The Journal of World Economy 2023, No.4
Beggar-Thy-Neighbour Effects of Competitors’ Exchange Rates on Export Product Quality
Li Baoxia; Zhang Hui; Wang Sheng; Zhang Yunxiao
Abstract：This paper theoretically and empirically identifies the influence channel of exchange rates on the quality of export products in a multinational environment and discusses the trade spillover effects of RMB exchange rates from an international comparison perspective. The results of the study reveal that competitors’ exchange rates (CERs) generate beggar-thy-neighbour effects on product quality that are not lower than those of bilateral exchange rates. The quality of import intermediate products and competitors’ products are the two key factors affecting CERs. Manufacturers of differentiated products, high-quality products and products from monopolised industries and advanced countries are relatively resistant to the shock of CERs. Product quality adjusts more when competitors’ currencies appreciate, suggesting a “ratchet effect”. Compared to other special drawing rights (SDR) currencies, the beggar-thy-neighbour effects of RMB depreciation are at a low level from the perspective of product quality, price and trade value. The conclusion of this paper provides a useful reference for exporters on how to cope with multinational exchange rate risks and maintain the international reputation of RMB exchange rates.
Key words：third-country exchange rates, beggar-thy-neighbour effects, competitor product quality, quality of import intermediate products
JEL codes：F14; F41; F31
Deepening Free Trade Agreements, Digital Trade Rules and Digital Trade Development
Yang Lianxing; Wang Qiushuo; Zhang Xiumin
Abstract：Based on the above important factual background, this paper breaks through the assumption of a homogenous FTA and constructs a three-dimensional FTA-deepening digital trade heterogeneity indicator system from the perspective of horizontal and vertical depth. The paper finds that both static and dynamic horizontal and vertical deepening of the FTA have significant positive effects on digital trade. The promoting effects of the core WTO-X depth provisions and the depth provisions of the measures behind the border are particularly significant, while the “third-country effect” of the FTA deepening has a significant inhibitory effect on digital trade. In terms of heterogeneity impact, the FTA’s types of deepening areas, digital trade provisions and digital trade products, etc. present significantly differentiated impacts on digital trade. The provisions on e-commerce and data flow have a strong deepening promotional effect, but the deepening of the provisions on intellectual property rights presents a certain inhibitory effect. The FTAs on political nature, economic integration and R&D cooperation have stronger positive effects on digital trade, and deepening of the FTAs has a stronger promoting effect on exports of computers and peripherals, followed by the promoting effect on exports of communications equipment. Based on global sample estimates, this paper explores the “Chinese model” of deepening FTA digital trade rules with the RCEP and CPTPP sample, and promotes China’s initiative of formulating a new round of global digital trade rules.
Key words：vertical deepening, provision heterogeneity, digital trade, free trade agreement
JEL codes：L41; D31
Inflation Expectations and Information Rigidity: An Analysis from the Media News Perspective
Zheng Tingguo; Fan Xinyue; Jin Wei; Fang Kuangnan
Abstract：Using nearly one million news articles from major national financial and economic newspapers, this paper constructs a large corpus of Chinese news and employs the latent Dirichlet allocation (LDA) model to transform news texts into structured high-dimensional news thematic attention time series to study the role of media news in driving inflation expectations. To this end, this paper uses the LASSO and LASSO-UMIDAS models to identify news topics that have a significant impact on inflation expectations, and it estimates the time-varying information rigidity based on the noise information model. By jointly modelling the information rigidity with the duration and signal-to-noise ratio of media coverage, an in-depth discussion is developed about the influence mechanism of media news. According to the results, media information will have both numerical and speed-driving effects on inflation expectations. In terms of numerical driving, some important news information, such as economic growth, price fluctuation, national news and financial credit, play a significant role in shaping inflation expectations. In terms of speed driving, the media coverage duration and signal-to-noise ratio have a significant positive impact on the information rigidity, thereby affecting the adjustment speed of inflation expectations.
