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When Cash Unlocks Mobility: China’s Shantytown Renovation Program and the Housing Markets
Zhiguo He, Zehao Liu, Xinle Pang, Yang Su, Kunru Zou, Jul 08, 2026The household finance literature typically ignores household migration decisions and how such decisions interact with financial conditions. We find that a relaxation of borrowing constraints can facilitate household migration to higher-tier cities where borrowing constraints are more binding than in cities of origin. Such endogenous location upgrading amplifies the increase in household housing expenditures following the relaxation of borrowing constraints, as well as intercity home price disparities.
Do Industrial Policies Improve Efficiency? Evidence From China's Credit Policies
Kaiji Chen, Yuxuan Huang, Xuewen Liu, Zhikun Lu, Yong Wang, Jul 14, 2026Are industrial policies distorting the economy, or correcting underlying distortions? Using Chinese firm-level data and a quantitative model, this article shows that preferential credit is directed toward high-markup (high-return) sectors, reallocating resources toward underfunded activities. While such policies weaken firm selection, they improve aggregate efficiency: removing them would nearly double productivity losses. The results suggest that, in a second-best environment, well-targeted industrial policies can enhance rather than reduce overall efficiency.
