NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Zhuo Chen

Tsinghua University
43 Chengfu Road
Beijing, 100083
China

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Tsinghua University

NBER Working Papers and Publications

November 2019Pledgeability and Asset Prices: Evidence from the Chinese Corporate Bond Markets
with Hui Chen, Zhiguo He, Jinyu Liu, Rengming Xie: w26520
We provide causal evidence for the value of asset pledgeability. Our empirical strategy is based on a unique feature of the Chinese corporate bond markets, where bonds with identical fundamentals are simultaneously traded on two segmented markets that feature different rules for repo transactions. We utilize a policy shock on December 8, 2014, which rendered a class of AA+ and AA bonds ineligible for repo on one of the two markets. By comparing how bond prices changed across markets and rating classes around this event, we estimate that an increase in the haircut from 0 to 100% would result in an increase in bond yields in the range of 40 to 83 bps. These estimates help us infer the magnitude of the shadow cost of capital in China.
July 2017The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes
with Zhiguo He, Chun Liu: w23598
China’s four-trillion-yuan stimulus package fueled by bank loans in 2009 has led to the rapid growth of shadow banking activities after 2012. Local governments financed the stimulus through bank loans in 2009, and resorted to non-bank debt financing after 2012 given the rollover pressure from bank debt coming due, a manifestation of the stimulus-loan-hangover effect. Cross-sectionally, provinces with greater bank loan growth in 2009 experienced more Municipal Corporate Bonds issuance during 2012-2015, together with more shadow banking activities including Entrusted loans and Wealth Management Products. We highlight the market forces behind the regulation changes on local government debt post 2012.
 
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