A Bridge on Economic Issues between China and the World
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Firm-to-Firm Referrals
Jing Cai, Wei Lin, Adam Szeidl, Dec 25, 2024Referring suppliers to clients reshaped the supplier-client network and improved business performance.
Beyond the Fundamentals: How Media-Driven Narratives Influence Cross-Border Capital Flows
Isha Agarwal, Wentong Chen, Eswar Prasad, Apr 02, 2025We provide the first empirical evidence on how media-driven narratives influence cross-border institutional investment flows. Applying natural language processing techniques to 1.5 million newspaper articles, we document substantial cross-country variation in sentiment and risk indices constructed from domestic media narratives about China in 15 countries. These narratives significantly affect portfolio flows, even after controlling for macroeconomic and financial fundamentals. This impact is smaller for investors with greater familiarity or private information about China and larger during periods of heightened uncertainty. Political and environmental narratives are as influential as economic narratives. Investors react more sharply to negative narratives than positive ones.
Free Education's Impact on Schooling Outcomes: Direct Effects and Intra-household Spillovers
Naijia Guo, Shuangxin Wang, Junsen Zhang, Mar 05, 2025This study estimates the direct and spillover effects of a free education program on educational outcomes in rural China. We find that although the program encourages more eligible children to attend secondary school, it also leads to a decrease in high school enrollment among ineligible girls with eligible siblings, as they are more likely to choose work instead. In the long run, males exposed to free education have more years of schooling than their non-exposed counterparts. However, such effect is not found among females. This disparity suggests that a gender-neutral policy may have an asymmetric effect between males and females because of spillover effects through intra-household resource allocation.
E vs. G: Environmental Policy and Earnings Management in China
Darwin Choi, Feifei Lai, Mar 12, 2025We examine the conflict between environmental and governance issues arising from China’s automatic air pollutant monitoring system, introduced in 2012. Our findings suggest that polluting firms engage in downward earnings management to potentially minimize regulatory attention, with factors such as firm size, profitability, and market conditions influencing the extent of this behavior. This study highlights the unintended consequences of environmental policies.
Decoding China’s Industrial Policies
Hanming Fang, Ming Li, Guangli Lu, Jul 02, 2025Industrial policy is often discussed through high-level narratives and flagship initiatives, yet its implementation—particularly at the subnational level—remains opaque. We leverage large language models (LLMs) to systematically analyze over three million government documents from 2000 to 2022, extracting structured policy information to decode China’s industrial policy at various levels of government. Combining these newly constructed granular industrial policy data with micro-level firm data, we document four sets of facts on China’s industrial policies, including the economic and political rationality of the choice of the target sectors, the dynamics of the policy tools, the diffusion and similarity of policies, and the effects on firm entry and productivity.
