During the 1990s, the United States experienced a period of stable economic growth and moderate inflation, which was once considered a huge success in monetary policy. Likewise, China achieved an excellent economic growth rate from 2000 to 2010. Although economies worldwide were affected by the global subprime crisis, they successfully emerged from a V-shaped reversal in 2009, which also highlighted the effectiveness of monetary policy adjustments. After 2010, however, Europe and Japan began to implement unconventional monetary policy measures. While negative interest rates began to appear, the economic growth since then is still not optimistic. China has moderately eased its monetary policy many times since 2014, but its economic growth rate has been L-shaped. From the perspective of China and advanced economies, monetary policies have been relatively effective or even ineffective rather than effective. This paper explores why the effect of monetary policy varies so dramatically in different periods.
In this paper, we argue that more attention should be paid to the relationship between population aging and the effect of monetary policy. As the population ages, the supply of labor is weakened and the aggregate supply curve is relatively steep. Due to the elderly population's low demand, the effectiveness of the expansionary monetary policy to drive aggregate demand is relatively weakened, which will lead to a higher price level. In addition, it is necessary to further examine the regional effect of monetary policy from the perspective of population aging. Due to regional characteristics and labor mobility, the age structure in provinces and cities has formed a regional imbalance. In addition, the response of economic activities to monetary policy changes also shows heterogeneity. This paper studies the channel through which the aging Chinese population affects the effects of monetary policy at the micro level. On the one hand, the aging population will reduce interest rates and the demand for social investments and social interest rate sensitivity. On the other hand, older people have a lower demand for goods with high dependence on loans, such as housing and durable goods, which leads to the lower demand for credit and lower external financing premiums. When the proportion of the older population is relatively large, it may lead to a decrease in the social demand for bank loans and hence a decrease in the sensitivity to bank credit.
Using a macro time series data set for China from 1990 to 2021, this paper first investigates the effect of population age structure on monetary policy based on the SVAR benchmark model and IVAR expansion model. The 1994-2020 panel data for 30 provinces in China are then used to explain the impact of the relationship between the regional heterogeneity effects of China's monetary policy on population aging. Finally, the channel through which population aging weakens the effect of monetary policy is explored using micro data for A-share listed companies and commercial banks.
The main conclusions are as follows. First, the results for both time series and panel data show that population aging weakens the effectiveness of quantitative-and price-based monetary policies. Second, the panel data results indicate that the demographic age structure is one of the reasons for the regional heterogeneity effects of monetary policy. Finally, the micro data for listed companies and commercial banks show that the aging population weakened interest rates and credit channels for monetary policy.
This paper contributes to the literature in the following three aspects. First, in terms of the aging population and the effect of monetary policy, this paper focuses on China and empirically analyses the effect of monetary policies on economic growth and inflation from both quantitative and price perspectives. In addition, we use the IVAR methodology to improve the “two-step” method. Second, in terms of the regional heterogeneity effects of monetary policy, population aging is considered as an explanation. Finally, in terms of the transmission channel of the monetary policy effect affected by an aging population, this paper empirically investigates the influence of demographic age structure changes on interest rate and credit channels at the micro level.

In the last two decades, the wage premium between China's service and manufacturing sectors has increased; however, the labor share pattern appears to be U-shaped. Concurrently, the processes of automation and tertiarization have accelerated in China. Following the incorporation of more industrial robots into factories and as the Chinese economy transitions from the manufacturing sector to the service sector, this paper explores the driving factors behind these trends and how they will affect factor income distribution.
We extend the task-based framework to the context of the manufacturing and service sectors, and then quantitatively investigate the implications of automation and tertiarization for primary income distribution. The core of our model is that the degree of automation is endogenous, firms adopt automation technologies to maximize their profits, and tasks are allocated to capital or labor following these factors' comparative advantage. Moreover, the adoption of automation and capital density are heterogeneous across sectors.
We extend the task-based framework to incorporate the manufacturing and service sectors, with a view to examining the quantitative impact of automation and tertiarization on primary income distribution. At the heart of our model is the notion that the extent of automation is endogenous. That is, firms adopt automation technologies to maximize their profits. In addition, the comparative advantages of various factors determine the allocation of tasks to either capital or labor. Finally, the adoption of automation and capital density is heterogeneous across sectors.
