TWO ESSAYS ON CHINA'S ECONOMY AND FINANCIAL MARKETS

Abstract

This thesis includes two essays on China’s economy and financial markets. Essay 1 examines the impact of state ownership of borrowers on the finance-growth nexus in China. Using a sample of 31 provinces from 2004 to 2013, I find that the growth effect of bank deepening is more evident with a larger fraction of State-Owned Enterprises while Non-State-Owned Enterprises contribute to economic growth with the expansion of equity market. Essay 2 examines the impact of funding liquidity on market liquidity by using a nature experiment in Chinese stock market in April 2015 when China Securities Regulatory Commission decides to restrict Off-market margin trading. With the exogenous decline in funding liquidity, the stocks those are not included in the official margin trading list experience a larger decline in market liquidity. My results also reveal that the commonality in liquidity within the Off-market margin stocks increases with the shocks.