Key words：inflation expectations, information rigidity, numerical driving, speed driving, media coverage
JEL codes：E17; E31
A Study on the Income Distribution Effect of China’s Antitrust Regulation
Song Yanqun; Li Kunwang; Hu Haoran
Abstract：Antitrust regulation is an important way to promote fair competition in the market and improve economic operational efficiency, which can effectively enhance the income distribution status in the market. This paper constructs a monopoly theoretical model and introduces the assumption of monopoly power and government regulation. The theoretical derivation and numerical simulation results indicate that the average wage of employees in enterprises with high market power is higher than that in enterprises with low market power. Antitrust regulation can reduce the degree of monopoly in industry, increase the productivity, profit margin and wage level of enterprises with low market power, and reduce wage, productivity and profit gaps between enterprises with low and high market power. Antitrust regulation also plays a significant role in reducing the wage gap between enterprises in monopoly industries. Drawing on the quasi-natural experiment of the implementation of the anti-monopoly law in China in 2008 and using the difference-in-differences (DID) method, this paper finds that antitrust regulation significantly reduces the wage gap between enterprises in the industry. From a heterogeneity perspective, antitrust regulation mainly narrows the wage gap between enterprises in non-natural monopoly industries, eastern regions, private enterprises and key regulated industries. From a mechanism perspective, antitrust regulation reduces productivity and profit gaps between enterprises in the industry, and subsequently narrows the wage gap. The conclusion of this paper provides a useful reference on how to use antitrust regulation in the context of market-oriented reform to promote rational income distribution.
Key words：antitrust regulation, market power, wage gap, productivity gap, profit gap
JEL codes：L41; D31
Effect of Logistics Infrastructure on Increasing Rural Household Income
Yuan Cheng; Li Jidong; Wei Yi
Abstract：A well-functioning rural logistics system is an important guarantee for promoting domestic circulation, rural revitalization, and increasing rural household income. Using the 2013-2019 China Household Finance Survey data (CHFS), logistics network POI data, and county-level socio-economic information, this study estimates the impact of logistics infrastructure on rural household income. The findings indicate that improving logistics infrastructure can significantly increase rural household income. At the county level, the elasticity of logistics sites on household income is about 8.43%; and at village level, the elasticity is around 11.72%-12.48%. The effect is more pronounced as distances between families and logistics sites decrease. The results are robust to instrumental variable estimation and difference-in-differences (DID) design. The heterogeneity analysis reveals that for the rural households residing in areas far from central city, with high slopes and elevations, and low levels of agricultural mechanization, the effect of increasing income is greater. The mechanism analysis shows that logistics infrastructure promotes rural household income mainly by reducing agricultural costs, changing planting choices, expanding employment opportunity, and attracting labors to hometowns. This study has important policy implications for poverty alleviation and the dual-circulation policy formulation.
Key words：logistics infrastructure, e-commerce, rural household income, logistics POI data, China Household Finance Survey (CHFS)
JEL codes：Q12; O12; H41
Bank Fintech and Corporate Financialization: Based on Risk Aversion and Profit-Seeking Motive
Li Zhen; Li Maolin; Zhu Linran
Abstract：By identifying fintech patents of Chinese commercial banks from 2010 to 2020, this paper combined it with loan information of A-share listed companies to investigate the influence of bank fintech on corporate financialization. It is found that the development of bank fintech can effectively reduce the level of corporate financialization. This conclusion is still valid after excluding the influence of the “selection effect” and the omitted variable bias. Bank fintech not only effectively weakens enterprises’ risk aversion motivation by promoting bank credit expansion and reducing mortgage loan dependence, but also helps to reduce corporate shadow banking business and narrow the spread between real and financial investment to weaken enterprises’ profit-seeking motivation. Further research shows that bank fintech plays a role in the corporate financialization mainly through the underlying technologies of digital technology patents, and mainly affects the long-term financial asset allocation of enterprises. However, the fintech development of banks has a more obvious effect on samples with a higher degree of digital transformation, non-state-owned enterprises and non-manufacturing enterprises. And it is conducive to guiding the financial capital return to innovation fields of the real economy.
