The impact of economic stimulus package on the Chinese economy

Gong, Jialin (2024) The impact of economic stimulus package on the Chinese economy. PhD thesis, University of Glasgow.

Abstract

China’s stimulus package after the global financial crisis in 2008 rapidly boosted its GDP. However, it also raised concerns about its long-lasting and unintended consequences that have reduced China’s growth potential. This thesis aims to explore the effect of China’s stimulus package from macro-, industry-, and firm-level perspectives. The first topic investigates the growth effects of the stimulus package. Based on province-level high-frequency data and a “heterogeneous panel” econometric method - Pooled Mean Group (PMG), the results reveal a significant long-term negative association between the stimulus package and GDP growth in China, despite positive short-term effects. The second topic examines how the stimulus package, when interacting with government intervention, influences industry investment and its subsequent outcomes. Using province-industry observations from 2003 to 2016 and employing the Difference-in-Differences (DID) strategy, I find that government backup encourages industries to invest more, at the expense of worsening aggregate efficiency. The third topic studies how the stimulus-driven credit boom affects the bank loan financing of firms. Through Chinese listed firm data from 2003 to 2018, the finding indicates that political connections serve as an implicit guarantee, enabling firms with these connections to obtain and maintain favourable treatment from bank lending after the stimulus package. Overall, this thesis supports the view that the stimulus package led more resources to being allocated to industries and firms with government backup, which, in turn, contributed to the slowdown in Chinese growth in the recent decade.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Subjects: H Social Sciences > HB Economic Theory
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Economics
• Supervisor's Name: Ding, Professor Sai and Yoshimoto, Dr. Hisayuki
• Date of Award: 2024
• Depositing User: Theses Team
• Unique ID: glathesis:2024-84506
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 27 Aug 2024 15:36
• Last Modified: 27 Aug 2024 15:36
• Thesis DOI: 10.5525/gla.thesis.84506
• URI: https://theses.gla.ac.uk/id/eprint/84506