Hostname: page-component-848d4c4894-2pzkn Total loading time: 0 Render date: 2024-05-06T11:51:36.401Z Has data issue: false hasContentIssue false
  • English
  • Français

Capital Inflows and Property Prices: Ethnicity, Education, and Spillovers

Published online by Cambridge University Press:  15 February 2022

Yuk-Ying Chang Open the ORCID record for Yuk-Ying Chang [Opens in a new window]  and
Sudipto Dasgupta Open the ORCID record for Sudipto Dasgupta [Opens in a new window]
Yuk-Ying Chang
Affiliation:
Massey University, Massey Business School y.chang@massey.ac.nz
Sudipto Dasgupta*
Affiliation:
Chinese University of Hong Kong, CUHK Business School
*
s.dasgupta@cuhk.edu.hk (corresponding author)
Get access Rights & Permissions [Opens in a new window]

Abstract

China has experienced significant capital flight over the past two decades. Despite anecdotal evidence that some of this capital has been invested in foreign residential markets, not much is known about its destination and impact. We examine the effects of capital inflows from China on residential property prices and the real economy in the USA and global metropolitan areas. We show that inflows had significant effects on residential property markets and employment in regions that i) have strong ethnic ties to China and ii) are destinations of Chinese students. We document spillovers to geographically adjacent regions without strong Chinese links.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 8 , December 2022 , pp. 3145 - 3177
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We thank Cristian Badarinza (the referee) and Jennifer Conrad (the editor) for very helpful comments and suggestions that greatly improved the article. We also thank Sheridan Titman for his helpful discussions. All errors are the authors’ own. Chang thanks Massey University’s Business Impactful Research Fund for funding.

References

Abadie, A.; Diamond, A.; and Hainmueller, J.. “Comparative Politics and the Synthetic Control Method.” American Journal of Political Science, 59 (2015), 495–510.CrossRefGoogle Scholar
Agarwal, S.; Choi, H. S.; He, J.; and Sing, T. F.. “Matching in Housing Markets: The Role of Ethnic Social Networks.” Review of Financial Studies, 32 (2019), 3958–4004.CrossRefGoogle Scholar
Badarinza, C., and Ramadorai, T.. “Home Away from Home? Foreign Demand and London House Prices.” Journal of Financial Economics, 130 (2018), 532–555.CrossRefGoogle Scholar
Bradsher, K., and Searcey, D.. “Chinese Cash Floods U.S. Real Estate Market.” The New York Times, Nov. 29, available at http://www.nytimes.com/2015/11/29/business/international/chinese-cash-floods-us-real-estate-market.html?_r=0 (2015).Google Scholar
Cheung, Y. W., and Qian, X.. “Capital Flight: China’s Experience.” Review of Development Economics, 14 (2010), 227–247.CrossRefGoogle Scholar
Cheung, Y. W.; Steinkamp, S.; and Westermann, F.. “China’s Capital Flight: Pre-and Post-Crisis Experiences.” Journal of International Money and Finance, 66 (2016), 88–112.CrossRefGoogle Scholar
Cuddington, J. T. “Capital Flight: Estimates, Issues and Explanations.” In Princeton Studies in International Finance. Princeton, NJ: Princeton University (1986), 58.Google Scholar
Favilukis, J. Y., and Van Nieuwerburgh, S.. “Out-of-Town Home Buyers and City Welfare.” Journal of Finance, 76 (2021), 2577–2638.CrossRefGoogle Scholar
Ferrantino, M. J.; Liu, X.; and Wang, Z.. “Evasion Behaviors of Exporters and Importers: Evidence from the US–China Trade Data Discrepancy.” Journal of International Economics, 86 (2012), 141–157.CrossRefGoogle Scholar
Gunter, F. R. “Capital Flight from China: 1984–2001.” China Economic Review, 15 (2004), 63–85.CrossRefGoogle Scholar
Gunter, F. R. “Capital Flight.” In International Encyclopedia of the Social Sciences, 2nd edn., Darity, W. A. Jr., ed. Detroit: Macmillan Reference (2008), 434–436.Google Scholar
Gunter, F. R. “Corruption, Costs, and Family: Chinese Capital Flight, 1984–2014.” China Economic Review, 43 (2017), 105–117.CrossRefGoogle Scholar
Gyourko, J.; Hartley, J.; and Krimmel, J.. “The Local Residential Land Use Regulatory Environment Across U.S. Housing Markets: Evidence from a New Wharton Index.” National Bureau of Economic Research, No. w26573 (2019).CrossRefGoogle Scholar
Juwai. “6 Reasons Why Education Underpins Chinese Overseas Property Investment.” July 7, available at https://list.juwai.com/news/2016/07/6-reasons-why-education-underpins-chinese-overseas-property-investment (2016).Google Scholar
Kar, D., and LeBlanc, B.. Illicit Financial Flows from Developing Countries: 2002–2011. Washington, DC: Global Financial Integrity (2013).Google Scholar
Kar, D., and Spanjers, J.. Illicit Financial Flows from Developing Countries: 2003–2012. Washington, DC: Global Financial Integrity (2014).Google Scholar
Li, Z.; Shen, L. S.; and Zhang, C.. “Capital Flows, Asset Prices, and the Real Economy: A ‘China Shock’ in the US Real Estate Market.” FRB International Finance Discussion Paper 1286 (2020).Google Scholar
Taplin, N. “‘Back Door’ Capital Outflows Should Worry Beijing.” Wall Street Journal, Oct. 14 (2019).Google Scholar
Wong, A. “China’s Current Account: External Rebalancing or Capital Flight?” International Finance Discussion Papers 1208. Board of Governors of the Federal Reserve System (2017). https://doi.org/10.17016/IFDP.2017.1208.CrossRefGoogle Scholar
Yang, J. “Deposit-Lending Synergies: Evidence from Chinese Students at U.S. Universities.” Journal of Financial and Quantitative Analysis, 57 (2022), 1960–1986.CrossRefGoogle Scholar
Zhu, A.; Li, C.; and Epstein, G.. “Chapter 10. Capital Flight from China, 1982–2001.” In Capital Flight and Capital Controls in Developing Countries. Cheltenham: Edward Elgar (2005), 262–288.Google Scholar
Supplementary material: PDF

Chang and Dasgupta supplementary material

Online Appendix

Download Chang and Dasgupta supplementary material(PDF)
PDF 467.9 KB