liu xiaolei: the key role of local governments in promoting the development of local industrial chains and future research directions
2024-09-24
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china development network news: the 2nd china financial discipline annual conference (2024) was held in beijing from september 20 to 21. this annual conference focused on "deepening financial system reform and accelerating the construction of a financial power", aiming to promote in-depth exchanges and innovations in financial disciplines, and contribute to promoting high-quality financial development and taking the path of financial development with chinese characteristics.
the annual meeting was jointly sponsored by renmin university of china and industrial and commercial bank of china, hosted by the national institute of finance of renmin university of china, the institute of modern finance of industrial and commercial bank of china, the school of finance and finance of renmin university of china, the china modern finance society, the china financial and financial policy research center of renmin university of china, and the china financial discipline autonomous knowledge system alliance, and co-organized by "financial research", "modern finance research" and "economic theory and economic management". this annual meeting was divided into the prologue forum, the opening forum, the second meeting of the council of the china financial discipline autonomous knowledge system alliance and six theme forums. more than 400 experts from more than 100 universities across the country, the industrial and commercial bank of china and other academic and industry representatives attended the meeting.
on the afternoon of september 20, the opening forum of the second annual conference of china finance (2024) was held. liu xiaolei, deputy director of the school of economics and management of peking university, delivered a keynote speech at the meeting entitled "the key role of local governments in promoting the development of local industrial chains and future research directions".
liu xiaolei said that the construction of our independent knowledge system should be devoted to studying chinese issues, especially summarizing china's unique development path. the goal is to elevate these practices to the level of economics or finance theory, while also being able to more effectively tell the chinese story to the west and the international community.
a notable phenomenon in china's economic development is the development of local industrial chains. industrial policies from the central government to local governments emphasize the need to develop local industrial chains in combination with local advantageous industries. for example, fujian province has built a new energy vehicle industrial chain, and all cities in the province have made arrangements around this industrial chain. for another example, ningde city relies on catl, a leading enterprise, to make arrangements along the upstream and downstream industries of catl and provide a number of support policies. in our survey of local governments, we found that local governments usually choose 10 industrial chains, with mayors, deputy mayors, secretaries, deputy secretaries and other government leaders serving as chain leaders and responsible for coordination, which reflects chinese characteristics.
projecting this practice onto academic research, macroeconomics generally recognizes the important role of local governments in promoting economic development. however, at the micro level, top journals in the financial field often have a negative view of the role of local governments: for example, local government investment squeezes out private investment, and local debt leads to financing difficulties for private enterprises. this article aims to resolve the inconsistency between macro and micro in academic research and explore the positive role of local governments in promoting the construction of local industrial chains.
economic theory emphasizes that cooperation between economic entities faces many frictions, which bring about information asymmetry costs, search costs, etc. effective intervention can reduce frictions and promote cooperation. for example, a study in a top economics journal in 2017 found that organized random pairing discussions can increase the probability of scholars jointly applying for a project by 75%, which shows that even within the same school, cooperation between scholars is challenging. similarly, cooperation between enterprises also has many frictions, and external forces are needed to reduce such frictions. the positive effect of china's local government in building local industrial chains is that it reduces the cost of cooperation between local enterprises and upstream and downstream enterprises in their industrial chains.
liu xiaolei introduced that our research mainly explored two issues: one is how the construction of local industrial chains affects the development of local enterprises; the other is what role the local government plays in it. we use chinese business registration data to measure the entry of new enterprises; use industry input-output tables to measure the upstream and downstream of enterprises; use the growth rate of upstream and downstream enterprises of a certain enterprise in the same city to measure the construction of the industrial chain; use the stock return rate of the enterprise to measure the future performance of the enterprise; we distinguish the differences between government boundaries and geographical boundaries, and study the coordination role of local governments. taking catl as an example, catl's upstream industries include non-ferrous metals, computers, rubber, chemicals, etc. we construct the entry variable of catl's upstream enterprises based on the weights of these industries, and similarly construct the entry variable of downstream industry enterprises. the average is taken to obtain the activity of catl's industrial chain. we found that this variable can significantly predict the next period of catl's stock return rate, and this impact is long-term. we used fama-macbeth technology to test and obtained the same results. in addition, we also examined profit margins, sales growth rates, and actual performance, and found that the activity of the industrial chain can also predict the actual performance of enterprises in the future.
we use the distance between cities to distinguish the impact of government boundaries and geographical boundaries on the above results. for example, for enterprises in xuzhou, the impact of the activeness of the industrial chain in suqian, which is also in jiangsu province, is greater than the impact of zaozhuang, which is closer to xuzhou but belongs to shandong province. this shows that the promotion of local industrial chain development to local enterprises is not only the natural agglomeration effect of marketization, but also inseparable from the intervention of local governments. our further research found that the local government's industrial policies, subsidies and government venture capital funds have played a role in promoting the growth of local industrial chains.
our main conclusion is that the construction of local industrial chains promotes the development of local enterprises, and local governments play an important coordinating role in this process. future research will explore more important issues, such as whether the construction of local industrial chains by local governments will lead to market segmentation? in the context of building a unified national market, how to define healthy competition and excessive competition. these issues will be left to future research.
