Summary： With the advent of the 40th anniversary of China's reform and opening-up policy, a systematic summary of the policy has been a hot topic in Chinese academic circles since the beginning of 2018. Unlike normal reflective research, this article aims to summarize the basic experiences under China's fiscal and taxation reform and discover the basic laws of the past forty years' reform, while not simply reiterating historical traces or listing achievements. Bearing these goals in mind, the future direction of the fiscal and taxation reform will also be figured out.
It is argued in this article that China's fiscal and taxation reform, as an important part of its overall reform, has always been subordinate to and served the needs of the overall reform during its course so far. This is the main clue to an understanding of China's fiscal and taxation system reform.
As such, we can easily trace the trajectory of fiscal and taxation reform in China.
(1) From 1978 to 1994, administrative decentralization and profit-transfer retention (fangquan rangli) from the central to sub-national governments dominated reform strategy, aiming to create good conditions for the whole economy to escape the planned economy. As a result, the Chinese government's financial capacity—especially at the central level—was dramatically weakened; this was regarded as the cost of reform. This situation pushed the Chinese government to consider continuing fiscal and taxation reform via institutional innovation rather than surrendering profits. These efforts helped to set up an initial fiscal framework suitable for a market economy.
(2) After 1998, the task of building a comprehensive institutional framework for public finance was added to the reform agenda. It focused on non-tax revenue, fiscal expenditure and financial management that failed to be fully considered and incorporated into the previous reform package. This meant China's fiscal and taxation reform was switched from a piecemeal, partial change to a comprehensive, global one.
(3) At the 18th CPC National Congress in 2012, the previous reform strategy centering on economic marketization was replaced with the general objectives of comprehensively deepening reform, because of the view that the reform and opening-up policy was in a critical stage and entering deep water. The target of the new strategy is to modernize China's state governance system and governance capacities by linking its economic system, political system, cultural system, social system and ecological civilization system reforms. Establishing a modern public finance system compatible with modern state governance is the goal of the new round of fiscal and taxation reform.
From the past adaptive reform we learned that fiscal systems must be changed gradually, accompanied by historical transitions from economic system reform toward comprehensively deepened reform. China's fiscal and taxation system reform practice has been successful so far mainly because of decision-makers' deep cognition and strict following of the objective law of the fiscal and taxation system and its operating mechanism when they plan and advance reform. This objective law can be summarized as follows: the marketization of the economy inevitably brings about a public finance system, and the modernization of state governance requires and decides on the modernization of public finance.
The direct expression of the new round of the fiscal and taxation system reform in President Xi Jinping's report at the 19th CPC National Congress emphasized its focuses, difficulties and pain points. We expect that at this new historical starting point, the only way for successful fiscal reform for the new era of socialism with Chinese characteristics is to accelerate the establishment of a modern fiscal system by fighting an uphill battle centered on the focuses, difficulties and pain points of fiscal and taxation system reform.
Keywords： 40th Anniversary of China's Reform and Opening-up Policy; Fiscal and Taxation Reform; Public Finance; Modern Fiscal System

Summary： Differences in the nature and structure of various assets may cause consumers to follow different lifecycle consumption paths. Research has broken the assumption about representative consumers with the lifecycle-permanent income hypothesis (LC-PIH) and enriched the research on heterogeneous consumers. While household assets grow continuously and consumer demand remains relatively low in China, it is becoming critical to study the impact of asset nature and structure on consumer behavior. Asset liquidity, rather than asset level, has a significant impact on consumption smoothing. Consumers with inadequate liquid assets are more vulnerable to liquidity constraints, and fail to achieve inter-temporal optimization (Kaplan et al., 2014). Furthermore, there may be differences between homeowners and renters in both their uncertainty and precautionary saving behaviors (Li & Yao, 2007). Regarding precautionary savings as mainly liquid assets (Carroll & Samwick, 1998), we can infer that there is a relationship between housing assets and liquid asset accumulation, which further affects the degree of liquidity constraints.
To address these issues, this paper considers the impact of both asset liquidity and housing asset demand. On this basis, we first perform a theoretical analysis of the impact of asset nature and structure on consumption smoothing and liquidity constraints, and discuss this impact further with the presence of wealth accumulation motives, to reveal the cause of the heterogeneous consumer behavior difference. Using financial assets and housing assets as proxies for liquid assets and illiquid assets respectively, we identify heterogeneous consumers by wealth-to-income ratio (liquid) and housing equity value. Next, to verify heterogeneous consumers' distinct behaviors under different asset structures, we estimate the marginal propensity to consume out of transitory income shocks based on the method of Blundell et al. (2008). Then we estimate wealth accumulation due to uncertainty following Carroll & Samwick's (1998) method. Furthermore, using the wealth-to-income ratio (liquid) as the dependent variable, we perform a quantile regression to analyze the linkages between liquidity constraints and precautionary saving.
Our findings are summarized as follows. (1) Consumers with insufficient financial assets have a high, positive marginal propensity to consume out of transitory income shocks; this varies significantly between homeowners and renters. It not only proves that the asset liquidation cost limits consumption smoothing and leads to liquidity constraints, but also reflects that housing assets bring about different degrees of liquidity constraints. (2) Compared with homeowners, renters face a higher level of uncertainty and have a stronger motive for wealth accumulation due to this uncertainty, which increases the degree of liquidity constraints. (3) This difference in precautionary saving motives is more significant in the case of a low wealth-to-income ratio and high degree of liquidity constraints.
The contribution of this paper lies in its integration of liquidity constraints and precautionary saving theory, and its exploration of variations in heterogeneous consumer behavior under different asset structures. The paper not only verifies the role of liquid assets in current consumption and liquidity constraints, but also analyses the impact of illiquid assets (housing assets) on liquid asset accumulation, with consideration of the impact of liquid assets on consumption smoothing for future fluctuation. This provides an explanation for the different degree of liquidity constraints caused by illiquid assets. The practical significance of the paper is our explanation of the coexistence of a “high wealth level” and “relatively insufficient consumption” in Chinese households from the perspective of asset liquidity and housing asset consumption attributes against the background of a high proportion of housing assets in households and the strong, rigid housing demand in China. It provides a reference for improving policies to stimulate consumer spending and leverage the fundamental role of consumption in economic growth.
Keywords： Asset Liquidity; Marginal Propensity to Consume; Precautionary Saving; Heterogeneous Consumers

