The Institute is pleased to announce the funding results of IEMS Research Grants 2021. Out of a total of 20 applications, 9 grants valued at more than HKD1.25 million altogether were awarded for unique research conducted on a broad range of emerging market-related issues.  

HKUST IEMS Research Grants support high-quality research that provides valuable insights into the challenges facing businesses and governments in emerging markets. The Institute encouraged collaborative proposals among HKUST faculty and with researchers outside HKUST.  Priority is given to collaborative research projects that are oriented around the Institute's focus research themes, as well as proposals that contribute to ongoing Institute’s research initiatives on the topics of Belt and Road, Digital Economy, and the Greater Bay Area. 

IEMS Research Grants 2021 Awardees

Absolute blockchain strength? An empirical examination of the emerging blockchain ABS market in China 

Prof Yanfeng Zheng, Department of Management 

Blockchain or distributed ledger technology has become a buzzword during the past decade. Its potential to challenge current business practices such as financial transactions have been touted or criticized by numerous researchers and practitioners. Nonetheless, existing literatures thus far has virtually zero empirical evidence to demonstrate how the existing financial services benefit from such a new technology. We exploit the emerging asset-backed security (ABS) market with approximately 7,000 ABS products issued between 2015 and 2020 to examine the impact of adopting Blockchain on the financial transactions. Our study will control potential endogeneity with coarsen exact matching (CEM) to carefully examine whether blockchain-based ABS products enjoy any premium than those non-blockchain-based ones. Moreover, we will investigate the specific channels or boundary conditions of the premium effect brought by the adoption of the blockchain technology to ABS market. Our study will make a timely and solid contribution to the existing debate or hype around the blockchain technology and its implications. 

Pursuing resilience in indigenously engineered, yet vulnerable, Philippines and Indonesian rice farming landscape 

Prof Laurence Delina, Division of Environment and Sustainability; Prof Kevin Kim-PongTam, Division of Social Science 

As crises cascade, from COVID-19 to economic recession to weather extremes, rice farming resilience-the capacity to endure socio-economic and environmental stresses-is imperative for food security. In emerging economies such as the Philippines and Indonesia, rice sector development programs have focused on enhancing material capital and on expanding access to these assets. While these interventions have increased resilience, the contribution of non­material capital, such as farmers' relationships with other farmers and even with nonhuman entities such as the Divine, have not been properly unpacked, especially in vulnerable indigenous landscapes. Using multi-method approaches, this project will study Philippine and Indonesian indigenous rice farmers as they experience extreme water-related stressors, geological hazards, socio-economic pressures such as out-migration, economic insecurity, ageing, over-tourism, and changing preferences among the youth to analyze the conditions that build their resilience (or extend their vulnerabilities), and to compare these experiences to reveal similarities and variations. 

Anti-Chinese Sentiment, U.S.‒China Trade War, and Chinese Multinationals’ Global IP Strategy.

Prof Yong H Kim.  Department of Management  

The recent surge in anti-Chinese sentiment—which coincides with the U.S-China trade war and the covid-19 pandemic—presents a dilemma to Chinese multinationals: they aspire to establish and defend their intellectual property (IP) globally while shielding themselves from anti-Chinese sentiment. We propose an “identity arbitrage” model of IP strategy in which multinational corporations manage their national identities and create an impression of being local when attempting to establish their IP in foreign markets. We argue that (ⅰ) China based multinationals are more likely to use their non-China-based subsidiaries to apply for patents in the United States when facing a rising anti-Chinese sentiment, and (ⅱ) this identity-choosing strategy facilitates eventual granting of their patents. With the rise of nationalism globally, our research is timely and relevant for not only Chinese firms but also companies from other emerging markets, as they, too, face xenophobia in their entry into developed economies. 

Foreign Advantages? A Study of Global Activist Short Campaigns.

Prof Allen Huang and Prof Emily Wang, Department of Accounting 

We propose to investigate the mispricing and limits to arbitrage of emerging market firms listed in the stock exchanges of developed markets. Using the setting of short arbitrageurs (short arbs ), we will investigate how the characteristics of targets' headquarters and listing countries affect the success of short arbs' campaigns. Increasing global financial integration has led short arbs to expand their targets to various countries. Anecdotally, their stellar performance in foreign targets, especially those in emerging economies, has elicited considerable attention from the financial press. Still, most research focuses exclusively on US short campaigns, and whether short arbs are generally accurate or manipulate stock prices for profit remains a source of debate. Using short arbs' locations and their targets' headquarters and listing locations, we aim to provide insight into the sources of firm overvaluation in the global financial market and the magnitude of arbitrageurs' constraints. 

