DOCSLIB.ORG

Phd Thesis (Charles Chen)

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Phd Thesis (Charles Chen) Chen, Charles I.‐hsin (2014) The dynamics of privatisation in China (1994‐2008): an empirical and econometric analysis. PhD Thesis. SOAS, University of London http://eprints.soas.ac.uk/18444 Copyright © and Moral Rights for this thesis are retained by the author and/or other copyright owners. A copy can be downloaded for personal non‐commercial research or study, without prior permission or charge. This thesis cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder/s. The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders. When referring to this thesis, full bibliographic details including the author, title, awarding institution and date of the thesis must be given e.g. AUTHOR (year of submission) "Full thesis title", name of the School or Department, PhD Thesis, pagination. The Dynamics of Privatisation in China (1994-2008): An Empirical and Econometric Analysis Charles I-hsin Chen Thesis submitted for the degree of PhD in Economics 2014 Department of Economics School of Oriental and African Studies University of London 1 Declaration for PhD thesis I have read and understood regulation 17.9 of the Regulations for students of the School of Oriental and African Studies concerning plagiarism. I undertake that all the material presented for examination is my own work and has not been written for me, in whole or in part, by any other person. I also undertake that any quotation or paraphrase from the published or unpublished work of another person has been duly acknowledged in the work which I present for examination. Singed: _________________________________ Date: ___________________ 2 Acknowledgement I would like to express my gratitude and indebtedness to those who helped me, particularly Bob Ash, Ben Groom, Robin Porter, Jason Lok and Wen-chin Chung, without whom this thesis will not be completed. A special thanks for my parents Wen-sen Chen and Po-chia Lu and, of particular, my wife Linda Anzi for their patience and understandings throughout all these years. 3 Abstract At the heart of China’s economic transition is the privatisation reform launched in the late 1990s. This thesis identifies the driving force behind the dynamics, characterising the privatisation story in China, in terms of the shrinkage of state sector. Nine hypotheses are established to test the influence of a variety of factors across macroeconomic environment, microeconomic condition and the context of political economy. Two panel datasets, generated from public data sources with respectively 450 and 3,300 observations during the period from 1994 to 2008, are analyzed by system general method of moments (system-GMM) in a dynamic specification. New empirical evidence adds to our understanding of privatisation in China by rejecting a uniformly consistent path, but highlighting its enormous complexity, captured in its evolutionary, regionally and sectorally diverse nature. The process of privatisation appears to be multi-dimensional, which not only reflected a centrally-determined national policy, but was played out as a drama in which the principal actors were the central reformers, local bureaucrats, enterprise managers, bank lenders and private investors. Word count: 91,908 (including main chapters with footnotes) 4 Table of Contents Title Privatisation in China (1995-2008) 1 Table of contents 5 List of tables 6 List of figures 9 Abbreviation 10 Chapter One Introduction 11 Chapter Two From Enterprise Reform to Privatisation (1978-1997) 25 2.1 Bumpy road toward SOE reforms 25 2.2 From enterprise reform to ownership revolution 38 2.3 Privatisation process 58 2.4 Privatisation performance 69 Chapter Three Literature Review: Why privatise? 76 3.1 Studies of the determinants of privatisation 76 3.2 Theoretical discussion and establishing hypotheses 104 Chapter Four Research Hypotheses and Methodology 136 4.1 Research hypotheses 136 4.2 Multi-level framework 152 4.3 Econometrics 166 4.4 Data and variables 181 Chapter Five Provincial Analysis 207 5.1 Data and summary statistics 207 5.2 Preliminary analysis 213 5.3 Empirical results 230 Chapter Six Industrial Analysis 254 6.1 Data and descriptive statistics 254 6.2 Preliminary analysis 256 6.3 Empirical results 263 Chapter Seven Concluding Analysis – Privatisation with Chinese 293 Characteristics? 7.1 General analysis 293 7.2 The story of Chinese privatisation 303 7.3 Concluding remarks: Privatisation with Chinese 308 characteristics? 