Summary： As a core aspect of urbanization, the integration of urban and rural areas provides an important impetus for economic growth in China. Neo-urbanization, which regards humans as its essence, mainly depends on the comprehensive integration of migrants and urban society. Specifically, neo-urbanization requires three types of migrant transformations: from agriculture to non-agriculture in working industries, from rural to urban in living areas, and from peasants to citizens in identification. At present, the institutional obstacle to neo-urbanization is hukou, which limits labor flow using different welfare systems. Due to new government policies, this obstacle will gradually disappear. Thus, culture discordance will become the major hindrance to integration. People who have lived in rural areas are familiar with traditional clan culture and informal institutions, which conflict with the contract system used in urban cities. This paper focuses on the impacts of traditional clan culture on migrants' employment, and explores the mechanism of traditional social capital that affects people's behavior in modern society.
Using the ratio of large family names as an index of clan culture, this paper studies the relationship between clan culture and migrants' employment based on data from the 2005 population census. This paper reveals that clan culture has a significant impact on migrants' employment. It increases the probability of migrants entering the low-skill service sector, but not the high-skill service sector, which implies that traditional social capital plays a role in low-skill sectors but not high-skill ones. These results are robust to alternative measurements of clan culture and various model specifications.
Combining the census dataset with the 2010 Chinese General Social Survey and 2012 China Family Panel Studies datasets, we investigate the mechanism through which clan culture affects migrants' employment. We identify two main possible mechanisms: social networks based on consanguinity, and social trust based on geographical relationships. We find that the main mechanism is social trust, not social networks. In urban cities, kinship contacts only include a small group of people. However, the mechanism should influence the general trust between individuals, which extend from relatives to fellows, neighbors and friends. Clan culture places emphasis on general trust and information sharing, both of which make it possible to meet the diverse labor demands of the service sector and increase the possibility of entering the service sector.
The difference of this paper from the existing literature and its contribution to the field is mainly demonstrated in the following four ways. First, this paper offers a new city development perspective to explore the impact of clan culture on migrants, which breaks through the limitations of clan culture research only on rural societies and points out one significant problem with integration. Second, the object of this culture and economic development study is transmigrants; however, this paper also refers to interregional migrants in China. Third, we use the ratio of large family names as the proxy for clan culture to overcome the endogenous problems in social capital research. Fourth, the existing literature mainly focuses on how clan networks influence peasants, but we emphasize that clan culture is an important mechanism that affects migrants.
Normally, the high-skill and low-skill service industries tend to evolve correspondingly. Thus, traditional clan culture could exert a positive impact on the service industry overall as it promotes the low-skill service industry. However, as shown by Grief & Tabellini (2010), clan culture might hinder urbanization in the long run because it cannot affect the high-skill service industry. Our research reveals that social trust, rather than social networks between people sharing the same family name, is key to interpreting the impact of clan culture on migrants' employment. In conclusion, service-industry-based integration should not only focus on traditional social capital, but should also concentrate on social trust, conforming to current contractual society.
Keywords： Social Capital; Migrants' Employment; Clan Culture; Trust

