The Journal of World Economy 2022, No.12
International Multilateral Development Bank and Global Export Growth: Taking the Case of Joining AIIB
Wang Jianxin
Abstract：The emerging multilateral development banks, such as AIIB, have provided a new economic and trade governance tool focusing on market development for international development assistance. This paper uses the global trade data from 2010 to 2020, and takes 91 countries’ participation in AIIB as a quasi natural experiment. The research results of this paper find that: compared with other countries in the world and countries before joining AIIB, members who join the AIIB will export 3% more on the whole. After controlling the Belt and Road, the NDB, the ADB, the China Europe Train, political and diplomatic relations, overseas economic and trade cooperation zones, economic and trade agreements and COVID-19 and other interference factors as well as the placebo test, the conclusions of this study are still robust. Looking into the mechanism, we find that the AIIB has promoted the infrastructure investment of all members, especially the quantity and quality of infrastructure investment, which plays an important role as an intermediary channel in promoting the export of all members. The research in this paper proves that the establishment of AIIB has economically promoted the infrastructure construction, market connection and trade growth of all members.
Key words：AIIB, global trade growth, international development cooperation
JEL codes：F14; G21
Policy Coordination and Economic Growth: Evidence from Countries along the “One Belt, One Road” Initiative
Peng Hongfeng; Yu Jingwen
Abstract：The “One Belt, One Road”(OBOR) Initiative is a new development strategy for China to deepen opening-up and foster globalization. It has also become a constructive form of strategic planning to achieve structural change and economic transformation. Capital account liberalization is indispensable for cross-border trade and investment. This paper attempts to establish a new capital account openness index for countries along the OBOR routes; it adopts the generalized method of moments for dynamic panel data and uses the DID technique to analyze the economic effect of capital account openness from the perspective of policy coordination. The results of the study reveal that policy coordination is quite important for the growth effect of capital account openness. When the deregulation measures on capital inflow control adopted by countries along OBOR routes coordinate with those taken by China on capital outflow control, promoting deregulation of capital inflows can ultimately promote economic growth. The OBOR Initiative also promotes the deregulation of capital inflow control in countries along OBOR routes and deregulation of China’s capital account shows a policy spillover effect.
Key words：“One Belt, One Road” Initiative, capital account openness, policy coordination
JEL codes：F15; F21; F43
Whether the Opening of Retail Industry Can Reduce Consumer Prices
Shi Xiaojing; Li Xiaofan
Abstract：The expansion of service industry opening-up has become key to breaking new ground in the pursuit of comprehensive opening. As an important link between production and consumption, the retail sector in China has succeeded in enabling full access to foreign direct investment (FDI) at the early stage of WTO accession. Unlike previous literature that focuses on its impact from a production perspective, this paper uses micro-survey data to analyse the impact of foreign supermarket entry on local consumer prices from a consumer-side perspective with the help of the exogenous shock generated from the gradual opening of FDI in the retail sector. The results indicate that the entry of foreign supermarkets can significantly reduce local food prices and all income hierarchy groups can benefit. In addition, the eastern region, which offers better conditions for trade and has a more intensive entry of foreign supermarkets, is more affected. The study also reveals that the entry of foreign supermarkets can increase the variety of imported goods and reduce the price of their retail category. Finally, a novel method is drawn on to measure the changes generated in overall consumer prices in different regions, and it is found that the entry of foreign supermarkets allows for the effective reduction of the local overall consumer price index.
Key words：retail industry, consumer price, foreign direct investment, circulation
JEL codes：F23; L81; D12
Research on the Monopoly Mechanism of “Either-or Choice” Strategic Behavior of Internet Platform
Cai Zuguo; Li Shijie
Abstract：This paper presents a model for the ranking of sellers in the platform and examines the impact of the “Either-or Choice” strategic behavior of Internet platform firm on the market competition. Then we explore the implementation mechanism of Internet platform implanting the “Either-or Choice” agreement into the market on the platform with the assistance of internal and external platform design. Moreover, the welfare effect of the “Either-or Choice” strategic behavior is analyzed. The empirical analysis is conducted with the industrial practice data from a large domestic e-commerce platform. The research finding is that the Internet platform identifies sellers who efficiently capture consumers’ attention with the help of internal and external platform design. Then the Internet platform requires them to sign the “Either-or Choice” agreement to control the multi-homing behavior of sellers and prevent them from leaving the platform. Internet platform has incentives to control the sellers above the waist, especially top- rate sellers. Furthermore, the platform internal design pushes the “Either-or Choice” decision of Internet platform companies, while the platform external design pushes the “Either-or Choice” decision by endogenously influencing the platform internal design.
Key words：Internet platform companies, “Either-or Choice” strategic behavior, platform design
JEL codes：L20; L41; M21
How Does Finance Support Entrepreneurship: A Natural Experiment Based on the Establishment of City Commercial Banks
Chen Yongbing；Chen Yongan；Wang Beibei
Abstract：The promotion of financial support for the development of the real economy has become a key policy to guarantee market players and stabilise basic economic conditions. This paper is based on a study of the causal relationship between the local financial market development and entrepreneurship using the establishment of city commercial banks (CCBs) between 1994 and 2011. The results derived from it indicate that regions that established CCBs experienced a greater increase in entrepreneurship relative to other regions, attributable to the easing of regional financing constraints. As a result, potential mechanisms are investigated, providing empirical support for the information asymmetry mitigation mechanism between banks and enterprises, driven by the comparative advantages of CCB local information. This mechanism highlights the heterogeneous effects between local and national banking institutions and underlines the importance of benefiting from comparative advantages among banking institutions and optimising the structure of the national financial system to support the development of the real economy.
