Summary： Having maintained dramatic economic growth over more than 30 years, China has become the second largest economy in the world and the largest manufacturer. This achievement has been called “the China Miracle”.
In contrast to the Washington Consensus, China has developed its own approach, the Beijing Consensus, following the basic principles of the political economy of socialism with Chinese characteristics, which is totally different from the capitalist development path of western countries. The history of this approach provides basic principles and key factors for the construction of a theoretical system of socialism with Chinese characteristics, including the insistence on a basic economic system that is socialist in nature, taking economic development as the central task to promote productivity, and following the socialist market economy system by letting the market play a decisive role in resource allocation, not by only increasing overall wealth but also by ensuring socialist fairness and justice.
To avoid the “middle-income trap”, China must achieve the following: maintain a moderately high economic growth rate, increase the proportion of high-end industries, accelerate technology innovation and achieve a high technology growth rate, increase the quality of economic growth, and work toward a fair social allocation system that increases overall wealth.
China requires new concepts, ideologies, and strategies to construct the framework of a new economic theoretical system of socialism with Chinese characteristics. Achieving this will mean adhering to the new concept of development that encompasses innovation, balance, openness, environment protection, and sharing. Specifically, it will include a comprehensive understanding of the target, speed, and impetus of development to maintain a medium-to-high rate of economic growth, an overall understanding of economic transition to promote industrial upgrading, a full-scale annotation of the independent innovation theories of developing countries to achieve technological innovation, a complete blueprint for the development path, resources and institutions to improve development quality, and a balanced consideration of the development goal to achieve fair distribution.
The economic theory system of socialism with Chinese characteristics is a new system that inherits and develops Marxist political economic theory and not only contains but is also superior to all other economic theories. In this sense, it is a creative theory that can guide the entire process of China's industrialization, urbanization, and modernization, and absorb the merits of all other economic theories.
Key Words： The Economic Theory System of Socialism with Chinese Characters; New Practice; New Theory; New System; Theoretical Value

Summary： Conventional wisdom argues that a well-functioning financial system is a key element of economic growth, and that most countries that achieve rapid economic growth are equipped with developed capital markets. However, China has achieved tremendous economic growth and great export growth despite an extremely underdeveloped financial market. Previous studies find that relying on informal finance such as money borrowed from family members, relatives, or friends has been a key means of financing in China's economic growth. However, most people were in poor areas at the early stage of China's economic reform and had limited available funds. Another form of informal finance is trade credit, especially that provided by suppliers within the same cluster. Trade credit between Chinese firms is prominent, and China's economic growth is typically characterized by cluster-based industrialization, especially in the eastern areas of China, where the rise of clusters had led to rapid economic growth. However, little research has focused on the role that trade credit plays in the expansion of firm exports as a substitute for formal finance, and especially how it affects firm entry and export growth, both of which are key to understanding China's dramatic export expansion.
This paper investigates the effect of clustering trade credit on firm exports using Annual Survey of Industrial Production data for Chinese firms from 1999 to 2007, taking a county as a cluster. We test whether clustering trade credit has an effect on firm exports by alleviating firms' financial constraints, and explore two possible mechanisms: the effect on firm entry and the effect on export levels. We find that total trade credit, as a substitute for formal financing, significantly promotes the export value of firms, which is consistent with the results of the mainstream literature. A series of robustness checks confirms the basic results. We further incorporate an agglomeration factor for clusters to control for omitted variable problems. To address the identification issue arising from the potential endogeneity of clustering trade credit, we construct a quasi-natural experiment using changes in firm location and estimate the regression using the difference in differences (DID) method. The results remain qualitatively robust. We then analyze the dynamic effect of cluster-based trade credit on firm entry and find that cluster-based trade credit improves the probability of non-exporters becoming exporters. Placebo tests show that cluster-based trade credit has no effect on processing exports. We make two contributions to the current literature. First, we find that by alleviating firms' financial constraints, clustering trade credit affects not only export levels, but also the entry decision of non-exporters. Second, we confirm that trade credit has different effects on different types of firms, specifically private enterprises (PEs), state owned enterprises (SOEs), and foreign-invested enterprises (FIEs). Clustering trade credit mainly affects private firms' exports, but has little or insignificant effect on the exports of SOEs and FIEs.