Summary： Since the 1978 economic reform, China's economy has grown rapidly. Meanwhile, the human capital structure has experienced drastic changes. One feature of these changes is the reduction in low-education human capital and the increase in high-education human capital. Such a change raises many interesting questions for both research and policy. Has the human capital structure change characterized by increasing higher education attainment promoted economic growth? Of the human capital structure upgrade and the total human capital stock increase, which is more important for economic development? Can human capital structure upgrading help explain regional disparity? In this study, we explore these questions using provincial-level panel data from China.
It is generally believed that heterogeneous human capital may differ in its contributions to economic growth. Moreover, human capital appears to have downward compatibility (i.e., high-level human capital can substitute for low-level human capital, but not vice versa). In this study, we define human capital structure upgrading as the process of a country or region improving its human capital structure and moving from human capital with low-level education to higher-level education. Modern economic growth depends on technological innovation, which relies on quality human capital. As a result, the rising share of advanced human capital and declining share of primary human capital in the structure of a country's human capital should play a key role in its economic development.
In general, technology advancement and industry structure improvement are important determinants of economic development. Human capital structure upgrading will affect innovation and the adoption of new technology, and help guide changes in industrial structure to achieve the optimal match with technology progress. Therefore, the process provides a channel through which human capital structure upgrading, characterized by moving from low-quality to high-quality human capital, promotes economic development.
In this study, we construct an index of human capital structure upgrading that includes changes in human capital in different education categories, and estimate its effect on economic growth and regional income inequality. We apply the GMM method using China's provincial panel data from 1987 to 2011, and makes two main contributions: (1) creating a human capital structure upgrading index that can capture relative changes in human capital with different education levels and using the index to measure the structure changes of human capital in China; and (2) analyzing the effect of human capital structure on economic growth and regional income disparity.
We find that human capital structure can better explain the disparities among the eastern, central and western regions of China than other measurements of human capital stock. The policy implications of improving human capital structure versus overall human capital stock are discussed. In particular, the main findings are as follows. (1) Human capital structure upgrading can promote economic growth and its effect is statistically significant. The marginal effect of human capital structure is larger than that of total human capital stock. (2) Human capital structure difference can better explain the income disparity among the eastern, central and western regions of China than total human capital stock or other factors. (3) Human capital structure differs significantly among regions. More specifically, the share of human capital with primary education is higher in the central and western regions than in the eastern region, while the share of human capital with tertiary education is lower.
Policy implications based on our findings include the following: (1) Under the “new economic norm” proposed by the government, to achieve sustainable development of the Chinese economy the government should focus more on human capital structure improvement. (2) To reduce regional economic disparity, policies that can help reduce the structural gap in human capital by balancing different levels of education will be more effective.
Keywords： Human Capital Structure Upgrade; Economic Growth; Regional Inequality

Summary： Since China's economic reform and opening-up, its industrialization and urbanization processes have been characterized by the large numbers of rural migrants seeking flexible jobs in urban areas. These migrant workers have played an increasingly important role in the urban labor market and made significant contributions to urban development. However, migrant workers generally lack labor protection. Compared with their urban counterparts, migrant workers are often considered to be unfairly treated by employers in terms of labor-related benefits. Aiming to improve the working conditions of disadvantaged groups, the Chinese government issued the New Labor Contract Law (NLCL) in 2008. Compared to the original labor protection law, the NLCL further clarifies the specific labor-related benefits that should be provided to employees, including the right to sign formal labor contracts and have social insurance purchased by their employer.
The NLCL has raised widespread concern in academia since its implementation. Although many studies have researched the economic effects of the NLCL from the perspective of enterprises (Feldmann, 2009; Kaplan, 2009), few studies have assessed the direct effects of the NLCL on labor protection. Our paper attempts to fill this research gap. Using data from the China Household Income Program (CHIP2007, CHIP2013), we examine the impact of the NLCL on migrant workers' social benefits, including working hours and different kinds of social insurance.
Regarding the design of empirical tests, we use the implementation of the NLCL as a quasi-natural experiment. Specifically, a difference in differences (DID) method is used to eliminate group-specific unobservable factors. Then, we correct for sample selection bias using the modified Heckman's two-step method. Finally, we explore the NLCL's heterogeneous effects by interacting the DID term with a series of measures of regional labor market heterogeneity.
Our benchmark results show that the NLCL has decreased migrant workers' working hours as much as 23%, and increased workers' probability of holding social insurance by 10%—26%. Correcting for sample selection bias does not change this conclusion. We further find that the effects of the NLCL on labor-related social benefits are stronger for migrant workers with lower bargaining power or lower education levels, but there is no significant difference between genders. Furthermore, controlling for industry-specific economic shocks during the same period does not change the NLCL's effects on migrant workers. The conclusions still hold when we consider possible small sample bias and eliminate the policy-anticipation effect.
Our study makes four main contributions to the literature. First, unlike the existing literature that has mainly focused on enterprises, this paper directly examines the impacts of the NLCL on migrant workers' labor benefits, which enriches the relevant literature on migrant workers. Second, we carefully correct the sample selection bias and control other possible confounders that may exist in this kind of research. Third, we construct a series of measures of regional labor market heterogeneity and discuss the heterogeneous effects of the NLCL on migrant workers' welfare improvement. It is a useful extension to the study of Gao et al. (2012). Finally, we construct an exogenous city-industry-specific labor demand shock to eliminate industry-specific economic shocks during the same period. This measure provides a useful control for changes in local labor market conditions under the two-periods DID framework, where the balanced path assumption is difficult to test.
As important legislation to protect the interests of grassroots workers, whether the NLCL can improve migrant workers' social benefits has been a controversial topic since its implementation. In the context of comprehensively advancing the rule of law, our empirical results not only provide a clear answer to the debate on whether the NLCL has improved the welfare of vulnerable groups, as represented by migrant workers, but also have important implications for the establishment and enhancement of labor protection legislation.
Keywords： Labor Protection; Migrant Workers; Welfare Improvement