7.4 About this research 313 Appendix 2A 324 5A 328 5B 346 References 347 5 List of Tables Table 2.1 Chronological table of enterprise reforms in China 27 (1978-1999) Table 2.2 SOE performance in selected years 45 Table 2.3 Subsidies to loss-making SOEs in central and local 48 governments (1978-2006) Table 2.4 Ownership diversification and enterprise numbers 49 (1980-2008) Table 2.5 Average decreasing share of state-owned enterprises and 68 employees by provinces and industries (1994-2008) Table 2.6 Measuring the privatisation performance in privatisation 70 literature Table 3.1 Theoretical studies of privatisation dynamics in literature 81 Table 3.2 Empirical studies of determinants of privatisation 94 Table 3.3 Theories, arguments, models and evidence for hypotheses 130 Table 4.1 Basic conditions of Chinese civil servants and administrative 151 personnel in enterprises (1994) Table 4.2 Privatisation variable in empirical literature 185 Table 4.3 Variable definitions and summary statistics in the provincial 198 dataset Table 4.4 Variable definitions, summary statistics and correlations 201 Table 5.1 Summary statistics in the provincial dataset 207 Table 5.2 Privatisation variable 1 – provincial index of state-owned and 211 state holding enterprises Table 5.3 Privatisation variable 2 – provincial index of employees in 212 state-owned and state holding enterprises Table 5.4 Regional and time comparison 214 Table 5.5 Simple regression analysis by pooled-OLS 228 Table 5.6 Empirical results for the hypothesis group of political 235 economy Table 5.7 Empirical results for the hypothesis group of macroeconomic 240 environment Table 5.8 Empirical results for the hypothesis group of microeconomic 245 conditions Table 5.9 Comparison of all hypotheses by principal component 250 analysis 6 Table 6.1 Summary statistics and correlation table 255 Table 6.2 Summary statistics by sector, region and time 258 Table 6.3 Mean comparison of the privatisation degree by industry 260 Table 6.4 Simple regression analysis by pooled-OLS 263 Table 6.5 Empirical results from light manufacturing industries 268 Table 6.6 Empirical results from the heavy manufacturing industries 273 Table 6.7 Empirical results from mining, electricity, gas and water 277 industries Table 6.8 Empirical results by regions 281 Table 6.9 Empirical results by time 288 Table 6.10 Privatisation patterns by sector, region and time 289 Table 2A.1 Number of state-owned and state holding enterprises with 324 independent accounting system in regions and industries (1994-2008) Table 2A.2 Number of employees in state-owned and state holding 326 enterprises with independent accounting system in regions and industries (1994-2008) Table 5A.1a Soft budget variable 1 – index of subsidies for loss-making 328 SOEs Table 5A.1b Soft budget variable 2 – industrial loans to total loans in 329 financial institutes Table 5A.2a Political ideology variable 1 – private-owned enterprises to 330 total enterprises Table 5A.2b Political ideology variable 2 – employees of private owned 331 enterprises to total employees Table 5A.3a Decentralisation variable 1 – self-funding share of the 332 investment of capital construction Table 5A.3b Decentralisation variable 2 – local revenue share to local 333 expenditure Table 5A.4a Market competition variable 1 – non-state share of industrial 334 output Table 5A.4b Market competition variable 2 – openness degree to 335 international trade Table 5A.5a Financial pressure variable 1 – asset-liability ratio 336 Table 5A.5b Financial pressure variable 2 – deficit budget share 337 Table 5A.6a Institutional infrastructure variable 1 – national physical 338 infrastructure index Table 5A.6b Institutional infrastructure variable 2 – national legal 339 7 infrastructure index Table 5A.7a Economic efficiency variable 1 – asset-contribution rate 340 Table 5A.7b Economic efficiency variable 2 – asset-output ratio 341 Table 5A.8a Firm size variable 1 – provincial index of average number of 342 employees in SOEs Table 5A.8b Firm size variable 2 – provincial index of average assets in 343 SOEs Table 5A.9a Human capital variable 1 – scientific and technical personnel 344 share of total SOE employees Table 5A.9b Human capital variable 2 – provincial index of labour 345 productivity Table 5B.1 Principal component analysis and summary statistics of new 346 variables 8 List of Figures Figure 2.1 Total number and annual growth rate of SOEs (1980-2008) 41 Figure 2.2 Subsidies to loss-making SOEs (1985-2006) 47 Figure 2.3 Industrial loans and growth changes (1979-2008) 52 Figure 2.4 Interest rate spreads for one year period (1955-2002) and the 54 real lending rate (1985-2002) Figure 2.5 Composition of the industrial output by ownership types 61 (1949-2008) Figure 2.6 Total industrial output by ownership types (1949-2008) 62 Figure 2.7 Decreases of SOEs by provinces (1994-2008) 63 Figure 2.8 Decreases of SOE employees by provinces (1994-2008) 64 Figure 2.9 Deceases of SOEs by industries (1994-2008)