The connections and commerce between firms within a cluster makes financing using trade credit a widespread substitute for formal financing, and clustering trade credit substantially increases firms' export performance. This finding explains why China has achieved great export expansion despite the lack of a developed financial system, and why private firms in China have achieved rapid export growth despite having almost no access to formal financing since China's market-oriented reform compared with SOEs and FIEs.
It is of vital policy importance to explore the export expansion patterns of BRICS countries, whose development is similar to that of China, and those of the Four Asian Tigers, whose development has been greater than that of China. Important questions about the similarity between the export patterns of China and those countries, sustainability, and the generalization of China's export expansion merit further discussion.
Key Words： Trade Credit; Cluster; Financing Constraints; Firm Export; DID

Summary： China's overseas M&As have often aroused wide concern or have even been restricted or boycotted in the host countries. The underlying reason for this concern is the idea that China's M&As may be driven by factors that differ from those of market economies. However, is there really a China model in cross-border M&As? Based on the classical framework for the motivations of developed countries, this study applies the two-stage gravity model to empirically analyze the motivations of the location strategies and investment volume decisions of Chinese overseas M&As from 1985 to 2012.Our general findings are that Chinese M&As reveal market-seeking and ore and metal resource-seeking motives, with the strategic-asset-seeking motive became more pronounced in the post-WTO period. Chinese acquirers lack political and economic risk consideration in location strategies and even show risk-loving patterns in volume decisions. Moreover, they pay close attention to transaction costs and tend to enter host countries with low levels of corruption. Finally, bilateral investment treaties have no significant effect on China's M&As. In general, however, these patterns are not specific to China.
The contributions of this paper are as follows. First, we systematically and comprehensively examine the motivations of Chinese cross-border M&As, which we argue are worthy of separate examination because green field investment and cross-border M&As are two different forms of investment and the latter may be more important for Chinese enterprises' lack of ownership advantages. To the best of our knowledge, this paper is the first study to focus on the patterns of Chinese overseas M&As. Second, we use the two-stage gravity model to examine the extensive margin and the intensive margin of M&As separately under the same theoretical framework, which solves the problem of sample selection bias. Third, the dataset is derived from the Thomson Financial SDC Platinum Database, which contains the most detailed records of global M&A transactions. Thus, we avoid the flaws in research conclusions drawn from small-sample methods such as case studies by using the world's most authoritative and widely used M&A data source.
Our findings have practical significance for addressing the various obstacles encountered in the process of Chinese overseas M&As. As with the case of developed countries, this paper shows that the Chinese M&As are also motivated by the markets, natural resources, strategic assets, and institutions of the host countries. Although the specific effects are not necessarily the same, the inconsistency is mostly due to the particular stage and the “world factory” status of the Chinese economy. In addition, the findings of this paper have policy significance for overseas M&As practice. For instance, we show that Chinese acquirers lack long-term horizons, as strict and logical econometric analysis indicates that they show risk-loving behavior in their overseas M&As. Therefore, corporate governance at the firm level needs to be strengthened, and the rational design of incentive and restraint mechanisms should be implemented.
This paper explores the motivation of China's overseas M&As from the perspective of the extensive margin and the intensive margin on a macro level, which has universal significance for emerging countries. Further in-depth research could be developed at the micro level using more detailed firm-level data. For instance, whether the motivations of overseas M&As for enterprises under different value chains (R&D, manufacture, marketing and sales) have systematic differences and the underlying reasons for the “risk-seeking” characteristic of China's overseas M&As can be taken into account in future studies.
Key Words： Overseas M&As; Motivation Analysis; Extensive Margin; Intensive Margin

Summary： Since the 1990s, the size and structure of Chinese exports have undergone great changes. According to the traditional trade statistics, the ratio of Chinese high-tech exports has continuously risen, and the technological upgrading of export products has been significant. China's level of export sophistication is higher than its corresponding income level(Rodrik, 2006); this is considered evidence supporting the so-called “China threat theory”. Have Chinese export products truly undergone these technological upgrades? Is the claim of the “China threat” to technology valid? To answer these questions, we must adopt a more scientific method to measure the technology content.
