that report greater obstacles to obtaining external funds. We also find that those large non-state firms with weak government connections, likely the engine for innovation in the coming years in China, are especially financially constrained, due perhaps to the formidable hold that their state rivals have on financial resources after the 'grabbing-the-big-and-letting-go-the-small' privatization program in China. Our empirical results suggest that government connections play an important role in explaining Chinese firms' financing conditions, and provide further evidence on the nature of the misallocation of credit by China's dominant state-owned banks. |
| Keywords: | Financial constraints; investment; political connections; firm size; China; capital allocation; invest cash flow sensitivity |
| JEL: | G18 G21 G28 G38 O16 |
| Date: | 2015–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1129&r=cna |
| By: | Fuest, Clemens; Liu, Li |
| Abstract: | Does ownership affect the way firms react to corporate taxation? This paper exploits key features of recent corporate tax reforms in China to shed light on the differential impact of taxation on firms under different ownership regimes including private, collectively owned and state owned companies. Employing a difference-in-difference estimation approach, we find that the increase in the deductibility of wage costs in 2006 has led to a sizable increase of wages per worker in private firms and an even larger increase in collective-owned enterprises. In contrast, there is no significant wage response in state owned enterprises. The decrease in the statutory tax rate for domestic firms since 2008 has induced collectivley owned enterprises and private firms to reduce debt while there is no significant response SOEs. Our results also suggest that the 2008 reform has reduced tax induced investment round tripping through Hong Kong, Macao and Taiwan. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15023&r=cna |
| By: | Lirong Liu; Hiranya K. Nath; Kiril Tochkov |
| Abstract: | Using bilateral trade data for 16 service categories, this paper examines the patterns, evolution, and determinants of comparative advantage (CA) in U.S. services trade with China and India from 1992 to 2010. The results indicate that the U.S. has a CA in most services, except in more traditional ones, such as travel and transportation. However, India, and more recently China, gained a CA in modern services, such as computer and information services during the period considered in this paper. An examination of the distributional dynamics indicates that the likelihood of U.S. gaining CA over an initial position of comparative disadvantage (CDA) in its trade of a particular service with India is higher than the probability of losing its initial dominance. In contrast, the U.S. CA or CDA vis-à-vis China exhibits high levels of persistence over time. The regression results suggest that relative abundance of sector-specific labor, human capital, and FDI inflows have been significant sources of CA for the U.S. over both China and India. |
| Keywords: | Services Trade; Comparative Advantage; China; India |
| JEL: | F14 O57 |
| Date: | 2015–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2015-1092&r=cna |
| By: | Wang, Li; Menkhoff, Lukas; Schröder, Michael; Xu, Xian |
| Abstract: | This paper shows that politicians' pressure to climb the career ladder increases bank risk exposure in their region. Chinese local politicians are set growth targets in their region that are relative to each other. Growth is stimulated by debt-financed programs which are mainly financed via bank loans. The stronger the performance incentive the riskier the respective local bank exposure becomes. This effect holds primarily for local banks which are under a certain degree of control of local politicians and it has increased with the release of recent stimulus packages requiring local co-financing. |
| Keywords: | Bank Lending,Bank Risk Exposure,Local Politicians,Promotion Incentives |
| JEL: | G21 G23 H74 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15026&r=cna |
| By: | Lirong Liu (Department of Economics, Sam Houston State University); Hiranya K. Nath (Department of Economics and International Business, Sam Houston State University); Kiril Tochkov (Department of Economics, Texas Christian University) |
| Abstract: | Using bilateral trade data for 16 service categories, this paper examines the patterns, evolution, and determinants of comparative advantage (CA) in U.S. services trade with China and India from 1992 to 2010. The results indicate that the U.S. has a CA in most services, except in more traditional ones, such as travel and transportation. However, India, and more recently China, gained a CA in modern services, such as computer and information services during the period considered in this paper. An examination of the distributional dynamics indicates that the likelihood of U.S. gaining CA over an initial position of comparative disadvantage (CDA) in its trade of a particular service with India is higher than the probability of losing its initial dominance. In contrast, the U.S. CA or CDA vis-à-vis China exhibits high levels of persistence over time. The regression results suggest that relative abundance of sector-specific labor, human capital, and FDI inflows have been significant sources of CA for the U.S. over both China and India. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:shs:wpaper:1501&r=cna |
| By: | Pothen, Frank; Fink, Kilian |
| Abstract: | We investigate why governments restrict exports of exotic raw materials taking rare earth elements as a case study. Trade restrictions on exotic materials do not have immediate macroeconomic effects. Relocating rare earth intensive industries is found to be the main reason behind China's export barriers. They are part of a more extensive strategy aiming at creating comparative advantages in these sectors and at overcoming path dependencies. Moreover, export barriers serve as a second-best instrument to reduce pollution and to slow down the depletion of exhaustible resources. Growing domestic rare earth consumption renders those increasingly ineffective. Rising reliance on mine-site regulation indicates that this fact is taken into account. Rare earth extraction is dominated by a few large companies; the demand side is dispersed. That speaks against successful lobbying for export restrictions. It appears as if the export barriers are set up to compensate mining firms. |
| Keywords: | Rare Earths,Export Restrictions,Political Economy |
| JEL: | Q37 Q38 D78 P26 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15025&r=cna |
| By: | Chen, Quanrun; Dietzenbacher, Erik; Los, Bart (Groningen University) |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gro:rugsom:15002-gem&r=cna |