Load more

Recommended publications
  • X001132127.Pdf
    ' ' ., ,�- NONIMPORTATION AND THE SEARCH FOR ECONOMIC INDEPENDENCE IN VIRGINIA, 1765-1775 BRUCE ALLAN RAGSDALE Charlottesville, Virginia B.A., University of Virginia, 1974 M.A., University of Virginia, 1980 A Dissertation Presented to the Graduate Faculty of the University of Virginia in Candidacy for the Degree of Doctor of Philosophy Corcoran Department of History University of Virginia May 1985 © Copyright by Bruce Allan Ragsdale All Rights Reserved May 1985 TABLE OF CONTENTS Introduction: 1 Chapter 1: Trade and Economic Development in Virginia, 1730-1775 13 Chapter 2: The Dilemma of the Great Planters 55 Chapter 3: An Imperial Crisis and the Origins of Commercial Resistance in Virginia 84 Chapter 4: The Nonimportation Association of 1769 and 1770 117 Chapter 5: The Slave Trade and Economic Reform 180 Chapter 6: Commercial Development and the Credit Crisis of 1772 218 Chapter 7: The Revival Of Commercial Resistance 275 Chapter 8: The Continental Association in Virginia 340 Bibliography: 397 Key to Abbreviations used in Endnotes WMQ William and Mary Quarterly VMHB Virginia Magazine of History and Biography Hening William Waller Hening, ed., The Statutes at Large; Being� Collection of all the Laws Qf Virginia, from the First Session of the Legislature in the year 1619, 13 vols. Journals of the House of Burgesses of Virginia Rev. Va. Revolutionary Virginia: The Road to Independence, 7 vols. LC Library of Congress PRO Public Record Office, London co Colonial Office UVA Manuscripts Department, Alderman Library, University of Virginia VHS Virginia Historical Society VSL Virginia State Library Introduction Three times in the decade before the Revolution. Vir­ ginians organized nonimportation associations as a protest against specific legislation from the British Parliament.
    [Show full text]
  • 419 CHAPTER 7 TREATMENT of a DEBTOR's HOME in FOREIGN JURISDICTIONS What Has Been Will Be Again, What Has Been Done Will Be Do
    CHAPTER 7 TREATMENT OF A DEBTOR'S HOME IN FOREIGN JURISDICTIONS What has been will be again, what has been done will be done again; there is nothing new under the sun. Ecclesiastes 1:9 The Bible (New International Version 1984) 7.1 Introduction Consideration of the treatment of the home of the debtor both inside and outside of insolvency, in other jurisdictions, may prove useful as guidance may be drawn from experiences abroad. Comparative research reveals differences in treatment of a debtor's home in various jurisdictions. In systems which do provide protection for the home against the claims of creditors, there are differences in the method in, and extent to, which this occurs. Traditionally, broadly speaking, two approaches have been identified. In some jurisdictions, formal statutory "homestead exemptions", the monetary limits of which are often capped, apply both in the individual debt enforcement process and in the event of the debtor's insolvency. In others, there is no formal "home exemption", as such, but statutory provisions regulating, inter alia, the civil process, family law, insolvency law or the recognition of human rights afford a measure of protection. This occurs, for example, by the imposition of certain procedural requirements before the home may be sold, protecting the interest in the home of a spouse or partner of the debtor from creditors' claims or postponing the forced sale of the family home, in certain circumstances. In a comparative study of exempt assets, after noting the differences, in various jurisdictions,
    [Show full text]
  • Financial Trading and Gambling Disorder in Spain