With the further development of global value chains, a country's export products are manufactured by the use of foreign intermediate inputs, while the technological content of export products does not completely come from the export country. A scientific method by which to calculate the technological content of exports would not rely on the product in the traditional method, but on the production process(Lall et al., 2006). The traditional methods of classification based on factor intensities and export sophistication may produce large errors, as they cannot calculate the real change of exportation technical content and structure. This paper therefore proposes a new method based on the production process, as follows: in the Input-Output Tables (IOTs), a product's input-output relationship can show the economic and technical characteristics of the final process of the product—that is, the final production process of the factors of production (capital and labor) and the intermediate inputs. Thus, the technological content of a product is likely to be the combination of the technological content of the final production process and the intermediate inputs. This paper adopts a calculation method similar to the principle of the trade in value-added, embodied elements, and carbon emissions (Johnson and Noguera, 2012; Koopman et al., 2014).
Through an empirical study based on the World Input-Output Database (WIOD) we generate the following results. First, since 1995, the technological level of China's exports has been upgraded and optimized. The overall technological content, domestic technological content, and the index of domestic technological content of the overall exports or the individual sector's exports have risen since 1995. The index of the domestic technological content of China's exports increased from 0.26 in 1995 to 0.55 in 2011, converging to the world average level. Second, the technological content of China's export products is extremely low and locked at the low end compared with developed countries such as the USA and Japan. Thus, it is difficult for China to engage in strong competition with these developed countries.
We contribute to the literature by measuring for the first time the technological content of products from the perspective of the production process. Second, we measure the technological content of products from the perspective of the global input-output model. Third, the heterogeneity of the technological content of export products in various countries is considered. Future studies might improve upon this paper in the following ways. First, because of data availability, the global IOTs used only include 40 countries and 26 sectors per country. More IOTs including more countries and sectors would be helpful in understanding the technological upgrading of export products. Second, it was impossible to measure TFP or other indicators in this paper; thus, the indicator of the technological content of the production processes in this paper, labor productivity, could be replaced by total factor productivity (TFP) or other indicators.
Key Words： Domestic Technological Content; Global Value Chains; Product Sophistication; World Input-Output Table

Summary： This paper investigates a lesser known effect of importing on firm performance:how a firm's import switching affects its factor intensity. Our analysis uses a large panel data set of China's manufacturing firms from2000 to 2006.We find that the average capital intensity of importers is significantly higher than that of non-importers.We also observed that most Chinese importers frequently experience product switching,which is defined as a new “extensive” margin of firm adjustment and reassignment of resources in Bernard et al. (2010, 2011).More importantly, our initial investigation shows that firms with import switching also have higher capital densities than firms without.
What accounts for the increases in firms' capital intensity and the heterogeneous outcome sacross importers? To answer the question, we construct a model with heterogeneity of productivity both in firms and intermediate inputs as in Halpern et al. (2011).In this model, a firm's profitability depends on both its own productivity and the factor intensity of the intermediate inputs.Our model focuses on product switching as a driver of the observed change in firm factor intensity, which yields three main findings that are helpful in understanding importers' higher capital intensity.First,it reflects how firms make decisions on import switching according to their production efficiency and the comparative productivity advantage of intermediate inputs, which is related to capital intensity. High-productivity firms are more likely to experience product churning. Second,the factor density of imported varieties can affect firms' import gains, which results in product switching. Imports of high capital intensity products would bring larger gains.Third, the model reveals the improving effect of import switching on firms' factor endowment structures.Firms that have a huge increase in their capital-labor ratios replace low capital intensity intermediate inputs with high capital intensity imported varieties after product switching.Our findings provide a new angle for interpreting the relationship among importing, product switching, and firms' capital intensity.Moreover, our work shows that the classic H-O forces operate at the firm level and that product switching is a channel through which trade can affect the factor endowment of microenterprises.