Summary： The current economic form of developed regions such as European countries and the United States represents the trend of transformation from an industrial economy to a service economy. Relying on high and new technology, developed countries use the reindustrialization development strategy to develop advanced manufacturing industries with high added value. As the reindustrialization strategy can increase the service object for the development of a service economy, the multiplier pull effect could act on employment growth in manufacturing-related service (Yuan and Gao, 2015). The rapid development of China's manufacturing-related service industry is in accordance with the needs of the times, providing good external conditions for the development of the manufacturing industry. It is the effective support for the manufacturing industry to realize the whole refined industry chain. In response, this paper explores the degree of interaction at the industry and regional levels between the manufacturing and manufacturing-related service industries in coupling coordination and evolution. Analyzing the causes of the interactions between industries and regions, and understanding the fast growth of China's manufacturing and manufacturing-related service industries, is of great guiding significance.
From the perspective of industrial evolution, the manufacturing and manufacturing-related service industries are not simply the causality for demand and supply. In fact, the interaction between the manufacturing and manufacturing-related service industries has always followed the trend of dynamic evolution with great environmental changes. At the same time, the industries are inseparable in their own development, and the integration of industrial coupling is not a simple overlay of the two industries, but more of a superimposed effect. Its research scope is greater than industrial association and integration. Therefore, from the industrial coordination point of view, this paper explores the laws and characteristics of the interactive evolution of industrial interaction. It is reasonable to explain the essence of the interactive evolution of the manufacturing and manufacturing-related service industries, and then explore the problems in the process of the two industries' coordinated development.
Based on the coupling coordination perspective, this article measures the overall development level and the degree of coupling coordination of the manufacturing and manufacturing-related service industries from 2001 to 2015. The measurements are taken separately for the industry and regional levels. The evaluation model is built by referring to the industry scale sector, economic benefits, growth potential and social contribution, and the model is used to simulate the trend of the degree of coupling coordination by modulating the coefficients of increment and stock. The empirical results demonstrate the following outcomes. (1) Coupling coordination between the manufacturing and manufacturing-related service industries has gradually developed to a good coordination stage from an initial period of imbalance, and the degree of coupling coordination between the industries has steadily risen. However, the overall development level of the manufacturing-related service industry is slightly behind that of the manufacturing industry. (2) According to the comprehensive industry development index, the paper summarizes the coupling coordination development type of the manufacturing and manufacturing-related service industries as fluctuating synchronization, convergence of evolution and unipolar dominance. The study also shows that the industrial development level is essential to the degree of coupling coordination of the two industries. In the unipolar dominant coupling coordination development type, the low development level of the manufacturing-related service industry restricts the degree of coupling coordination between the two industries. The type of synchronization can overcome the difference in coupling coordination. (3) A stock resources advantage is currently the main power source for improving the coupling coordination development level of the two industries. Hence, the correlated polices of the two industries to optimize stock resources and cultivate high-quality incremental resources are crucial to improving the degree of coupling coordination of the manufacturing and manufacturing-related service industries. These policies are critical for the government in the current economic transition period in China.
Keywords： Manufacturing Industry; Manufacturing-related Service Industry; Coupling Coordination Degree; Increment and Stock

Summary： After growing at an unprecedented rate of approximately 10% annually for over three decades, China's strong growth streak has recently run out of steam, showing steady and marked deceleration during the “new normal”. Along with the economic slowdown, the problem of over-capacity in China's manufacturing industries has become more serious and is attracting greater attention from policymakers. The iron and steel industry is fundamental to the national economy, and its development directly affects China's national power. Given the importance of the industry, this paper uses data from the Chinese Industrial Enterprises Database (CIED) 1998—2013 to estimate firm-level capacity utilization in the industry and explores the causes of the over-capacity problem and the differences across ownership.
We first document two stylized facts about the problem of over-capacity. (1) Capacity utilization is not always pro-cyclical. In fact, capacity utilization was counter-cyclical during 2005—2007, when the economy grew rapidly, and after the 2008 global financial crisis. (2) There is a significant difference in capacity utilization between state-owned enterprises (SOEs) and non-SOEs. Non-SOEs utilize a higher proportion of their capacity than SOEs.
This study analyzes the causes of the over-capacity problem; the findings are outlined as follows. (1) Non-market factors (such as financial support, sunk costs, firm size, employment elasticity, etc.) play more important roles in explaining the capacity utilization of iron and steel enterprises than market factors. Therefore, the over-capacity problem reflects the conflicts in market or non-market methods of resource allocation. (2) The performance of market factors as a mean of resource allocation depends on non-market factors. While financial support and sunk costs strengthen market factors, firm size and employment elasticity weaken them. The latter dominates the former, implying that non-market factors attenuate the allocative efficiency of the market. (3) Non-market factors like financial support become stronger when economic uncertainty increases, thus reducing the function of the market to balance demand and supply for iron and steel. This is why capacity utilization was counter-cyclical during 2005—2007 and after 2008. (4) Firm size is positively correlated with capacity utilization, implying that large enterprises invest more rationally than small firms. In addition, iron and steel enterprises must grow large to upgrade their technology and operations, which helps improve their efficiency and capacity utilization.
We also investigate the causes of the difference in capacity utilization between SOEs and non-SOEs. First, the difference mainly results from variations in sunk costs and financial support; both can explain over half of the total difference. More specifically, SOEs have higher sunk costs and more financial support, which reduces their capacity utilization. Second, while market factors contribute to only around 33% of the difference, non-market factors contribute to 98.3%. Therefore, the fundamental method for resource allocation is the principal factor for understanding capacity utilization. Third, the difference in firm size is also a determinant of the capacity utilization gap between SOEs and non-SOEs, because large firms utilize more of their capacity and SOEs are typically larger than non-SOEs.
The analysis in this paper has important policy implications. First, to improve capacity utilization, it is urgent to eliminate local governments' motives to invest irrationally. However, local governments should aim to provide high-quality public service. Second, distorted market factors are the channel through which non-periodic power impedes the market's power to balance demand and supply. Therefore, as the fundamental method of allocating productive resources, periodic market factors should again play a role in adjusting the demand and supply for iron and steel via price. Third, a fair, competitive market environment can help overcome the problem of over-capacity. As financial support is one of the most important determinants of the gap between SOEs and non-SOEs, it is best to tighten SOEs' budget constraints and guarantee financial resources for non-SOEs.
Keywords： Iron and Steel Industry; Overcapacity; Capacity Utilization; Periodic Factors; Non-periodic Factors