Key words：city commercial banks (CCBs), entrepreneurship, financing constraints, information asymmetry, comparative advantage
JEL codes：D23; G21; M13; O16; R11
Regional Tax Preferential Policies, Corporate Cross-Regional Development and Tax Avoidance
Ma Guangrong; Cheng Xiaomeng
Abstract：Drawing on regional corporate income tax preferential policies, this paper studies the impact that differences in corporate income tax rates between cities exert on corporate cross-regional development by using listed companies’ investment data from between 2006 and 2018. The study’s findings reveal the following. (i) The direction of corporate cross-regional development is from high to low tax-rate cities, and the number of established subsidiaries grows with the tax difference between cities. (ii) The registration of subsidiaries in “tax havens”is for both real investment and tax avoidance. The greater the difference in tax rates between the cities where the parent and subsidiary companies are located, the greater the scale of the transactions of the interfering related parties. This shows that regional tax preferential policies promote corporate cross-regional development, but also lead to more tax avoidance activities. (iii) The initial agglomeration economy is an important factor affecting the ways in which tax preferential policies promote real investment. The real investment scale is greater in cities with a higher level of agglomeration economy. However, the scale of corporate tax avoidance activities is irrelevant to the initial agglomeration economy. The conclusions of this paper indicate that when formulating regional tax preferential policies, the government should consider the different levels of initial agglomeration economy between regions and, at the same time, it should prevent companies from using cross-regional development to conduct tax avoidance activities, thus guiding the flow of capital in a reasonable manner.
Key words：regional tax preferential policies, cross-regional development, agglomeration economy, corporate tax avoidance
JEL codes：G31; H23; R12
Combined Collection, Information Acquisition and Corporate Tax Burden: Evidence from China
Tian Binbin; Yu Baixue; Ye Jingjing
Abstract：Theoretically, combined tax collection can effectively bring the cross-checking mechanism of information into play and increase access to tax-related information, leading to efficiency in tax collection. Drawing on micro-enterprise data of the National Taxation Survey from 2008 to 2011, this paper examines the above logic using empirical analysis. The research findings reveal that after combining the scope of tax collection and administration, the effective tax rate of the business tax in the companies of the treatment group increases on average by about 10% compared to the companies of the control group. At the same time, since the logic of combined collection and administration mainly lies in greater access to tax-related information through cross-checking, it is found that the above effect is more pronounced in industries with a high degree of information asymmetry, and in companies where corporate income tax is levied through auditing. The above findings exclude the competing logic of strategic tax collection by the tax authority, and mechanistic evidence is found that the combination of tax collection and administration reduces the turnover of companies that enjoy tax preferences and increases the corporate tax to be reimbursed. This paper provides useful insights on future reforms of the tax collection system.
Key words：combined collection, information, cross-checking, effective tax rate
JEL codes：H71; H77
The Pricing Effect of Default-Involved Credit Rating Agencies
Gao Haoyu; Ouyang Yiling; Li Ni
Abstract：This paper empirically analyses how a credit event affects the initial credit spreads of bonds subsequently rated by the same CRA using a sample of all credit bonds issued between 2016 and 2020. The study shows that, all else being equal, bond investors require a higher risk premium from newly- issued bonds rated by default-involved CRAs and this risk premium, which comes from punishing CRAs for reputation loss, is relatively lower for more reputable CRAs. The channel analysis indicates that highly reputable CRAs exercise their accountability by closely observing the different credit fundamentals of bond issuers, promptly reviewing their ratings to make early warnings and reducing unexpected defaults. The hypotheses of rating shopping and rating catering are also distinguished and excluded, and it is demonstrated that the risk premium is unrelated to the matching between issuers of risky bonds with weak ratings and default-involved CRAs. CRAs do not adopt more lenient rating strategies to cater to issuers after their reputation is damaged, further supporting the rationale of maintaining reputation. This study has implications for understanding credit risk spillover, and preventing and defusing systemic financial risks.
Key words：bond defaults, credit rating agencies (CRAs), financing costs, reputation rationale
JEL codes：G12; G14; D83
Debt Default, Territorial Credit and Risk Spillover
Wang Weitong; Xin Ge; Zhou Jiayin
Abstract：Rigid payment breaking is an important measure for a country to prevent large risks, but it also causes a substantial debt default and has an impact on the bond market. This paper uses the difference-in-differences identification strategy to study the risk spillover effects of local state-owned enterprise (SOE) debt default events in the context of rigid payment breaking in China. The empirical study finds that a debt default event of local SOEs leads to a significant increase in the interest rate of new bonds issued by other SOEs in the same territory and a significant reduction in the total debt financing scale of local SOEs in the same territory. However, this spillover effect materialises more in the short- term. The above risk spillover effect is more likely to occur in regions with low credit. At the same time, the local SOE credit bond market below the provincial level and the urban investment bond market will also be affected. This paper provides micro-evidence on the logic of systemic risk formation in bond market and suggestions for better risk prevention.
Key words：rigid payment breaking, debt default, territorial credit, systemic risk, risk spillover
JEL codes：E43; H63; H81