Key words：bank fintech,the financialization of enterprises,risk aversion,profit-seeking
JEL codes：G21; G30; E58
Population Ageing and Firm Entry: A Study Based on China’s Prefecture-Level Cities
Feng Jin; Li Yuting
Abstract：Firm entry is a non-negligible driver of economic growth. Based on China’s industrial and commercial registration data, population data from census and sample surveys, and city-level data, this paper examines the impact of population ageing on firm entry and its mechanism. The results of the study reveal that, all things being equal, an increase of one percentage point in the proportion of the population over 65 years of age reduces the number of firm entries by approximately 3%. This negative effect is mainly due to the decrease in the entry of labor-intensive firms, high-tech firms and some firms in the service sector. Therefore, the impact mechanism is examined in terms of labor supply, human capital level and local market demand. The negative effect of population ageing on firm entry is more significant in low- administrative-level cities, non-resource-based cities, and cities with fragile initial economic development conditions. It is concluded that there are significant differences in the capacity of different types of cities to cope with the effects of population ageing, and therefore support policies are needed at the central level for the most vulnerable and disadvantaged cities.
Key words：population ageing, firm entry, local economic growth
JEL codes：D21; J14; R23
Business Group, Short-Term Financing and Long-Term Investment and Business Risk
Cai Weixing; Pu Yuqi; Xia Ting; Wei Qingfang
Abstract：Accounting for the behaviour of short-term financing and long-term investment (SFLI) and based on the internal capital market and the illusion of “too big to fail”, this paper constructs a basic analysis framework and performs an empirical test by drawing on the data of listed companies from 2003 to 2019. The results of the study indicate the following. First, business groups have a significant positive impact on SFLI. Policy-driven instrumental variable regression and event studies based on the status change of business groups provide further evidence of the causal effect of business groups on SFLI. Second, the influence of business groups on SFLI is significantly heterogeneous. At the group level, the greater the expansion scale, the bigger the impact of business groups on SFLI. At the level of member companies, this impact is most significant in large companies, companies with a high level of financing constraints and companies with a low level of governance. Finally, the paper further discusses business risk, noting that the illusion of “too big to fail” may come from only noting short-term risk reduction and ignoring the long- term risk accumulation, and SFLI presents a significant contagion effect within the business group.
Key words：business group, short-term financing and long-term investment (SFLI), too big to fail
JEL codes：G14; G31; O32
Mergers and Acquisitions, Resource Reallocation and the Growth of Target Firms
Chen Aizhen; Zhang Pengfei
Abstract：Mergers and acquisitions (M&As) of Chinese firms are becoming increasingly active, but the effect of resource reallocation has been questioned due to the exposure of many failed cases. Few studies have paid attention to the fact that M&A performance is mainly affected by the development of target firms after being acquired. Therefore, this paper uses data on Chinese industrial firms from 2000 to 2013 to investigate the growth of target firms and the resource reallocation effect after being acquired. The study finds that after the acquisition, the investment of target firms increases while their efficiency decreases, leading to a setback in firm growth. The investment of large target firms is reduced, while their efficiency increases, resulting in a more positive efficiency effect in resource reallocation than the negative quantitative effect of reducing investment in resources, thus promoting firm growth. On the other hand, the investment of small target firms increases while their efficiency decreases, leading to a greater negative efficiency effect in resource reallocation than the positive quantitative effect of increasing investment in resources, thus inhibiting firm growth. The paper also discusses the practical space for M&As to promote the transformation of large firms and the development of the “specialisation and innovation” of small and medium-sized enterprises, providing theoretical support and a new perspective to explore how to reallocate resources to promote supply-side structural reform.
Key words：mergers and acquisitions (M&As), effect of resource reallocation, growth of target firms, firm size
JEL codes：D61; G34; L16