To provide further evidence of product churning's effect on firms' factor intensity after importing, we use transaction-level trade data merged with manufacturing firm data.Following Lall (2000), we classify imported intermediate inputs by factor density according to the SITC 3-digit product code to investigate whether firms' product switching patterns are consistent with the model prediction that firms add varieties with high factor density and capital-intensive intermediate input products through importing. We find that over the 2000-2006 period, some importers in China added products that were more capital-intensive than their existing products and dropped those that were less capital-intensive in the year of importing.
Our empirical work shows that imports of intermediate inputs increase firms' capital density by about 40% and product switching by about 26%.This increases capital density through the dual margin, but the extensive margin has a larger role than the intensive margin. To tackle the potential estimation bias due to sample selection, we use the PSM method to compare importers and non-importers with similar ex-ante characteristics.We find that importers experienced a significant increase in capital intensity relative to non-importers,and the results are robust. Given the reality of China's trade development,our findings indicate that by further trade liberalization and facilitation, the external policy constraints that restrict firm import intermediate inputs and product switching can be reduced, which will help to improve firms' factor endowment structures and the production and trade structure of the whole economy and will eventually drive China's trade transformation.
Key Words： Importing; Intermediate Inputs; Product Switching; Factor Intensity

Summary： China has entered the so-called “economic new normal” with increasing pressure from the economic downturn since 2014. To create a new driving force for growth, the Chinese Central Government implemented the “supply-side structural reform” in November 2015, which Chinese President Xi Jinping hoped would improve social productivity and total factor productivity (TFP).
As one of China's most important macro policies, improving TFP through supply-side structural reform has its theoretical foundation in both growth theory and development economics. At the micro level, TFP represents the input-output efficiency of a firm. It can be improved through the overall technological progress of a whole industry or through firms' movements toward the frontier. These are technical effects. At the macro level, TFP can be improved by the reallocation of resources and factors into industries with higher input-output efficiency. This is a structural effect. If these two effects can be measured properly, they could provide more information on industrial technical change, the inter-industry flow of factors, and allocation efficiency for policy making by government agencies.
To measure the technical and structural effects, the growth accounting method, the Divisia Index, the decomposition model of Massell (1961), and the shift-share method are integrated into a modeling framework. The macro and sector data for 17 industries are applied to measure the sources of China's growth, particularly the technical and structural effects. The decomposed results show the following. (1) Due to its latecomer advantage, China experienced high-quality growth during 1978-2014.More than one-third of the contribution resulted from the general improvement of technological change, a technical effect. (2) With the narrowing of the technological gap between China and developed economies, the contribution of technical effects declined rapidly after 2005, while the contribution of structural effects has continuously improved, supporting fairly high TFP growth. This trend is particularly prominent in the secondary and tertiary industries because of the acceleration of industrialization and urbanization. (3) After the global financial crisis, China's resource allocation showed a tendency toward “reverse technological progress”. Areas of overcapacity such as iron and steel and cement and the financial and insurance and real estate industries have been stagnating and even retrogressing technically but have accumulated a greater proportion of factors. The factor-driven aspect increased until 2014. The growth of TFP at the macro and sector levels is important for China to maintain rapid high-quality growth. In the short term, it is feasible to induce factors and resources to enter the sub-sectors of higher technical and efficiency levels and to exert a structural effect. In the medium and long term, emphasis should be put on implementing innovation-driven development strategies.
This paper constructs a model framework to extend the decomposition of productivity from the traditional labor productivity to TFP. The decomposition of macro TFP into technical effects and structural effects provides a theoretical foundation for China's supply-side structural reform. The empirical study confirms that the growth quality of China since the global financial crisis is less than satisfactory. The results have strong implications for policy makers.
Key Words： Total Factor Productivity (TFP); Technical Effect; Structural Effect; Growth Accounting

Summary： Overcapacity, local government debt, and the real estate bubble are three major threats to the Chinese economy. The chronic problem of overcapacity has plagued the Chinese economy for many years and has been the focus of macro control. The literature on this topic emphasizes the causes rather than the measurement of overcapacity; and the methods used (investigation method, trend-through-peak method, production function method, and data envelopment analysis method) are static; they overlook the inter temporal decision procedure of firms. We argue that overcapacity is a byproduct of firms' market decision and that it is necessary to incorporate firms' multi-stage input-output procedure into the model to measure overcapacity in China. We thus extend the DSBM model proposed by Tone & Tsutsui (2010) and use inventory as a carry-over activity to re-estimate provincial industrial capacity utilization in China. Our sample covers 30 Chinese provinces and municipalities in 2001-2011, and the input and output data are from China Industry Economy Statistical Yearbooks.