    A CLINICAL ECONOMY OF SPECULATION: Financial Trading and Gambling Disorder in Spain JORGE NU´ N˜ EZ University of California, Davis http://orcid.org/0000-0001-6266-7052 “Did you know that a brokerage firm can lend you up to fifty times your real trading capacity?” Yes, I replied, knowing that the question was a rhetorical one. “Well, that’s what got me here,” said Silvia during our interview at the psychiatric clinic of the Catalonia University Hospital (CUH).1 Silvia was a fifty- something financial trader who had been diagnosed with gambling disorder, an entrepreneurial woman who, after quitting her job in a medium-size bank, set up shop as a freelance trader in her small hometown near Barcelona.2 When I interviewed Silvia in early 2013, she was under clinical treatment for gambling disorder and had various pending lawsuits for defrauding former clients and friends of more than half a million euros. This article concerns itself with Silvia and the clinical economy of her trans- formation from financial trader to problem gambler. In examining the medicali- zation of trading as gambling disorder during the Spanish financial crisis of 2007 to 2015, I show that the mobilization of clinical resources was not simply a matter of regulating financial markets. In the process, new lines were being drawn around the concept of proper speculation. This article develops the concept of a clinical economy of speculation, which refers to “the exchange of symptoms for diagnosis and treatments” (Davis 2010, 155) through which the category of the problem gambler is repurposed to include financial traders.
    [Show full text]
  • The Laws of the Sea and the Principles of Reprisal According to the Roman
    CHAPTER FIVE THE LAWS OF THE SEA AND THE PRINCIPLES OF REPRISAL According to the Roman Corpus Juris, the sea was a res nullius or a nullius territorium by natural law. This meant that it was free from any claims of ownership, and instead belonged to all.1 However, even though much medieval law was founded on the principles of the Corpus Juris, it did not mean that actions taken at sea took place in a judicial void and by default were permissible. How actions at sea were perceived judicially is, however, a delicate question. In this chapter, I shall analyse what laws regulated behaviour at sea, and how they failed to address the issues of piracy and reprisals. These reprisals were the common manner in which to justify piracy, and they took place in a juridical grey area where the king, on an ad hoc basis and strongly influenced by foreign as well as domestic policies of the realm, decided what reprisals should be authorised by him and when. This authorisation was expressed in two types of government- authorized seizures: arrest and marque. An analysis of these aspects is important, for it expresses the peculiar legal status of piracy in the Middle Ages and provides a further framework for the understanding of the status of piracy in an era characterised by weak central governments. The Law Merchant Many historians have made assumptions about the laws of the sea and how maritime, especially commercial, life was regulated. It is a matter of debate what exactly constituted the law of the sea and commercial law in regard to piracy.
    [Show full text]
  • 11GUEREE CO, Cent Efficiency Would.Be Secured If They Do Not Think I Am Best on October 14 William Kaempffer,-Mrs^-M
    ;:.:::!.-.:.-. __,V. -./ -v . o PAGE TEN fSEfTEMBER 2_, 3,944 08k 1 will determine"^; peace terms, and if the other nation' tones, nearly obscured what little English he could com- A free land is one where a about his Job" waiter or clerk can properly Next Salvar* Drive The Rahway Record don't like it therWs nothing they can do about it. mand in his relation to Lieutenant Paul Mancusbt of the answer people who unjustly bawl Established July 13, 1833 tale of how he and another, Louis Shockley, 84 East Hazel him out—provided he doesn't core 'This Record will wrap a torrid -1170 Broad 8tn*t Tel. Rah. 7-0600 New Furthermore," the "indispensable", man should know pack f or Tojo. ""HMo SUNDAY, OCT. 8 Published Thursday arteroons by The Rahway Publishing Corporation. that whatever is agreed upon at the Dumbarton Confer wood avenue, at separate times Wednesday night, had been II Xntered at the post office at Rahway, New Jersey, as Hcond class mall matter Waste Paper In Bundles under the act of March 3, 1879. ence, will not last two minutes when the general confer badly beaten by two hold-up men. The reason for the ma- Tin Cans, cleaned and flattened CASUALTIES 1NCEEASE With 4 Allied fronts. Walter • P. Marpre-iT. ...—P-blUber ence of all nations is called, for the other-countries,-dis licious, attack,- according to Albert, was-that he had.been Help to Win the War r O. C. Stearns.. Editor SURGICAL DRESSINGS gusted at the procrastination and appeasement methods able to produce only 20 cents when his assailants, whom he EXCLUSIVE AT'RrjrCOERKE CO.
