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Evaluating the Effectiveness and Efficiency of the Four-trillion Yuan Stimulus Package: Evidence from Stock Market Returns of Chinese Listed A Shares

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  • Zhiguo Li
  • Xiaorong Zhang

Abstract

Using stock returns of individual Chinese A shares as dependent variables, we confirm that the 2008 global financial crisis hit China through the demand channel and find that the four-trillion yuan stimulus package had a larger and more lasting effect on stimulating the real economy than on encouraging stock market speculation. The package, implemented with tremendous credit expansion in 2009 and 2010, is both effective and efficient in facilitating the financing of firms' working capital, but has weaker effects on the financing of investments. Long-term capital allocation is not efficient in that it goes to firms that idiosyncratically invested heavily before the financial crisis but not to those that are in need of capital for investment determined by industry features. Specifically, state-owned companies are privileged in long-term financing but significantly underperform non-state-owned ones.

Suggested Citation

  • Zhiguo Li & Xiaorong Zhang, 2014. "Evaluating the Effectiveness and Efficiency of the Four-trillion Yuan Stimulus Package: Evidence from Stock Market Returns of Chinese Listed A Shares," Global Economic Review, Taylor & Francis Journals, vol. 43(4), pages 381-407, December.
    • Handle: RePEc:taf:glecrv:v:43:y:2014:i:4:p:381-407
    DOI: 10.1080/1226508X.2014.982319
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    Cited by:

    1. Zhou, Lin & Tian, Li & Gao, Yuan & Ling, Yingkai & Fan, Chenjing & Hou, Deyi & Shen, Tiyan & Zhou, Wentong, 2019. "How did industrial land supply respond to transitions in state strategy? An analysis of prefecture-level cities in China from 2007 to 2016," Land Use Policy, Elsevier, vol. 87(C).
    2. Gao, Yuan & Tian, Li & Cao, Yandong & Zhou, Lin & Li, Zhibin & Hou, Deyi, 2019. "Supplying social infrastructure land for satisfying public needs or leasing residential land? A study of local government choices in China," Land Use Policy, Elsevier, vol. 87(C).
    3. Pan, Li (Sunny) & Pezzuti, Todd & Lu, Wei & Pechmann, Cornelia (Connie), 2019. "Hyperopia and frugality: Different motivational drivers and yet similar effects on consumer spending," Journal of Business Research, Elsevier, vol. 95(C), pages 347-356.
    4. Sheng Zhang & Meng Xu & Yifu Yang & Zeyu Song, 2021. "Technological Innovation, Production Efficiency, and Sustainable Development: A Case Study from Shenzhen in China," Sustainability, MDPI, vol. 13(19), pages 1-12, September.
    5. Li, Fengqing & Cheng, Yao & Li, Lingyue, 2021. "How entrepreneurialism influences HSR-driven land development: Case studies of Anhui province, China," Land Use Policy, Elsevier, vol. 106(C).

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