China & World Economy最新文献

Digital transformation has far-reaching implications for income distribution within and across firms. This study explored the influence of digital transformation and anti-monopoly policy on firm income disparity. A digital transformation index was constructed by improving dictionary-based methods with natural language processing algorithms, and data from Chinese A-share listed companies between 2009 and 2023 were analyzed. The results showed that: (i) digital transformation reduced intrafirm income disparity through digital influence and digital human capital, with stronger effects in firms facing fewer financing constraints or paying lower cash dividends; (ii) this disparity-reducing effect was weaker among leading firms, although the Anti-monopoly Guidelines strengthened it; (iii) digital transformation increased interfirm income disparity within industries by fostering monopolies in technology and talent acquisition; and (iv) the Anti-monopoly Guidelines promoted market competition and enhanced the spillover effects of technological innovation, thereby mitigating the disparity-increasing effect.

Low interest rates are a prominent feature of China's current financial landscape. Using panel data on Chinese listed companies from 2016 to 2023 and a difference-indifferences model, this study showed that low interest rates can exacerbate corporate default risk, particularly among highly leveraged, highly financialized, and zombie firms. In such an environment, firms hold less cash and display higher levels of excessive debt and overinvestment, both of which can increase default risk significantly. The study further examined the role of macro-prudential policies in mitigating risks arising from accommodative monetary policy and confirmed the effectiveness of regulation targeting the lending supply side. These findings provide empirical evidence of the adverse effects of China's low interest rate environment and offer insights into the development of enterprise risks and the implementation of preventive measures.

This study employed a difference-in-differences model to examine whether judicial reform could affect corporate employment, using the establishment of China's circuit courts in 2015 as a quasi-natural experiment. It found that the reform of the judicial system enhanced corporate employment significantly. The effects were stronger in enterprises with limited external financing and those situated in provinces with high levels of administrative intervention. Mechanism analysis suggested that the reform encouraged firms to pursue litigation more actively, reducing local judicial protectionism. It also promoted employment by easing financing constraints, expanding firm output, and improving productivity. A cost–benefit analysis showed that the circuit courts were highly efficient in promoting employment. Further analysis found that local state-owned enterprises tended to increase labor input by cutting wages and capital investment whereas private firms raised capital investment to facilitate capital deepening.

Corporate social responsibility (CSR) plays a vital role in advancing sustainable development. This study used China's 2018 value-added tax (VAT) rate reduction reform as a quasi-natural experiment to examine how indirect tax adjustments influence CSR performance. The results indicated that decreased VAT rates enhanced CSR performance by improving corporate cash flow, increasing corporate profits, and alleviating managerial myopia (short-term decision making). The first two channels relaxed internal resource constraints, while the latter enhanced management's willingness to engage in long-term, socially responsible investments. Further analysis showed that these positive effects were mainly evident in enterprises with weaker market power, higher levels of corporate governance, and those subject to stringent environmental regulations. This study enriches the literature on taxation and CSR, demonstrating that fiscal policy tools, such as VAT rate reduction, can act as effective levers to encourage sustainable corporate practices and align business growth with social objectives.

How would an escalation of trade tensions between the world's two largest economies reshape global trade patterns and welfare? This study quantified the global effects of potential tariff increases under the second Trump administration using a quantitative general equilibrium model that captured input–output trade linkages. A simulation of a 30 percent increase in US tariffs on Chinese imports indicated that China's exports to the US would fall by 59.1 percent for intermediate goods and 52.7 percent for final goods, with significant diversion toward Mexico and Canada. At the same time, US imports would shift toward Association of Southeast Asian Nations countries, South Korea, and a few other economies. Certain third countries would experience modest welfare improvements but broader tariff escalation scenarios would result in welfare losses for all economies. These findings underscore the critical importance of maintaining open trade polices and stable international trade relations for global economic welfare. Dialogue and cooperation between the US and China are essential to navigate trade complexities and foster a more resilient and prosperous global economy.