Our major findings are as follows. (1)There is a significant difference between the static DEA method and the dynamic DEA method in measuring capacity utilization. The static method tends to underestimate capacity utilization and overestimate the excess capacity and the excess volatility of capacity utilization. The results of the dynamic method show that the average capacity utilization rate is 60.68%; thus, there is a serious problem of excess capacity and an obvious pro-cyclicality property. (2) The dynamic analysis of register type, industrial type, and firm scale indicates that the problem of excess capacity exists at all levels. The capacity utilization of SOEs is higher than that of other types of enterprises, the utilization of heavy industry capacity is lower than that of light industries, and the utilization of large enterprises is lower than that of small and medium enterprises. (3) The eastern region of China does not have the problem of excess capacity, while the central, western, and northeast regions have serious overcapacities. This phenomenon exists in terms of different property rights, industrial types, and scales, which shows that the marketization level, the degree of openness, efforts to protect property rights, and other factors rooted in different regions are the ultimate causes of regional differences in overcapacity. Thus, we suggest that excess short-run micro-policy interventions should be avoided and that the long-run effectiveness of the market competition environment should be enhanced.
We extend the literature in the following ways. (1) We measure technological rather than economic capacity, which is more suitable given the development stage and transformation of the Chinese economy: we take inventory as a carry-over activity to model the intertemporal decision-making procedures of firms, which makes our model closer to the real production procedure. (2) We use a slack-based model rather than a radial model to estimate industrial capacity utilization because it can overcome the problem of overestimation when there are slacks in input or output. (3) Because economic development shows great heterogeneity at the provincial level, capacity utilization may also exhibit large differences between regions. Therefore, we discuss capacity utilization in three dimensions, “register type”, “light and heavy industry”, and “firm scale”, to enhance our understanding of overcapacity in China.
Key Words： Overcapacity; Capacity Utilization; Dynamic SBM; Inventory

Summary： Adjusting the income distribution gap with various tools such as tax, social security, and transfer payment is an important function of public finance. The purpose of this study is to measure China's fiscal redistribution effect comprehensively. However, the traditional method of measuring the fiscal redistribution effect does not consider indirect taxes, which means that it is inappropriate to be used in China, where indirect taxes are the main source of tax revenue.
The literature shows that the traditional fiscal redistribution measuring method consists of three parts: budget incidence analysis, income accounting framework, and the measurement and decomposition of the MT index. This method can measure the redistribution effect of each fiscal tool—direct tax, social security income and expenditure, and transfer payments—as suggested by Reynolds & Smolensky (1977), KaKwani (1977; 1986), Wang et al. (2012), Huesca & Araar (2014), and Lustig (2015). However, indirect taxes cannot be effectively incorporated into the method, and they therefore affect the completeness and accuracy of the measurement of a country's fiscal redistribution effect. Many scholars believe that indirect taxes should be integrated into the analysis framework. For example, Musgrave et al. (1974) argues that the impact of indirect taxes should be considered when measuring the fiscal redistribution effect because indirect taxes decrease the currency income of residents or increase commodity prices and make residents' real income fall. Smolensky et al. (1987) point out that the traditional accounting framework does not include producers' and consumers' behavior in the model and cannot calculate the real income of residents and distributional effects without including indirect taxes. Based on the theory of indirect tax incidence, this paper divides indirect taxes into use-side tax and source-side tax of residents' income and combines them in a modified traditional accounting framework.
A computable general equilibrium (CGE) model is built, containing 62 production departments, 5 groups of rural residents, and 5 groups of urban residents. By constructing a social accounting matrix (SAM) based on the input-output table and residents' income survey data for 2012, introducing a lump-sum tax, and adopting the method of differentiated tax incidence, we measure the income distribution effects of all China's fiscal tools—including 15 indirect taxes such as value-added tax, business tax, consumption tax, enterprise income tax, customs duties, and other indirect taxes paid by companies, as well as the three social security benefits, four transfer payment, the five social security contribution and personal income tax—on residents' income for each group and the Gini coefficient.
