THE 2008 ECONOMIC STIMULUS PLAN AND HOUSING PRICE: THE ROLE OF SOEs

Abstract

How does China’s 2008 economic stimulus plan affect housing price through the channel of state-owned enterprises (SOEs)? Utilizing a sample of 206 Chinese cities and a different-in-difference approach, we show that the housing prices in cities with a higher prevalence of SOEs, tend to grow disproportionately faster than that in cities with lower prevalence of SOEs after the shock of 2008 China’s stimulus plan. The heterogeneity tests show that the SOE channel plays a more important role in cities with more city investment bonds, less financial development and lower level of marketization. Our conclusion is robust across a battery of sensitivity tests.