Summary：The extant research on short sales has largely focused on the debate over whether short-sale constraints help reduce price volatility, prevent large price movement, improve price discovery and increase market stability. Cohen et al. (2007) and Kaplan et al. (2013) point out that to avoid the endogeneity problem that has plagued the vast majority of empirical studies, it is important to find ways to separate demand and supply factors in securities lending markets, thus isolating the effect of short-sale constraints on stock price. However, most of the research on this topic has used either net short-sale position or securities borrowing costs to measure short-sale constraints. Unfortunately, both measures are results of demand and supply interactions in the securities lending market. For example, an increase in short-sale positions may be due to an increase in demand for short sales or a decrease in securities borrowing costs. A rise in securities borrowing costs could be due to tightened short-sale constraints or an increase in short-sale demands. As a result, measures of short-sale constraints are linked to equilibrium demand and supply factors inherent in securities lending markets, inevitably leading to endogeneity problems between short-sale constraints and stock prices. Studies on short-sale constraints and share price behavior in Chinese stock markets have generally focused on how changes in Qualified Securities for Financing and Lending (QSFL) affect share returns. For example, Xu & Chen (2012) find that QSFL has not significantly improved price discovery efficiency, but has helped reduce the skewness of returns and price crashes for large capitalization, low turnover and low PE shares. Zhao et al. (2014) find that shares newly added to the QSFL list experience lower return volatility, skewness and kurtosis. Li et al. (2015) find that QSFL leads to improved price discovery. In addition, the amount of securities lending is positively related to the efficiency of price discovery.Although QSFL is a unique trading mechanism inherent in China's transition toward a more efficient financial market, it fails to separate demand and supply factors in the securities lending market for three reasons. First, it does not distinguish between trade financing and securities lending, which have different effects on share prices, market quality and return characteristics. Second, changes in the amount of securities lending can be accrued to supply (reduction in short-sale constraints) or demand (increase in negative news in the market) factors. Third, size, liquidity, volatility and price are all important determinants used by the securities regulatory authority to add or delete shares from the QSFL list. Thus, QSFL cannot be used as a natural experiment in studies of short-sale constraints and stock prices.This paper argues that Qualified Securities for Short-sale Refinancing (QSSR) is a unique trading mechanism that only affects the supply of securities available for short sales in Chinese capital markets. Using the difference in differences method, we investigate whether and to what extent exogenous changes in the QSSR list lead to increases in short-sale activities that in turn affect return volatilities, stock overvaluation and asymmetric return distribution characteristics. We find that as securities are added to the QSSR list, both the volatility of returns and the frequency of extreme negative price movements increase. In addition, QSSR stocks experience significantly negative abnormal returns (AR) and cumulative abnormal returns (CAR). The differences in both AR and CAR are positively related to investor heterogeneity. Moreover, market betas for QSSR stocks increase in the bear market while they decline in the bull market. Our results indicate that short sales reduce asset bubbles and the asymmetric risk characteristics of asset returns, thus improving price discovery and promoting market stability. However, short sales also lead to higher return volatility and increase the risk of market crashes. Therefore, the securities regulatory authority must continue to improve short-sale and other trading mechanisms, and strictly enforce the law, to build a solid foundation in capital markets toward the national strategy of “mass entrepreneurship and innovation.”