    [Show full text]
  • Financial Reform in China:The Problematic Aspects of Protecting
    Financial Reform in China: The Problematic Aspects of Protecting Creditor Rights Berry Fong-Chung Hsu*, Douglas Arner∗∗ and Qun Wan∗∗∗ Abstract Since 1979, China has been involved in an on-going process of economic reform with the goal of transforming from a centrally planned economy to a socialist market economy. As one aspect of this process of transition, China has to address issues of financial-sector and state-owned enterprise reform. With its accession to the World Trade Organization in 2003 and its related commitments to foreign competition and financial sector reform the process of transition has taken on new urgency. In its process of enterprise and financial reform, China has used a policy of gradualism and legislative forbearance, i.e. a certain ambiguity and flexibility in legislating and interpreting policy through law. This paper discusses how this policy is application in addressing the non-performing loan (NPL) problems, a substantial component is related to property rights. In addressing the NPL problems, four asset management companies were created. They are state-owned, non-banking financial institutions with power to manage enterprises. In disposing the vast volume of financial assets (a substantial of which are real estate related), the property right issues under Chinese law have to be addressed. These include the validity of transfer of property (e.g. loans sold by the mortgagees), creditor rights (e.g. problems of transferred mortgages), corporate law concerns (e.g. issues related to creditor rights, equity rights, and real estate), and foreign participation (e.g. foreign ownership of real estate). * B.Sc., LL.M.
    [Show full text]
  • Kraus V. Professional Bureau of Collections Of
    Case 17-4137, Document 3, 12/27/2017, 2203488, Page1 of 20 FILED IN CLERK'S OFFICE US DISTRICT COURT E.D.N.Y. NOV 2 7 2017 * UNITED STATES DISTRICT COURT * EASTERN DISTRICT OF NEW YORK BROOKLYN OFFICE ------------------------------------------------------x BLIMA KRAUS, On Behalf of Herself and All Other Similarly Situated Consumers, Plaintiff, MEMORANDUM AND ORDER 17-CV-3402 - against- PROFESSIONAL BUREAU OF COLLECTIONS OF MARYLAND, INC., Defendant. ------------------------------------------------------x GLASSER, Senior United States District Judge: Plaintiff Blima Kraus ("Kraus") brings this putative class action against Professional Bureau of Collections of Maryland, Inc. ("PBCM"), alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U .S.C. § 1692 et seq. Before the Court is PBCM 's motion to dismiss the complaint under Rule l 2(b)( 6) of the Federal Rules of Civil Procedure. Kraus's claim is essentially as follows: She alleges that PBCM's June 6, 2016 letter to her (the "Letter"), which transmitted an offer to settle her debt for 40% of her account balance, violated 15 U.S.C. § l 692e because it listed her account balance but did not indicate that the account balance might increase due to interest or other charges. Section l 692e prohibits the use of "any false, deceptive, or misleading representation or means in connection with the collection of any debt," including "[t]he false representation of ... the character, amount, or legal status of any debt." 15 U.S.C. §§ 1692e, 1692e(2)(A). In Avila v. Riexinger & Associates, LLC, the Second Circuit held that a debt collector violates § l 692e if it notifies a consumer of his or her account balance but fails to disclose that the consumer's balance may increase due to interest and fees.