The results show that China's overall effect of fiscal redistribution of income is reverse adjustment. The Gini index increased by 2%, in which the source-side indirect tax, use-side indirect tax, and social security spending increased the Gini index by 1.7%, 3.2%, and 1.3% respectively, while the transfer payments, social security contributions, and personal income tax decreased the Gini index by 3%, 0.4%, and 0.7% respectively. This phenomenon is rare in both middle-income and high-income countries. The main reason is that the positive adjusting effects of China's transfer payments, social security spending, and personal income tax on income distribution are too low, while the negative effect of indirect tax is too high, resulting in a larger negative effect than a positive one.
To improve China's fiscal redistribution function, we offer four suggestions: gradually increase the proportion of direct tax while reducing the proportion of indirect tax accordingly; gradually increase the proportion of transfer payment and expenditure on social security while reducing the proportion of general fiscal expenditure; optimize the individual income tax system and intensify the redistribution effect of individual income tax; and reduce the repressiveness of the indirect tax.
Key Words： Income Inequality; Fiscal Redistribution; Gini Coefficient; Computable General Equilibrium (CGE)

Summary： Over the past 20 years, China has exhibited an obvious characteristic:its social development has lagged behind its economic growth,mainly due to the relative shortage of social public goods. Given China's rapid economic growth, why is there a relative shortage of social public goods? The only explanation is that local governments' fiscal inputs are insufficient because in China, local governments are responsible for social public goods. What causes these insufficient fiscal inputs?There are two arguments: one is that the vertical fiscal imbalance leads to fiscal gaps for local governments; the other is that intergovernmental competition leads to the expenditure bias of local governments. However, these two arguments ignore the effects of intergovernmental transfers. In China, to encourage local governments to supply sufficient quantities of public goods,the central government transfers large amounts of fiscal revenue to local governments to make up the fiscal gaps caused by the fiscal system. Although local governments prefer economic public goods under competition pressures, Bucovetsky & Smart(2006), Hindriks et al. (2008),Weingast (2009), and other studies suggest that intergovernmental transfers can correct the distortion of local governments' incentives as long as they are properly designed in the cooperative federal system.Based on the facts and studies discussed above, this paper hypothesizes that the shortage of social public goods is mainly due to the bad incentives induced by intergovernmental transfers.
To verify the above conjecture, this paper establishes a theoretic model based on the characteristics of China's intergovernmental transfers and the competition among local governments to analyze the incentive effects of the financing mechanism and the distribution mechanism of intergovernmental transfers under the constraints of competition among local governments.Further, this paper identifies the incentive effects empirically by constructing provincial panel data and adynamic panel model.Our conclusions confirm that in China, intergovernmental transfers have not increased the incentives for local governments to increase social public goods or strengthened the disciplining effects of competition among local governments. If other governance objectives of the central government are not considered, China's intergovernmental transfers are an important cause of local governments' preference distortions. In the empirical results,we find no evidence of significant encouragement in local governments' public goods supply from the financing mechanism and distribution mechanism of the vertical transfer payments. Neither do we find support for their reinforcement of the constraint effect on local government competition.Conversely, we find that the financing mechanism and the distribution mechanism have significant negative effects on the supply of social public goods for local governments in areas in which the contribution rate and the benefit rate exceed the threshold level.Considering the types of intergovernmental transfers, earmarks from the central government can have significant positive incentives for local governments to increase social public goods. However, this is contrary to the reform direction of China's intergovernmental transfers. The policy implications of the above findings make it clear that China should consider intergovernmental transfers as an important incentive mechanism for local governance and should reduce the concentration level of local fiscal revenue and the extent to which local expenditures are dependent on subsidies from the central government.