We use the lens of this model to derive three main findings. First, we observe that in addition to structural transformation, the adoption of endogenous automation technologies serves as a significant mechanism for the evolution of factor income distribution in China. Second, we find that both automation technologies and structural change jointly explain the U-shaped labor share pattern and the increasing sectoral wage premium. Automation technologies dominate the decrease phase in the U-shaped labor share pattern, while structural change dominates the increase phase on the other side. Both automation technologies and structural change play a crucial role in explaining the continuous growth of wage premiums. Finally, we demonstrate that factor and skill endowments are the driving factors behind automation technologies and structural change, which have significant implications for the factor income distribution pattern. In particular, deepening capital reduces the share of labor income and expands the wage premium. An increase in service labor supply increases the labor share and decreases the wage premium. However, manufacturing labor shortages reduce both the labor share and the wage premium.
This paper makes three contributions to the literature. First, we build a tractable but general model to investigate automation and structural changes in China, in addition to their implications for factor income distribution. This model can be used to discuss the patterns of both labor share and wage premium using a uniform framework. Hence, we supplement theory on the evolution of China's factor income distribution. Moreover, we complement studies that identify the influential factors in income distribution based on microdata and empirical methods by providing a macro perspective. As mentioned above, our model effectively explains the changes in the aggregate labor income share and the sector wage premium. Second, our model matches the changes in factor endowment, industry structure, employment structure, wage premium, and so on over the last two decades, especially the nonmonotonic pattern of aggregate labor share, which bolsters our confidence that multiple factors must affect the factor income distribution. Our second contribution is to shed light on the driving factors and the intermediate channels behind the pattern of the factor income distribution. Finally, we simulate how factor income distribution varies with factor and skill endowments. We decompose the total effects into the automation and structural change effects. In this respect, our work has both theoretical and practical significance and illuminates future patterns in factor income distribution.
In the future, increasing the human capital investment in manufacturing labor, gradually narrowing the skill gap between manufacturing labor and service labor, and encouraging the transfer of manufacturing labor to service labor are possible ways to improve the income distribution pattern.

Since the outbreak of the 2008 global financial crisis, Chinese local governments' debt and unique shadow banking practices have grown explosively. In contrast to the numerous studies that have explored the systematic macroeconomic risk introduced by these practices, this paper focuses on shadow banking pricing mechanisms for local government financing vehicles (LGFVs) from a micro perspective. Based on the detailed information about trust products issued by trust companies (i.e., a typical shadow banking practice in China), which were used to raise money for the LGFVs controlled by 178 Chinese city governments from 2010 to 2017, this paper demonstrates that the booming land market and investors' rigid payment expectations are two important cornerstones of Chinese shadow banking pricing references. More specifically, the findings include the following. (1) Prices are higher for city land and the credit spread for LGFVs' debt is lower; however, land auction failures will increase the cities' LGFV debt costs. (2) If the local governments' expenditure depends heavily on their land leases, which signals a high default risk for LGFVs, then shadow banking tends to require that these LGFVs pay a higher risk premium. (3) The shadow banking institutions' capacity for maintaining rigid payments to investors can help to reduce the LGVFs' financing costs. The relevant proxies for this capacity include capital adequacy ratios, leverage, and the trust asset scale. Furthermore, the governments' ownership of shadow banking institutions, especially the central government's controlling rights, can reinforce the expected rigid payments to investors. However, the introduction of a new budget act in 2014 weakened the positive relationship between investors' rigid payment expectations and local governments' property rights significantly. (4) Local governments control about half of the trust companies in China; however, this affiliation does not seem to intensify the adverse selection and moral hazard problems experienced by shadow banking institutions when the LGFVs select these linked banks to help raise money. In contrast, some evidence shows that affiliated shadow banking practices can help the LGFVs to decrease their credit spreads by mitigating the information asymmetry between the LGFVs and investors.