    [Show full text]
  • Consumer Debt Issues People's Republic of China
    Consumer Debt Issues People’s Republic of China November 2020 INSOLVENCY PRACTICE GROUP TECHNICAL PAPER SERIES Consumer Debt Issues - People’s Republic of China (PRC) Contents i Acknowledgement ii 1. Consumer insolvency regime 1 1.1 Introduction 1 1.2 What are the consumer bankruptcy / restructuring processes available? 3 1.3 Which is the competent court or other authority to apply for consumer insolvency 3 proceedings? 1.4 Who is the 'boss' in consumer insolvency proceedings (judge or administrator)? 4 1.5 What legal and actual requirements are there to enter into consumer insolvency 4 proceedings? 1.6 Costs and timelines of the available procedures 6 2. Means testing for insolvent individuals 6 3. How are the various claims treated? 8 4. What changes and reforms are needed? 10 5. Court Approved Settlement in respect of Mr Cai: Report of the Wenzhou Case 10 INSOL International 6-7 Queen Street, London, EC4N 1SP Tel: +44 (0) 20 7248 3333 Fax: +44 (0) 20 7248 3384 Copyright © No part of this document may be reproduced or transmitted in any form or by any means without the prior permission of INSOL International. The publishers and authors accept no responsibility for any loss occasioned to any person acting or refraining from acting as a result of any view expressed herein. Copyright © INSOL INTERNATIONAL 2020. All Rights Reserved. Registered in England and Wales, No. 0307353. INSOL, INSOL INTERNATIONAL, INSOL Globe are trademarks of INSOL INTERNATIONAL. i INSOLVENCY PRACTICE GROUP TECHNICAL PAPER SERIES Acknowledgement INSOL International is pleased to present a technical paper on the People’s Republic of China (PRC) under its Insolvency Practice Group Technical Papers Series focusing on “Consumer Debt Issues”.
    [Show full text]
  • From Commonwealth to Constitutional Limitations: Thomas Cooley's Michigan, 1805-1886
    University of Michigan Law School University of Michigan Law School Scholarship Repository SJD Dissertations Other Publication Series 2014 From Commonwealth to Constitutional Limitations: Thomas Cooley's Michigan, 1805-1886 Robert Allan Olender University of Michigan Law School Follow this and additional works at: https://repository.law.umich.edu/sjd Part of the Constitutional Law Commons, Courts Commons, Legal History Commons, and the State and Local Government Law Commons Citation Olender, Robert Allan, "From Commonwealth to Constitutional Limitations: Thomas Cooley's Michigan, 1805-1886" (2014). SJD Dissertations. This Dissertation is brought to you for free and open access by the Other Publication Series at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in SJD Dissertations by an authorized administrator of University of Michigan Law School Scholarship Repository. For more information, please contact [email protected]. From Commonwealth to Constitutional Limitations: Thomas Cooley's Michigan, 1805-1886. By Robert Allan Olender Dissertation Submitted to the University of Michigan Law School Ann Arbor, Michigan In partial fulfillment of the requirements for the degree of Doctor of the Science of Jurisprudence 2014 Faculty Committee Professor William Novak, Chair Professor Thomas Green Professor Richard Primus 1 © Copyright by: Robert Allan Olender 2014 All rights reserved. 2 Acknowledgments A long list of friends and mentors provided considerable assistance during my journey to complete this work. I am indebted to them and thankful for their guidance, support, and wisdom. I am particularly indebted to my advisor and committee chair, Professor William Novak. Professor Novak took on the considerable task of molding me into a legal historian.
    [Show full text]
  • Financial Trading and Gambling Disorder in Spain
    A CLINICAL ECONOMY OF SPECULATION: Financial Trading and Gambling Disorder in Spain JORGE NU´ N˜ EZ University of California, Davis http://orcid.org/0000-0001-6266-7052 “Did you know that a brokerage firm can lend you up to fifty times your real trading capacity?” Yes, I replied, knowing that the question was a rhetorical one. “Well, that’s what got me here,” said Silvia during our interview at the psychiatric clinic of the Catalonia University Hospital (CUH).1 Silvia was a fifty- something financial trader who had been diagnosed with gambling disorder, an entrepreneurial woman who, after quitting her job in a medium-size bank, set up shop as a freelance trader in her small hometown near Barcelona.2 When I interviewed Silvia in early 2013, she was under clinical treatment for gambling disorder and had various pending lawsuits for defrauding former clients and friends of more than half a million euros. This article concerns itself with Silvia and the clinical economy of her trans- formation from financial trader to problem gambler. In examining the medicali- zation of trading as gambling disorder during the Spanish financial crisis of 2007 to 2015, I show that the mobilization of clinical resources was not simply a matter of regulating financial markets. In the process, new lines were being drawn around the concept of proper speculation. This article develops the concept of a clinical economy of speculation, which refers to “the exchange of symptoms for diagnosis and treatments” (Davis 2010, 155) through which the category of the problem gambler is repurposed to include financial traders.
