Zheng Michael Song

Department of Economics
Chinese University of Hong Kong
Shatin, N.T., Hong Kong

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NBER Working Papers and Publications

November 2016The Long Shadow of a Fiscal Expansion
with Chong-En Bai, Chang-Tai Hsieh: w22801
In 2009 and 2010, China undertook a 4 trillion Yuan fiscal stimulus, roughly equivalent to 12 percent of annual GDP. The "fiscal" stimulus was largely financed by off-balance sheet companies (local financing vehicles) that borrowed and spent on behalf of local governments. The off-balance sheet financial institutions continued to grow after the stimulus program ended at the end of 2010. After the end of the stimulus program, spending by these off-balance sheet companies accounted for roughly 10% of GDP each year, with an increasing share used for what are essentially private commercial projects. The off-balance spending by local governments is likely responsible for a 5 percentage-point increase in the aggregate investment rate and part of the 7 to 8 percentage-point decline in current...
January 2016Liquidity Regulation and Unintended Financial Transformation in China
with Kinda Cheryl Hachem: w21880
We trace the origins of China's rapidly developing shadow banking sector to the adoption of stricter liquidity rules by Chinese regulators in the late 2000s. Our analysis exploits cross-sectional diĀ¤erences in the bindingness of these rules along with time variation in product characteristics. We also discuss alternative hypotheses for the rise of shadow banking in China and explain why these hypotheses cannot account for the origins of the system.
March 2015Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China
with Chang-Tai Hsieh: w21006
Starting in the late 1990s, China undertook a dramatic transformation of the large number of firms under state control. Small state-owned firms were privatized or closed. Large state-owned firms were corporatized and merged into large industrial groups under the control of the Chinese state. The state also created many new and large firms. We use detailed firm-level data to show that from 1998 to 2007, (i) state-owned firms that were closed were smaller and had low labor and capital productivity; (ii) the labor productivity of state-owned firms converged to that of private firms; (iii) the capital productivity of state-owned firms remained significantly lower than that of private firms; and (iv) total factor productivity (TFP) growth of state-owned firms was faster than that of private fir...

Published: Chang-Tai Hsieh & Zheng (Michael) Song, 2016. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," Brookings Papers on Economic Activity, vol 2015(1), pages 295-366.

November 2012Comment on "The Governance of China's Finance"
in Capitalizing China, Joseph Fan and Randall Morck, editors
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