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Finance Leases: A Hidden Channel of China’s Shadow Banking System
Jinfan Zhang, Ting Yang, Yanping Shi, Nov 11, 2020We find that banks use their affiliated leasing firms to provide credit to constrained clients in order to circumvent the government’s targeted monetary tightening policy, which offsets the expected decline in traditional bank loans in overcapacity industries and hampers the effectiveness of the monetary policy. Although this regulatory arbitrage may cause systemic risk at the macro level, bank-affiliated leasing firms...
Price Discovery and Market Segmentation in China’s Credit Market
Zhe Geng, Jun Pan, Apr 08, 2020The recent unprecedented wave of bond defaults in China has captured the attention of investors worldwide. We document a severe segmentation between the pricing of state-owned enterprise (SOE) and non-SOE bonds that arises sharply post 2018. Using our default measure, we find that this market segmentation is not driven by the fundamentals of the firms. We also show that this market segmentation has also caused...
Data, Collateral, and Implications for the Credit Cycle
Leonardo Gambacorta, Yiping Huang, Zhenhua Li, Han Qiu, Dec 09, 2020The use of massive amounts of data by large technology firms (big techs) to assess firms’ creditworthiness could reduce the need for collateral in credit markets. Using a unique dataset of more than 2 million Chinese firms that received credit from both an important big tech firm (Ant Group) and traditional commercial banks, we find that a greater use of big tech...
Going Bankrupt in China
Bo Li, Jacopo Ponticelli, Aug 26, 2020We use a new case-level dataset to document a set of stylized facts on bankruptcy in China and study how the introduction of specialized courts across Chinese cities affected insolvency resolution and the local economy. We find that specialized courts hire better-trained judges and are 35% faster at dealing with bankruptcy cases than civil courts within the same city. We also find evidence that their introduction benefited the local economy by fostering firm entry, increasing average capital productivity, and favoring the reallocation of employment out of "zombie" firm–intensive sectors.
FDI and Firm Productivity in Host Countries: The Role of Financial Constraints
Wontae Han, Jian Wang, Xiao Wang, Mar 03, 2021Using the Chinese firm-level data, we find that FDI firms may have even lower cutoff productivity than local firms, although FDI firms are still, on average, more productive than their local counterparts. In addition, these findings are more pronounced in financially more vulnerable sectors. We argue that easy access to international financial markets by FDI firms has played an important role in driving our empirical findings...
