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Could State-Controlled Media Stabilize the Market during the U.S.-China Trade Frictions?

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Zhang, W., Du, J. Could State-Controlled Media Stabilize the Market during the U.S.-China Trade Frictions?. Credit and Capital Markets – Kredit und Kapital, 55(2), 153-201. https://doi.org/10.3790/ccm.55.2.153
Zhang, Wenjia and Du, Julan "Could State-Controlled Media Stabilize the Market during the U.S.-China Trade Frictions?" Credit and Capital Markets – Kredit und Kapital 55.2, 2022, 153-201. https://doi.org/10.3790/ccm.55.2.153
Zhang, Wenjia/Du, Julan (2022): Could State-Controlled Media Stabilize the Market during the U.S.-China Trade Frictions?, in: Credit and Capital Markets – Kredit und Kapital, vol. 55, iss. 2, 153-201, [online] https://doi.org/10.3790/ccm.55.2.153
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Could State-Controlled Media Stabilize the Market during the U.S.-China Trade Frictions?

Zhang, Wenjia | Du, Julan

Credit and Capital Markets – Kredit und Kapital, Vol. 55 (2022), Iss. 2 : pp. 153–201

5 Citations (CrossRef)

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.55.2.153
Language
English
Pages
49
Keywords

Author Details

Wenjia Zhang, Associate Professor, School of International Economics, China Foreign Affairs University, No. 24, Zhanlan Road, Xicheng District, Beijing, 100037.

Julan Du, Associate Professor, Department of Economics, The Chinese University of Hong Kong, Room 926, Esther Lee Building.

Cited By

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    Credit and Capital Markets – Kredit und Kapital, Vol. 55 (2022), Iss. 2 P.149

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  2. Trade War Actions, Reporting Strategies, and Stock Market Reactions

    Zhang, Wenjia | Du, Julan

    Review of Pacific Basin Financial Markets and Policies, Vol. 27 (2024), Iss. 01

    https://doi.org/10.1142/S021909152450005X [Citations: 0]

  3. Trade war, media tone and market reaction asymmetry

    Zhang, Wenjia | Du, Julan

    Journal of Chinese Economic and Foreign Trade Studies, Vol. 16 (2023), Iss. 2 P.153

    https://doi.org/10.1108/JCEFTS-10-2022-0064 [Citations: 2]

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  5. Can the sentiment of the official media predict the return volatility of the Chinese crude oil futures?

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    https://doi.org/10.1016/j.eneco.2024.107967 [Citations: 0]

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Abstract

The China-U.S. trade frictions brought about many uncertainties to the Chinese economy. This research investigates whether China’s state-controlled media played a role in stabilizing investors’ expectations by examining the relations between media tone and Chinese stock market reactions in the context of China-U.S. trade frictions. Firstly, even though the media tone of news on trade frictions did not elicit significant reactions at the market level, those firms heavily exposed to export business with the U.S. produced significant positive reactions to a high media tone of the state media. Secondly, investors, especially SME investors, perceived more uncertainties to the high tones of Chinese media in the early days of Trump’s presidency and reacted negatively to the media’s high stance, as shown in the volatility. Thirdly, after the war was initiated, higher-tone news released from the state-controlled press eased people’s anxieties and stabilized the market, especially for the large caps, leading to lower volatilities in most subsequent stages. Generally, the official media’s tone manipulation is partially effective in preventing a market meltdown and easing investors’ worries.

Table of Contents

Section Title Page Action Price
Wenjia Zhang / Julan Du: Could State-Controlled Media Stabilize the Market during the U.S.-China Trade Frictions? 153
Abstract 153
I. Introduction 154
II. Literature Review and Hypotheses Development 156
2.1 Media Tone and Stock Returns 157
2.2 Media Tone and Stock Volatilities 158
2.3 Market Reactions in Different Stages of the Trade Frictions 159
III. Data Sources and Methodological Design 160
3.1 Data Sources 160
3.2 Measurement of Media Tone 161
3.3 Baseline Model 153
IV. Empirical Results 153
4.1 Media Tone and Stock Market Returns 153
4.2 Media Tone and Stock Market Volatilities 154
4.3 Market Reactions in Different Stages 155
4.4 Further Discussion 155
V. Conclusion 155
References 155
Appendix A: Detailed Description of Each Stage and News Release 156
Appendix B: Placebo Tests The Impact of State-Controlled Media Tone on Abnormal Return of Placebo Group 156
Appendix C: Testing the Asymmetric Effects of Trade Events on the Abnormal Return of SSE50 156
Appendix D: Testing the Asymmetric Effects of Trade Events on Abnormal Volatility of SSE50 156

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