This study investigated the effects of labor force participation on the physical and mental health of older adults, using the implementation of the provincial-level Regulations on the Protection of the Rights and Interests of the Olderly as an entry point and applying the control function method to address endogeneity. The results indicate that the labor force participation of older adults improved their physical health significantly but had no significant effect on mental health. The positive effect on physical health was stronger for women, urban residents, those with lower education levels, and those with health insurance. Labor force participation operated through income effects and health behavior channels but no evidence was found for a social support channel. These results suggest that removing institutional barriers and empowering older adults can help to address the challenges of an aging population and promote a healthier China.

This study investigated the impact of forward-looking information in local government work reports on investors' valuations of firms. Using local government work reports from China, it found that a positive tone in the forward-looking content increased the cumulative abnormal returns of local listed firms significantly. The effect was more pronounced in regions with greater economic policy uncertainty, particularly among private enterprises and firms whose executives lacked a government or public-sector background. Investors reacted more positively to forward-looking information in reports that provided additional incremental information. As the positivity of local governments' forward-looking tone increased, local listed firms received more government grants, faced lower tax rates, made greater long-term investments, and exhibited better future performance. Investors responded positively to content regarding economic topics such as the business environment and resource allocation but showed no reaction to content related to social welfare and public well-being. Additional analyses indicated that the tone effect was associated positively with local government procurement activity and was more pronounced in infrastructure industries.

Cross-regional tourism expenditure can stimulate market activity and meet the increasing demand for high-quality tourism experiences. Using UnionPay offline transaction data matched with flight route information from 2013 to 2018 in China, this study applied a difference-in-differences model to investigate the impact of direct flights on cross-city tourism expenditure. It found that, after the opening of new routes, the cross-city tourism expenditure between city pairs increased by approximately 3.2 percent. Direct flights also increased tourism expenditure on sightseeing, lodging, catering, and shopping, with the larger effects for city pairs separated by more than 400 km. Destinations with high-quality cultural and natural assets, such as national 5A-level tourist attractions, world cultural and natural heritage sites, and national tourist resorts, tended to experience increased tourist expenditure. Direct flights also produced spillover effects on expenditure in surrounding cities, which decreased with distance, and these effects occurred mainly in hub cities and origin nonhub cities. These findings have implications for urban growth policy.

Strengthening purchasing power, stimulating consumer confidence, and improving the structure and standards of consumption are essential for China's successful economic development. Human capital is linked to income, wealth, social status, and cognitive preferences, and plays a long-term role in consumption growth. This study explored the impact of human capital on conspicuous consumption in China, using a novel individual-level measure – the visibility index – to capture conspicuous consumption. Drawing on data from the China Family Panel Studies (2012–2020), a comprehensive human capital index was constructed by combining cognitive and noncognitive abilities through the entropy weight method. To address potential endogeneity, the historical distribution of Confucian temples and ancient academies was used as an instrumental variable for human capital. The empirical results show that improvements in human capital can significantly increase conspicuous consumption, particularly among middle-income groups, rural residents, and nonagricultural workers. A key contribution of the study is the clear identification of social status signaling as the primary mechanism linking human capital to conspicuous consumption. These findings offer new insights into consumption behavior and human capital development in China's increasingly complex and rapidly evolving socioeconomic landscape.

Dynamic efficiency is an important concept in the analysis of consumption, asset pricing, and fiscal policies. Using an illustrative overlapping generations model, this study shows that when the interest rate is lower than the growth rate, active fiscal policy can increase both consumption and efficiency. It provides an integrated analysis using different interest rate metrics, comparing the risk-free rate r_f, returns on assets r_e, and returns on capital r_k with the growth rate g. The findings indicate that, in general, r_f < g, g < r_e, and g < r_k. This condition suggests that fiscal policy can play a positive role in stimulating consumption. As the economy decelerates, the gap between r_f and g continues to narrow. A state-space model is also used to estimate China's natural interest rate r* and potential growth rate g*, showing that r* < g* and the gap between them has narrowed gradually over the past two decades.