    [Show full text]
  • Research on Bond Issuers' Default Risk Ke Bi1,*
    Advances in Social Science, Education and Humanities Research, volume 543 Proceedings of the 2021 6th International Conference on Social Sciences and Economic Development (ICSSED 2021) Research on Bond Issuers' Default Risk Ke Bi1,* 1Melbourne Business School, The University of Melbourne, Melbourne, Victoria 3053, Australia *Corresponding author. Email: [email protected] ABSTRACT After analysing the RMB 3 billion credit bond default events of Yongcheng Coal and Electricity Group (Yongmei in the following paper) which is a local state-owned enterprise with AAA credit rating from its rating agency before the default event, some problems have been found. From Yongmei’s consolidated financial statements and the parent company’s financial statements, it can be found that both statements have a large proportion of short-term debts and their debts from banks are replacing with bond debts. In contrast to the consolidated balance, the parent company has only RMB 2.7 billion in cash and cash equivalents. As the parent is the subject of debt and repayment, it has insufficient solvency, especially in the short term. Besides, from the rating agency’s rating reports and announcement, the rating model uses EBIT and EBITDA as profit indicators and all data from consolidated statements, which are mismatched with the subject of bonds. Hence, it left loopholes to the parent company to upgrade its rating, to ‘transfuse blood’ to its loss-making subsidiaries, or to evade debts. Ultimately, according to these findings, suggestions are provided to debt issuers, regulators, institutional investors and rating agencies. Keywords: Bond Default, Default Risks, Evading debts, Rating Failure 1. INTRODUCTION have invisible guarantees from the government, there has been no substantial default by state-owned enterprises for 1.1 Research Background a long time.
    [Show full text]
  • Bailouts and Bankruptcy Law in China: a Confusion of Law and Policy*
    Volume 12, No. 4 50 Bailouts and Bankruptcy law in China: A Confusion of Law and Policy Chuyi WEI Peking University, China Abstract: It is not uncommon for large companies in China, especially SOEs, to be bailed out with government funds or bank loans. This article explores the bailouts of non-financial companies in the country with empirical and theoretical analysis. It finds that the government, especially the local governments are keen to bail out large companies in order to prevent social instability. Also, bailouts in China are still erratic and unprincipled. When bailouts are carried out under the bankruptcy law, legal principles are frequently undermined to the detriment of the creditors. This article argues that bailouts and governmental intervention in general must be constrained with legal principles so that inefficient companies can be closed down and resource can be allocated more efficiently. Key Words: Bailout, Chinese Bankruptcy Law, Economic Reform Cambridge Journal of China Studies 51 1. INTRODUCTION The Palgrave Dictionary of Economics defines a bailout as 'the rescue of an economic entity from potential or actual insolvency', usually carried out by a national government, a central bank or an international organisation.1 The 2008 financial crisis has provided ample examples of bailouts as many financial institutions collapsed. Non-financial companies can also be bailed out by the government, for example, utility and airline companies, if they are considered ‘too-big-to-fail'.2 In the EU, bailouts are regulated by the regime of rescue and restructuring aid (R&R aid), which is an exception to the state aids rule that prohibits the Member States from giving subsidies or other aid to businesses.3 Under the regime, R&R aid for a firm in difficulty may be considered compatible with the common market at the discretion of the European Commission.4 In the US, bailouts are not regulated through a formal legal regime.
    [Show full text]