This paper makes two potential contributions to the literature. First, we discuss the pricing mechanism of Chinese shadow banking for LGFVs' debt. The related literature can be divided into two strands: shadow banking and LGFVs' debt pricing. The first strand in the shadow banking literature focuses on the driving forces behind the rapid development of shadow banks and their consequences for monetary policies and systemic financial risk. The second strand of the shadow banking literature analyzes the determinants of Chinese municipal investment bonds' credit spread; however, these bonds are issued and traded in the public capital market. Municipal investment bonds have transparent offering procedures and strict information-disclosure obligations, which attract sophisticated institutional investors instead of retail investors. In contrast, shadow banks are inclined to seek regulatory arbitrage and escape regulation. In addition, shadow banking products attract more retail investors than institutional investors. Therefore, research on the impact of shadow banking prices on LGFVs' debt should be conducted. Second, this paper constructs a new framework for the analysis of LGFVs' debt pricing that includes three relevant factors and can provide a new extension to the literature. Many studies focus on the role of local governments' implicit guarantees; however, this paper is concerned with the implicit guarantee from shadow banks and their large shareholders (i.e., governments, especially the central government). The literature has ignored the role of land prices and the local governments' reliance on land sales in the LGFVs' debt pricing. This paper sheds light on these three factors' effects on debt pricing. Finally, the literature ignored local governments' special control rights for shadow banks. Local governments control about 44% of trust companies. We analyze the special relationship between local governments and shadow banks and its effect on the LGFVs' debt pricing. Our findings will extend the literature on shadow banking's operation mechanisms.

This paper uses the QFVAR model proposed by Ando et al. (2022), which is different from the traditional GFEVD method-based VAR model (Dieblod and Yilmaz, 2014), to measure the tail risk spillover effect among listed financial institutions under extreme positive and negative shocks. The left-tail risk induced by a negative shock and the right-tail risk induced by a positive shock represent risk accumulation and risk outbreak, respectively. This paper analyzes the risk spillover effect of financial systems and financial institutions, and the network structure of the risk spillover. On this basis, this paper empirically tests the risk spillover channels among financial institutions and the effectiveness of macroprudential policy tools in restraining the risk spillover effect. Our sample consists of 31 Chinese listed financial institutions, comprising 16 banks, 12 securities companies, and 3 insurance companies. The sample period runs from January 2011 to December 2020.
The main findings are as follows. First, during the sample period, there are two different time trends in the total spillover index of the financial system. Induced by negative shocks, the left-tail spillover index rises sharply when there is drastic volatility in the financial markets, while the right-tail spillover index, induced by positive shocks, is consistent with the trend of the financial sector's leverage. Second, the risk spillover level of financial institutions induced by different directional shocks depends on specific financial characteristics. When the risk spillover is induced by a negative shock, large financial institutions have a higher spillover-to index and financial institutions with a large amount of interbank business have a higher spillover-in index. When the risk spillover is induced by a positive shock, highly leveraged financial institutions have a higher spillover-to index and financial institutions with a serious maturity mismatch problem have a higher spillover-in index. Third, a financial institution's risk induced by a negative shock will influence other institutions along the interbank business channel and the common asset holding channel. Moreover, a financial institution's risk induced by a positive shock will influence other institutions along the information channel. Fourth, the requirements for the reserve ratio and the liquidity coverage ratio can significantly mitigate the risk spillover effect along the interbank business channel, while the requirements for the capital adequacy ratio, the leverage ratio, and the loan-loss provision ratio can significantly mitigate the risk spillover effect along the common asset holding channel and the information channel.
Our study has three policy implications. First, the regulator should take advantage of counter-cyclical policy timeously according to the operating conditions of the financial market and the financial industry. During periods of market turbulence, market liquidity should be maintained at an adequate level. During periods of financial boom, policy tools such as counter-cyclical capital buffers and dynamic loan-loss provisions can be used to reduce financial institutions' incentive for risk-taking. Second, the regulator can find out the emphases and put forward heterogeneous requirements appropriately according to the regulatory indicators of financial institutions. For financial institutions with a large amount of interbank business, a higher reserve ratio and liquidity coverage ratio should be required; for financial institutions with high leverage, the regulator should monitor their high-risk business activities; and large financial institutions should be required to maintain a higher leverage or capital adequacy ratio. Third, the regulator should further enrich the toolbox of macroprudential policies and optimize the macroprudential policy management system.
Compared with existing studies, this paper makes following contributions. First, this paper divides exogenous shocks into positive and negative shocks, and combines the quantile regression model with the VAR model to measure the tail risk spillover effect. Second, by constructing connectedness indices and a regression analysis, this paper empirically tests the determinants of tail risk spillover among financial institutions to investigate the channels of risk spillover. Third, this paper empirically tests the effectiveness of macroprudential policy tools in mitigating tail risk spillover among institutions.