This paper makes two contributions. First, it expands the studies of Hauptmeier (2007) and Liu (2014) by simultaneously considering the two channels of intergovernmental transfers in the theoretic model and identifying their effects in the empirical analysis.Second, it combines intergovernmental transfers with the competition among local governments and analyzes the interactive mechanism between them based on Weingast (2009).
Key Words： Intergovernmental Transfers; Contribution Rate; Benefit Rate; Threshold Level

Summary： China's capital account has gradually opened, and increasing numbers of countries now accept the RMB for valuation, investment, and reserves. If the RMB's currency anchor status can be improved in international trade and finance, China will achieve a real financial market system, which will be an important part of internationalization. Thus, analysis of whether RMB is a “hidden anchor” in international economic activities and the impact of China's capital account liberalization on the anchor status of RMB have practical significance. This paper estimates the opening degree from measurements of the nominal capital account and the actual capital account. As, the nominal capital account was almost closed during 2001Q1-2015Q1, the actual capital account is used during that period. Then, as the opening of the capital account and the exchange rate of the RMB are in an interactive relationship, the “money anchor” model with interaction is used to analyze the impact of capital account opening on currency anchor status. To evaluate the benchmark results comprehensively, invoicing, investment, and reserve are used as robustness checks. The final section concludes and provides recommendations.
Based on 2001Q1-2015Q1 quarterly data, we draw the following conclusions. First, the RMB has already become a “hidden monetary anchor” for most countries in the world, especially those that have close economic relations with China. The opening up of the country's capital account will further strengthen this relationship. Second, during the study period, the RMB exchange rate had a negative relationship with the sample countries, mainly because the current-account surplus is lower for many countries in the global economy and thus the foreign exchange rate declines. However, China's economy is still experiencing stable growth and the RMB plays an important role in the international monetary system. Hence, the currency continues to face great pressure to appreciate. Furthermore, since the end of the policy of quantitative easing, the currencies of the sample countries have depreciated. China's economic growth is still high from a global point of view, which, coupled with its current account surplus, foreign direct investment, joining of the SDR, new mechanism for the RMB exchange rate, and ample foreign exchange reserves, will bring about the appreciation of the RMB.Third, there was no significant change between the nominal capital account and the actual capital account from 2001Q1 to 2015Q1 in China, although the actual capital account exceeded the nominal capital account in some years between 2004 and 2011. China is still a highly closed country for the capital account. There is little point to liberalization until interest marketization, exchange rate liberalization, and RMB internationalization are achieved in China. Capital account opening will promote domestic financial stability and improve the level of financial supervision. Finally, even though China has committed to opening its capital account, increasing the rate of that process will help to enhance the RMB's “anchor” status, accelerate its internationalization, and help it achieve full convertibility among neighbor countries. The effect of China's capital account liberalization on the internationalization of RMB is significant.
The innovation of this paper lies in the following three points: we measure the degree to which China's capital account has opened based on interest rate parity theory, the accounting method, and the FH condition; we use a global sample to investigate the effect of capital account liberalization on the status of RMB internationalization as a “monetary anchor”; and we explore the topic from the three aspects of payment and settlement, international currency and the bond market, and international foreign exchange reserves.
Key Words： Capital Account; Liberalization; Anchor Currency; RMB Globalization; Status

Summary： The dual-class structure is a special type of corporate governance mechanism by which voting rights and cash-flow rights are asymmetrically allocated. This structure enables founders to maintain control over firms without increasing their own capital proportionally when financing externally. It has recently become globally popular for high-tech firms to adopt the dual-class structure, and the relevant literature focuses on the related agency issues. This paper, in contrast, explores the impact of this special governance structure on innovation.We analyze global listed internet firms, which are the pace setters of the new economy.
Theoretically, we expand the Chemmanur & Jiao (2012) model to incorporate a new component of short-term performance sensitivity to generate our hypotheses. Our model results indicate that the dual-class structure is helpful in promoting innovation in general. Furthermore, our theoretical results suggest that the effects of the dual-class structure on innovation depend on external monitoring. In a developed economy in which external monitoring is effective, outside investors are less sensitive to short-term performance. In such an environment, the dual-class structure with a chairman-CEO founder is helpful in promoting innovation. In contrast,in a developing economy in which external monitoring is ineffective,the dual-class structure with a chairman-CEO founder impedes innovation. In such an economy, the dual-class structure with a hired professional manager benefits innovation.
