The academic paper The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes, co-authored by LIU Chun, Associate Professor of Tsinghua SEM, CHEN Zhuo (Tsinghua PBCSF) and HE Zhiguo (University of Chicago) won the 6th Liu Shibai Economics Award on December 9.

LIU Chun

This paper bridges the global financial crisis, China's "four trillion" stimulus package in 2008, and the rapid expansion of shadow banking in China after 2012, and explores their inherent connections and interaction mechanisms, emphasizing the important role of market forces in financing structure changes and systemic financial risk prevention for local governments. The paper identifies that the "four trillion" stimulus package implemented in 2009 was an important driving factor for the rapid growth of shadow banking after 2012. The paper is innovative in three aspects.

Firstly, it provides an economic explanation for the explosive growth of China's shadow banking after 2012.

Secondly, it is the first academic systematic comparison between China's shadow banking sector and the one represented by trust companies in the "Federal reserve era" of the United States a century ago, both of which are found to have met the financing needs of the real economy in the process of rapid economic development, objectively promoting the modernization of financial markets, including interest rate marketization, bond market development, and non-banking wealth management business.

Thirdly, the paper asserts that for the development of the financial system in the long run, the breaking of rigid redemption and implicit government guarantees are greatly significant for the development of China's capital market. It helps regulatory agencies to use market forces to prevent systemic financial risks, promote the deepening of marketization of the entire economy, and improve the efficiency of financial services to the real economy.

LIU Chun's main research areas include capital markets, econometrics, and risk management, and he has run courses such as intermediate financial theory, financial data analysis, and financial practices.

In recent years, LIU Chun has published articles in both domestic and foreign journals, including Journal of Financial Economics, Journal of Banking and Finance, Journal of Applied Econometrics, Journal of Financial Econometrics, Journal of Financial Research, Journal of Management Science in China, Statistical Research, China Industrial Economics, China Soft Science, Financial & Trade Economics, Journal of Marketing Science, and China Journal of Economics.

The Liu Shibai Economics Award was established in 2012 by Southwestern University of Finance and Economics and the Liu Shibai Award Fund for the whole society, aiming to promote theoretical innovation in economics with Chinese characteristics, develop philosophy and social sciences with Chinese characteristics, continue the innovative spirit of Professor Liu Shibai and scholars of older generations in economic research, explore classic works of contemporary economics, and recognize and develop future academic masters.

The Liu Shibai Economics Award has been held six times and is one of the most influential and academically renowned economics awards in China. The biannual award is designed to promote development of economics with Chinese characteristics, style, and grandeur. This year, there are 10 award-winning papers and monographs.