To avoid control of credit scale and structure, China's commercial banks began to convert loans into interbank assets by nonstandard accounting operations. Over a long period of time, these interbank “quasi-loans” which are in the form of interbank assets, became an important form of Chinese-style shadow banking practices. Hence, China's regulatory authorities began to focus on strengthening the regulation of interbank arbitrage and idling funds. However, the Western experience does not have reference value because of the unique Chinese interbank arbitrage conditions. Accordingly, China is experimenting with and adjusting interbank regulations to identify culturally Chinese supervision methods. Simultaneously, interbank quasi-loans have a profound impact on the financing of small and micro enterprises (SMEs). On the one hand, informal financing practices, such as interbank quasi-loans, can complement formal financing practices. On the other hand, interbank arbitrage will crowd out SMEs' financing availability. In addition, the idling funds generated during the interbank arbitrage will also lead to a virtual economic boom that will distort the allocation of credit resources and worsen SMEs' financing environment. Therefore, using Chinese interbank regulations to regulate interbank quasi-loans efficiently is of great significance for SMEs' financing practices.
To test the impact and mechanism of interbank regulations on the SMEs' financing availability and comprehensive financing costs empirically, we select SMEs that are energy intensive, highly polluting, or operating at overcapacity, in addition to real estate enterprises, as the research object. Under the limitation of data availability and quality, all the SMEs that we choose are listed companies or publicly traded on the new over-the-counter market. The financial and macro data for 2008 to 2019 are drawn from the Wind Economic Database while the monetary policy and credit data are drawn from the People's Bank of China's official website. In addition, considering the endogeneity problem, we use the systematic generalized method of moments as the empirical model. First, we introduce the different arbitrage methods used in the interbank market in China and construct an interbank idling funds index. Second, based on our theoretical analysis and research hypothesis, we examine the nonlinear impact of interbank quasi-loans on financing availability and the comprehensive financing cost for SMEs. Next, we use the mediating effect model to test and compare the heterogeneous regulation mechanism in SMEs' financing practices in addition to these enterprises that could obtain loans easily. Meanwhile, we concentrate on the role of interbank idling funds during this process. Finally, we analyze the influence of interbank capital turnover on the comprehensive financing costs for SMEs by constructing an interbank fund turnover index.
We found that an U-shaped nonlinear relationship between interbank quasi-loans and SMEs' financing practices. The more developed the regional formal financial framework is, the less SMEs will depend on interbank quasi-loans. Moreover, by comparing the containment mode of interbank regulations, we find that the flow control and look-through regulations are effective in controlling interbank quasi-loans. Specifically, the structural effect of restricting interbank fund idling effectively improves SMEs' financing practices. However, restricting the scale of interbank practices must be weighed further as research shows that interbank fund turnovers have not reached an optimal level.
This paper contributes to the literature in the following aspects. First, China's regulatory authorities have accumulated some interbank regulation experience in recent years, but the literature rarely discusses the effect and mechanism of interbank regulations on the real economy. Hence, this paper takes interbank regulations as the main starting point to provide suggestions for Chinese-style interbank regulations. Secondly, earlier studies usually take the interbank scale as a characteristic of interbank arbitrage and seldom focus on the role of interbank idling funds. This paper proposes a quantitative index for interbank idling funds, which aids in understanding its connotations and could inspire future research into interbank idling funds. Third, SMEs' financing difficulties cannot be separated from interbank regulation interventions. However, the literature is inconsistent considering informal financing perspectives. This paper discusses the relationship between interbank quasi-loans and SMEs' financing practices, which extends the literature on the interaction between SMEs' financing practices and informal financing practices.

The emergence of new agricultural operators in China includes agricultural business entities with relatively large operating scales and good management capabilities and material equipment conditions. In addition, they have relatively high labor productivity and land output and resource use rates, with commercialized production as their primary goal. These business entities include family farms, farmers' cooperatives, and agricultural enterprises, which not only promote agricultural modernization and increase the added value and supply of agricultural products, but also improve farmers' income and living standards. In recent years, the Chinese government has attached great importance to the development of new agricultural operators and has introduced a series of supporting policies and measures. However, the development of new agricultural operators also relies heavily on financial support. In reality, due to limited personal wealth, lack of collateral, and insufficient credit records, financial institutions, especially commercial banks, do not favor the creators of these entities, who are mainly farmers. These farmers find it difficult to raise sufficient funds; therefore, they cannot operate their projects normally.