Keywords： Qualified Securities for Short-sale Refinancing; Short-sale Constraints; Short Sale; Stock Price Fluctuations; Market Stability

Summary： The relationship between information dissemination and stock pricing is a research subject of great theoretical and practical significance. Financial media play a pivotal role in this relationship as channels to distribute information to investors. This paper studies the influence of information dissemination on stock pricing. The voluminous body of literature has been overwhelmed by the concerns of market efficiency and information pricing, but not its propagation process. This phenomenon is partially due to data unavailability. Engelberg & Parsons (2011) discuss the difficulty of examining the causal impact of media in stock markets. They circumvent this difficulty by examining the trading behavior of different investor groups after the same news exposure. In this paper, we test the “two-step communication theory” on the data sample of “Baidu Stock Pick” (BSP) to investigate the causal impact of media on stock pricing. Barber & Odean (2008) report that individual investors are attracted to stocks that gain abnormal attention from news coverage, excess trading volume, or price surges. Internet financial media may play a similar role while inducing market attention to stocks.We develop a theoretical framework following Hong & Stein (1999), and depict the dynamics of pricing in response to news using a numerical simulation. We then conduct an empirical analysis on the data sample of BSP. Empirically, the qualitative hypothesis is tested using big data stock selection data from the Baidu stock market. The robustness test excludes the influence of market bull/bear and endogenous factors by using a Heckman two-stage model on the empirical results.We report three main findings. (1) Baidu successfully recommended hot stocks with short-term price momentum following the release of source news. The selected stocks exhibited excess returns and excessive trading volumes before the BSP announcement. (2) A “BSP stock recommendation” accelerated the pricing process of the source information, which is fully priced on the announcement day. (3) The market overreacted in response to BSP recommendations on the announcement date, which was followed by price reversals on the next day. The shorter the gap between the “stock recommendation” and “source news”, the greater the overreaction. Overall, Baidu demonstrated the power to influence public opinion and accelerate the process of information pricing. However, Baidu did not have a long-term impact on the pricing of the recommended stocks.The power of public opinion leadership may come from three advantages of an Internet finance medium. First, the medium may use its channel breadth to deliver previously reported news to a wider scope of investors. Second, the medium may use its creditability, built upon its expertise, to boost investors' confidence in the re-transmitted news. Third, the medium may transmit previously reported news with a financial interpretation. The effects of these three processes are not identified in this paper. How to identify these three effects is the direction of our further research.This paper is the first documented study to consolidate both the “secondary communication theory” and the theory of limited attention in explaining the dynamics of pricing in response to news. In addition to its contribution to the academic literature, this paper offers a helpful reference for securities market regulation. In this paper, the “secondary communication theory” in information communication and the limited attention of investors are combined to explain the relationship between “information and price”, which is the first attempt to do so in the literature. With the increasing popularity of mobile interconnection, Internet finance media are growing in quantity and market penetration. They may play the role of market opinion leaders and influence stock prices. For example, BSP recommended stocks are observed with, on average, price gains on the announcement day, and losses on the subsequent day. For the sake of a fair market and investor protection, surveillance is warranted on stock recommendations or analyses issued by Internet finance media.

Keywords： Big Data Stock Selection; Two-step Communication; Limited Attention; Overreaction

 Summary： China has made great achievements in both attracting foreign direct investment (FDI) and investing abroad (OFDI) in recent decades. China has been the largest FDI destination among developing countries for a long period, and is also emerging as an important source of multinational investments as more Chinese domestic firms start doing business in foreign markets. After becoming a net outward direct investor in 2014, China's OFDI exceeded its FDI of USD 70.15 billion in 2016, which attracted much attention. As the popular investment development path theory argues, a country focuses on attracting inward FDI at the first stage of its development, and starts to engage in OFDI in the second stage only when it accumulates a stronger competitive advantage in international markets. Hence, it is natural to ask whether foreign investment in China encourages Chinese domestic firms to invest abroad. However, compared with the trend of parallel growth of FDI and OFDI in China, there is scant academic research on the relationship between China's FDI and OFDI. Several papers have studied the relationship between China's FDI and OFDI using country-level data or specific industry-level data. However, multinational investment data at the enterprise level, being more granular and based on profit-maximizing behavior, provides more direct and credible evidence. This paper focuses on whether the large-scale influx of foreign investment has promoted overseas investment by Chinese enterprises. We find unique OFDI data on Chinese firms during 2004—2013 by merging the Chinese Manufacturing Firms' Survey dataset with the Lists of Chinese Firms' OFDI collected by the Ministry of Commerce in China. We carefully examine how FDI affects Chinese domestic firms' OFDI through both horizontal spillover in the same industry and vertical spillover with industrial linkage. Horizontal spillover refers to the fact that [JP2]Chinese firms gain advanced production technology and management experience from their foreign affiliates in the same industry. Meanwhile, the presence of these foreign affiliates also propels Chinese local firms to improve their competence via the market competition effect. Vertical spillover occurs through both forward and backward industrial linkage between foreign affiliates and domestic firms. While forward spillover happens when indigenous firms purchase intermediate inputs provided by their FDI affiliates in upstream industries, backward spillover happens when domestic firms sell their products to their FDI affiliates operating in downstream industries.[JP]Generally, our study finds that FDI does help Chinese domestic firms to invest in foreign countries, through horizontal, forward and backward spillover. Each 1% increase in horizontal, forward and backward FDI spillover will result in OFDI by Chinese firms increasing by 0.435%, 0.225% and 0.359%, respectively. The backward spillover effect of FDI is higher than the forward spillover effect. Further, FDI spillover has a strong impact on Chinese firms' OFDI in middle and high-income countries. At the same time, the positive impact on research and development and service- and vertical production-oriented OFDI is more obvious. Finally, the paper confirms that FDI promotes the OFDI of local enterprises through two channels: the direct spillover effect and the indirect effect of improving the productivity of enterprises and then promoting the OFDI of Chinese indigenous firms.Our study may contribute to the literature in the following ways. First, our study helps demonstrate how foreign entry affects the internationalization patterns of Chinese indigenous firms. As several studies have shown the export spillover effect of FDI in China, our study further helps demonstrate that the presence of foreign affiliates also encourages Chinese domestic firms to invest in foreign markets. Meanwhile, our study helps establish the determinants of OFDI in China. As previous studies have shown how firms' OFDI depends on firm characteristics like productivity, financial constraints, ownership and so on, our conclusion demonstrates that the spillover effect of FDI also matters for Chinese local firms' OFDI.