Excess Capacity and Vent for Surplus: Evidence from China’s Belt and Road Initiative.

Prof Jin Wang, Division of Social Science 

The Belt and Road Initiative (BRI) is a large-scale global infrastructure development strategy, profoundly reshaping the world. The existing literature mostly focuses on assessing its impact on the recipient countries' costs and benefits and has been mainly at the national level. Taking a different perspective, the proposed study aims to explore the incentives for Chinese regional governments and local enterprises to engage in the overseas cooperation projects actively, and whether such regional participation has benefited those recipient countries. To do so, we plan to compile novel micro-level Belt and Road project data of Chinese firms since 2006. Our findings will gain insights into the interactions between the BRI, sustainable development in China, and the economic integration in recipient countries, guiding and facilitating the future development of international cooperation between China and other countries. 

Foreign Direct Investment along the Belt and Road.

Prof J.T. Li, Department of Management 

The Belt and Road Initiative launched by the Chinese government in 2013 has aroused massive global attention and engendered profound impact. Given the various parties involved and intricate relationships between them, there is great complexity regarding the implementation of the projects. In this project, we draw from the institutional and geopolitical perspectives to examine the selection and participation of host and third-party country firms in BRI projects. We portray firm selection in a BRI project as the outcome of a one-tier bargaining game between China and a host country. Institutions and geopolitics influence both the legitimacy gap of Chinese SOEs in a host country and their relative bargaining power, which shapes the likelihood of a host or third country firm’s participation in BRI projects. We aim to offer a more nuanced understanding of how BRI projects unfold in its implementation and shed light on the negotiation logistics in the process  

The Transmission of Shocks through Multinationals

Prof Robin Gong, Department of Economics 

We study how economic shocks are transmitted from developed countries to emerging markets through multinational activities. We combine U.S. multinational data with tax records and trade transactions of Chinese firms to construct a unique linkage between U.S. multinational headquarters and their Chinese subsidiaries. We examine the impact of two types of economic shocks: (1) Chinese import competition in the U.S. market and (2) internal capital market shocks during the financial crisis, on U.S. multinationals’ entry and exit decisions in China and their subsidiaries’ sales and employment growth as well as international trade activities. Based on a quantitative model featuring multinational production, we discuss the welfare implications of the transmission and propagation of economic shocks through multinational production networks in an export platform. 

Trade Policy and Labor Market Power in China

Prof Amber Yao Li, Department of Economics 

We propose an analysis of the impact of trade policy on labour market power in China. Our preliminary regression analysis show that the tariff reductions reduced labor market monopsony. We will explore further the mechanisms for the falling markdown in response to trade liberalization, and the role of the elasticity of labour supply. First, we will test whether the reductions in markdowns is concentrated in regions with a high influx of migrant labour. Second, we will explore whether this effect is heterogeneous among firms with different skills intensity. Third, we will test whether the regions with more college expansion alleviated the shortage of skilled labour supply and weakened the aforementioned labor market consequences. Moreover, we will build a simple model to uncover the underlying mechanisms and to quantify general equilibrium impact of the liberalication on labour’s share in the manufacturing through both the markup and markdown channels. 
 
 

Determinant of obstetric ultrasound demand in emerging market: evidence from Malawi

Dr Yaeeun Han, Institute for Emerging Markets Studies 

 
Low-and middle-income countries (LMIC) are one of the fastest growing emerging markets in the health industry. Low-cost portable ultrasound was developed to meet the unique need of LMIC, which account for more than 99% of the world’s maternal death. Although there is evidence of its ability to diagnose abnormal pregnancies, many households in LMIC lack the ability to pay. This poses a number of research questions: how big is the willingness to pay, and what is the determinant of willingness to pay? Furthermore, how does couple’s agreement on gender preference play a role in demand for obstetric ultrasound? We will answer this question using panel data collected in Malawi containing information on 1342 women who received obstetric ultrasound and their willingness to pay. Also, we will characterize the prevalence of fetal growth restriction and abnormal fetal presentation to assess the true magnitude of preventable neonatal morbidity and mortality.