Empirically, we test the hypotheses using a global dataset of listed internet companies collected manually from BvD-Osiris. Our sample period covers 2004 through 2013. Our results present significant evidence that the dual-class structure facilitates high-tech firms' innovation in general.The evidence is even more pronounced under the propensity score matching and Heckman selection model specifications, which mitigate selection bias issues. To address the identification issues, we use a triple-difference (DDD method) specification to identify the causal effect of the dual-class structure on innovation, and we find strongly supportive evidence.
We make three contributions to the literature with this paper. First, the empirical literature on the dual-class structure largely focuses on the related agency issues (Anderson et al., 2009; Hong, 2013; Niu, 2008)while ignoring its impact on innovation. This paper fills that gap. Second,the literature overlooks the effect of the founder as a CEO-chairman. We factor this effect into our model and present the related empirical evidence. Finally, we find that the effect of the dual-class structure on innovation differs in developed and emerging economies. This finding sheds new light on policy design relating to the adoption of the dual-class structure in an emerging economy such as China.
Key Words： Dual-class Structure; Innovation; Internet Firm; Corporate Governance

Summary： A company's name mirrors its business reputation and has fundamental effects on its performance. It is reasonable to expect companies to be more likely to change their names once they are exposed to negative news shocks, such as a lawsuit. The impact of a lawsuit on a company's reputation tends to be more significant in China because lawsuit aversion is a traditional Chinese value, and appearing in a courtroom is considered a shameful act both for an individual and an organization. With that in mind, this paper offers a formal study of the relationship between lawsuits and the name change behavior of Chinese companies.
We first investigate a company's incentive to change its name because of reputation considerations after being accused of corrupt action using a three-stage game model. We assume that only the company knows the quality of its product. In the first stage, the company can choose to either honestly report or purposely misreport its product quality to consumers. If consumers identify misreporting behavior, in the second stage, they punish the cheating company by bringing a lawsuit against the company. In the third stage, the misreporting company decides whether to change its name or not. By changing its name, it pretends to be a newly established company and sells its product as a newcomer; however, it has to pay the cost of changing its name. We prove that in the equilibrium, there exists a threshold quality level and that companies with quality higher than this level find it advantageous to tell the truth in the first stage, while those with quality lower than this level are better off lying and subsequently changing their names.
Using a binary choice model and the instrumental variable approach, we empirically examine how lawsuits affect the probability of name changes using data on name changes and lawsuit cases between 1996 and 2015 for Chinese listed companies. Our estimation results show that while the lawsuit effect is not significant for the accusers, the defendants were more likely to change their names when they are accused. As for different types of lawsuits, we find that lawsuits concerning loan and property rights have stronger impacts on companies' name change probability than lawsuits concerning product quality. We further study the mechanism by which lawsuits affect name changes by Chinese listed companies. We show that cash flow from financing, ROE (return of assets), and market value decline once a company is accused in the courts and that the company has to expend more on its management costs as a result of the lawsuit. Generally, our study supports the reputation signal of names for Chinese listed companies, which are thus more likely to change their names when they are exposed to certain negative shocks, such as lawsuits. Our results imply that lawsuits may function similarly to negative credit ranking, which reveal signals about a company's reputation, but this signal mechanism can be weakened by companies' name change behavior. It is therefore necessary to restrict name changes to some extent.
This paper is the first study to explore the relationship between lawsuits and the name change behavior of companies for reputation considerations. It contributes to the literature in the following three ways.(1) It treats a name change as the reaction of a company to a dynamic change in its reputation and offers a better understanding of firm behavior.(2) It verifies the reputation effects of lawsuits, offers a solid example of the informal effects of formal institutions, and reveals the positive role of legal institutions in corporation governance.(3) Our analysis of the possible paths by which the lawsuit may transmit its reputation effects includes multi-dimensional fields such as capital markets and agent-cost problems, whereas the existing literature is mainly limited to the product market.
Key Words： Name Change; Reputation; Lawsuit; Litigation; Information Asymmetry