Investing in China

Course No：E2800220 Program：undergraduate

Credit：2 Instructor：Hai Lu、Qiaowei Shen
Prerequisite： Semester：2023 Spring

Instructor’s resume/brief introduction(Within 500 words):

Instructor’s contact information：

Professor Hai Lu （卢海教授）

Office: Guanghua Building #2, 330
Email: hai.lu@gsm.pku.edu.cn

Professor Qiaowei Shen（沈俏蔚教授）

Office: Guanghua Building #2, 411.
Email: qshen@gsm.pku.edu.cn

TA’s contact information::

Office hour:

Course Overview
This course is designed to help students gain insights into Chinese institutions that can facilitate
investment decisions in Chinese capital markets and a few specific industries. Understanding the institutional
environment in China is important because it exhibits significant differences from shareholder-driven
Western economies. The course begins by introducing a stakeholder approach to understand Chinese markets
and highlighting the major differences relative to the capital markets in developed countries. Subsequent
classes are devoted to understand the behaviors and incentives of market participants in more depth such as
the government, managers, investors, and analysts. The course is largely based on our own research. Topics
include information quality and earnings management, high-speed train network, artificial intelligence,
sustainable development and ESG, carbon neutrality, digital economy, silver industry and healthcare,
EV-industry, joint-venture and cross-listing firms.

A broader objective of this course is to raise awareness for a thorough understanding of the relevant
institutions when engaging in international investment decisions.

Course Objectives

Detailed Course Plan

Class Topic Reading Materials (To be completed) Assignment
Topic 1 Chinese Economy and Franklin Allen, Jun Qian, Chenyu Shan, Julie Zhu, 2021.
Financial Markets: Dissecting the Long-term Performance of the Chinese
Overview Stock Market. Working paper.

Shareholder vs. Clive Lennox and Joanna Wu, 2022. A Review of

Stakeholder China-Related Accounting Research in the Past 25 years.
Framework Journal of Accounting and Economics, forthcoming.

Xiaodong Zhu, 2012. Understanding China’s Growth:

Past, Present, and Future. Journal of Economic
Perspectives, 26, 4, 103-124

Marlene Amstad, Guofeng Sun and Wei Xiong. The

Handbook of China’s Financial Systems. Princeton
University Press, 2020.

Topic 2 Information Information Quality in China’s Capital Market and the

Environment and Information Transparency Index, 2019, 2020, 2021 White
Earnings Quality in Paper, Guanghua-Rotman Center for Information and
China: Field Evidence Capital Market Research

Dichev, I., J. Graham, C. Harvey, and S. Rajgopal. 2013.

Earnings Quality: Evidence from the Field. Journal of
Accounting and Economics, 56: 1-33.

Hai Lu, Jee-Eun, Shin, and Mingyue Zhang, 2022.

Financial Reporting and Disclosure Practices in China,
Working paper.

Topic 3 Earnings Management Luckin Coffee: A Case on Misrepresentation of HW1

and Strategic Behavior Financial Information distributed
of Market Participants
in China
Topic 4 High Speed Train Papers published in Chinese academic journals on the
Network: Government effect of high-speed trains on local economy and labor
Decision under market.
Stakeholder
Framework

Topic 5 AI Industry and Various research reports and a PhD thesis on AI

VC/PE investment investment
Topic 6 Sustainable Global ESG activities and its impact on corporate
Development (I): behavior.
Theory, Institutions
and Global Trend
Topic 7 Sustainable Lu, Hai, Jee-Eun Shin, Emma Wang, 2021. Inside the HW2
Development (II): “Black Box” of Corporate ESG Practice: Field Evidence distributed
Field Evidence on from China, Working paper.
ESG and supply chain
Hai Lu, Qilin Peng, Jee-Eun Shin, and Luping Yu,
Migration of Global Supply Chains: A Real Effect of
Mandatory ESG Disclosure, 2022.

Topic 8 Carbon Economy Carbon Peak 2030 and Carbon Neutral 2060

Topic 9 Digital Economy TBD, Various research reports.

Topic 10 Silver Economy TBD, Hanewald, K., Bateman, H., Fang, H. and Wu, S.,
2020. Is there a demand for reverse mortgages in China?
Evidence from two online surveys. Journal of Economic
Behavior & Organization, 169, pp.19-37.

Topic 11 EV Industry TBD

Topics China and World: History of open-door policy in China

12-13 Joint-Venture and
Cross-listed firms Background and development of the joint agreement
between PCAOB and CSRC

Cases: Joint-ventures in China

Topic 14 Final Exam

Topic Group project 10 teams (20 minutes each team) Written Group
15-16 presentations and Project due
(Last two discussions one week after
classes) presentations

Final Exam：

Teaching Methods

IT tools to be used in the classroom

Textbooks

References & Readings

Videos, CD-ROMs and other adjunct learning resources used

Rules students must follow

Course Assessment
Class participation: 15%
Two individual assignments: 20%
Group research project: 30%
Final exam: 35%
The expectations for each category are explained below:

Class participation – Attend classes and actively participate in discussions, asking/answering quality
questions, etc.

Individual assignments – You will be asked to complete two homework assignments. The write-up will be
evaluated based on the quality of your comments and insights.

Group research project – Each group consists of 4-5 members. You are asked to conduct research on the
perspective of investment in a certain industry and complete a research report. You also need to present
analyses and key findings in class.

Final exam – A two-hour exam will be conducted to assess your understanding of the concepts you study in
class.