Keywords： FDI; OFDI; Horizontal Spillover; Vertical Spillover; Industrial Linkage

Summary： As the cost of labor, resources and environment increase, the traditional competitive advantage of China's export trade continues to weaken, and a new competitive advantage has not yet formed. Thus, China faces a “double squeeze” from developed and developing countries. However, as the economy enters the “new normal”, deepening the political and economic system reform and promoting economic upgrading is becoming common practice. This paper is mainly concerned with the following two questions. Will streamlining administration and delegating power (SADP) effectively promote firms' exports? If yes, will it foster new competitive advantages?There is currently no uniform definition of SADP. According to our research, the People's Daily referenced “SADP” 191 times between 1978 and 2015. SADP's first peak appeared in 1984, when it first appeared in policy discourse in The CPC Central Committee Decision on Reform of the Economic System, of which the main content was about enterprise decentralization and benefits. At the end of the “cultural revolution”, the national economy was on the verge of collapse, and people's lives had been difficult for a long time. The discontinuity of political and economic policies at the beginning of the transition led to the readjustment of the national economy. SADP broke the shackles of the old system, promoted economic recovery and development, and was an important foundation for later economic restructuring. In a more general sense, SADP has not stopped, reaching its second peak after the third plenary session of the 18th CPC central committee in 2013. Li Keqiang, 2016 Premier of the State Council, gave a televised speech on the reform streamlining administration, delegating power and optimizing service. Streamlining administration refers to streamlining government administration, and delegating power refers to decentralizing power to lower-level government, markets and society.This article uses matching data from the Chinese industrial firm database and Chinese customs database, based on policy experimentation with the delegation of approval powers for export rebates, to empirically analyze the impact of SADP in export rebate management systems on firms' export performance. The results show that SADP significantly improved firms' export performance, resulting in an increase in firm exports of about 12%, while product quality increased by about 7% and product price decreased by about 6%. Furthermore, this paper performs robustness tests from four different aspects, while considering the propensity score matching, difference in differences and industry tax rebate rate differences, and controlling the impact of specific policies and the problem of missing variables, and the results still stand. Further analysis found that SADP has more benefits where the power of public principle-agent failure is negligible. As for firm ownership, decentralization mainly improves the export performance of non-state owned firms, especially private firms.The contributions of this paper are as follows. First, this is the first paper to examine the dividends of SADP from the perspective of export tax rebate system reform. This article is a re-understanding of the relationship between government and the market in a socialist market economy, and it is a timely response to the current decentralization reform. Second, this article selects the decentralization the approval right of export tax rebate as the breakthrough point and uses the difference in differences method to overcome the problems of past studies-the inability to deal effectively with endogenous problems and the selection of the quantitative indicators—and improves the reliability of the research conclusion. Third, this paper complements the study of export tax rebate systems affecting firm export performance. The literature mainly focuses on the economic impact of the change to the tax rebate rate. This paper inspects the rapid change in the export tax rebate and further explores its influence on the quality of export products.[WTHZ]Keywords： Decentralization; Export Tax Rebates; Policy Experimentation; Export Performance

Summary： As different stages of production are organized in different regions (known as production fragmentation or vertical specialization in the literature), traditional trade statistics measured in gross terms could become increasingly less reliable. Thus, the statistics illusion has been a more important problem in evaluating trade benefits. As a result, value-added trade accounting based on the input-output technique is attracting increasing attention from scholars and policymakers, and global value chains (GVCs) have recently become a hot topic. However, most of the literature focuses on trade decomposition in value added at the inter-country level (GVCs) or the inter-region level within a country (national value chains; NVCs), while little focuses on integrating GVCs and NVCs into a uniform framework to study value-added regional interactions. Given the great differences in China's coastal and inland areas, such as their economic development level, opening degree and factor endowment, different regions may play different roles in regional cooperation and value-added links between GVCs and NVCs. To reveal this relation, this paper studies the value-added supply-demand roles of China's domestic regions and value-added gains in China and other Asia-Pacific economies from the perspectives of NVCs and GVCs.First, this paper extends the framework of Koopman et al. (2014) of value-added export accounting in a uniform input-output system that contains different regions in China and the major Asia-Pacific economies, to obtain the value-added linkages of each region of China and its partners (either domestic or overseas) from both the demand side and the supply side. In our framework of value-added export accounting, inter-regional outflow in gross value can be decomposed into six parts: added value created by a region itself and consumed in other regions, added value created by a region itself that later returns to the region, added value created by other regions in China, added value created by other economies in the Asia-Pacific, content from the rest of the world, and pure double-counted items. Based on the value-added outflow, this paper constructs two indexes to show the characteristics of value-added linkages from the demand side and the supply side, that is, the vertical specialization index and value added distribution ratio, respectively. Second, we investigate the trade gains in value added through participating in NVCs and GVCs. We compute trade gains in value added in NVCs and GVCs at the absolute value level and the relative ratio level, and compare them for China's coastal and inland areas and other Asia-Pacific economies. By constructing individual trade gain indexes for NVCs and GVCs, this paper also further studies different gains from these two kinds of value chains. Furthermore, this paper investigates the consistency between value-added supply-demand linkages and value-added trade gains, demonstrating that regional interactions in value-added linkages and trade benefits from participating value chains combine to become an organic whole. [JP]The conclusions of this paper are as follows: (1) China's domestic regions exhibit a strong linkage with economic poles, and a reciprocal value-added supply-demand linkage exists between China's inland and coastal areas, and also between developing Asia-Pacific economies and developed economies such as the United States and Japan. (2) To prevent trade gains from embedding into NVCs and GVCs, NVCs are better than GVCs, and inland China exhibits a higher gain rate in value added from embedding NVCs than coastal China, while the case for GVCs is the opposite. (3) Apart from regions, the distribution pattern of trade gains from participating in value chains is highly similar to that of value-added supply-demand linkages, implying that closer value-added supply-demand relationships come with greater mutual benefits and stronger win-win cooperation.

Keywords： Global Value Chains (GVCs); National Value Chains (NVCs); Value-Added Supply-Demand Geographic Characteristics; Trade Gains in Value Added

Summary： With the rise of value-chain trade, its role in global business cycle synchronization is now the focus of international macroeconomics. Most scholars have investigated the effect of value-chain trade on the correlation of global economies under the Frankel-Rose (FR) effect framework. Burstein et al. (2008), Ng (2010) and Duval et al. (2016) consider that value-chain trade can change the role of the FR effect, and that it can significantly improve bilateral output co-movement, but after controlling it, traditional bilateral trade has no significant—even negative—influence on bilateral output co-movement. [JP3]However, Di and Levchenko (2010) and Pan et al. (2015) argue that value-chain trade amplifies the FR effect. Either view indicates that the global value chain (GVC) has a profound impact on global business cycle synchronization.[JP]During its integration into the global production system, China's national value chain (NVC) has developed rapidly. The NVC is a professional network production mode corresponding to the GVC. Specifically, the NVC is led and governed by local firms, which integrate domestic raw material supply, component production, product assembly and logistics distribution based on the domestic market. Thus, an important issue is the relationship between NVC and interregional business cycle synchronization, in other words, whether China's regional economies will be linked by the NVC. Although Su (2016), Lee & Pan (2016) and Li (2016) explored the NVC, none of them researched the relationship between NVC and interregional business cycle synchronization. This paper is not a simple repetition of the literature on the linkage between GVC and international business cycle synchronization because there are two significant differences between interregional and international business cycle synchronization. First, the subject status is different. Regions within a country must use the same currency, and cannot use different monetary and exchange policies (like sovereign countries) to eliminate asymmetric macroeconomic shocks across regions. Second, the sources of shocks are different. International business cycle synchronization derives from common shocks such as global oil prices and spillover effects from international trade and investment. However, interregional business cycle synchronization not only relates to the international economic environment; it is mostly driven by close interregional trade and divisions within a common currency zone. Unfortunately, the current research on China's interregional business cycle is more a simple description of facts. Although Huang et al. (2011) and Xu and Hong (2013) used gravity models to indirectly confirm that China's interregional business cycle synchronization also falls under the FR effect, they did not investigate the transmission effect of NVC to interregional business cycle synchronization.This paper adopts China's regional input-output tables to investigate the effect of NVC on interregional business cycle synchronization. The results show that NVC trade increases interregional business cycle synchronization, while interregional trade decreases bilateral output co-movement, so interregional trade's FR effect is mainly caused by NVC trade. At the same time, the transmission effect of NVC is not only affected by the value-chain position difference between regions, but also by significant time and space characteristics. Further, GVC trade amplifies the positive effect of NVC trade on interregional output co-movement, while traditional international trade amplifies the negative effect of traditional interregional trade. Thus, NVC is an important force ensuring that regional economies grow closely and synchronously during China's export-oriented development.Breaking through the global perspective of research on value-chain trade and the business cycle, this paper provides rare empirical evidence of the role of value-chain trade in business cycle synchronization within a developing country. This paper confirms that NVC plays a leading role in promoting interregional output co-movement, which guides China's adjustments to regional policies and its construction of a new opening system in the process of deepening reform.

Keywords： National Value Chain; Business Cycle; Interregional Economic Synchronization; Global Value Chain