Fortunately, digital inclusive finance in China has developed rapidly in the past decade. According to the World Bank's 2021 Global Findex Database, China has become an important leader in the development of digital finance worldwide. Digital inclusive finance has not only overcome the pain points of traditional rural finance, such as information asymmetry and high transaction costs, but has also greatly improved the accessibility, convenience, and effectiveness of financial services for the agricultural sector. This paper explores whether the development of digital inclusive finance can alleviate farmers' financial constraints and promote the establishment of new agricultural operators？ Studying this issue not only expands the literature on digital inclusive finance services for the real economy, but also provides references and insights for the development of digital inclusive finance and the modernization of agriculture in other developing countries.
This paper uses panel data from 1,845 counties in 27 Chinese provinces between 2014 and 2020 in an instrumental variable approach to empirically examine the impact of the development of digital inclusive finance on the creation of new agricultural operators, in addition to its underlying mechanisms. We report three main findings. First, the development of digital inclusive finance has a significant positive effect on the creation of family farms, farmers' specialized cooperatives, and agricultural enterprises. This conclusion is robust under various sensitivity tests, including controlling for region-time fixed effects and constructing a difference-in-differences model using the “FIGI China Project” pilot. Second, the mechanism analysis shows that digital inclusive finance not only directly promotes the creation of new agricultural operators by improving farmers' access to formal credit, but also indirectly promotes new agricultural operators by increasing farmers' income and agricultural mechanization levels. Third, a heterogeneity analysis indicates that the breadth, depth, and digitization of digital finance all have a positive impact on the creation of new agricultural operators. Digital inclusive finance has a stronger effect on the creation of small and micro agricultural operators, compared with medium and large new agricultural operators, which highlights the inclusiveness of China's digital inclusive finance development. Furthermore, the impact of digital inclusive finance on the creation of new agricultural operators varies across counties, with a stronger effect in areas with less topographical variation.
This paper makes three main contributions to the literature. It is the first empirical study to examine the impact of digital inclusive finance on the creation of new agricultural operators, which enriches the literature on the role of digital inclusive finance in promoting rural revitalization. Earlier digital inclusive finance studies have mainly focused on its impact on farmers' entrepreneurship, agricultural production, and rural poverty, while its effect on the creation of new agricultural operators has not been explored fully. Second, this paper elucidates the mechanisms through which the development of digital inclusive finance affects the creation of new agricultural operators, including both direct and indirect effects. The findings reveal the deeper reasons for the promotion of the creation of new agricultural operators using digital inclusive finance. Third, we examine the heterogeneity of the impact of digital inclusive finance on the creation of new agricultural operators from three perspectives, namely digital finance heterogeneity, the scale of new agricultural operators, and the topographical variation across counties. These results provide new insights into how digital inclusive finance promotes the creation of new agricultural operators.

As a driving force of high-quality development, innovation must run throughout the Chinese-style modernization process. With the simultaneous arrival of the digital economy era, innovation is becoming a new driving force for global economic growth. The 14th Five-Year Plan for the Development of Digital Economy released in January 2022 clearly states that the added value from core industries in the digital economy will increase to 10% of the gross domestic product by 2025. As the main carrier of the integrated development of digital and real economies, the effect of enterprises' digital transformation has attracted much attention. In this context, the practical question is whether digital transformation can improve enterprises' technological innovation ability and thus become an important engine for their high-quality development. This paper explores the mechanism of action and whether the innovation effect of digital transformation differs among enterprises. The findings will help us to obtain a deep understanding of how digital transformation can boost high-quality economic development and provide important references for accelerating the construction of a modern industrial system.
By constructing a theoretical model for how digital transformation affects innovative enterprise decision-making practices, this paper elaborates on the internal influencing mechanism between these two factors. Based on listed companies' digital transformation data from 2010 to 2020 and the perspective of research and development (R&D) investment and efficiency, this paper conducts an in-depth analysis of the impact and heterogeneity of enterprises' digital transformation on their technological innovation. This paper's innovative points can be summarized into three aspects. First, digitalization's inherent characteristics are combined to build a more general framework for theoretical analyses. This paper focuses on enterprises' production, operation, and innovation choices, and establishes a general equilibrium model to demonstrate the active mechanisms of profit guarantees, cost control, and the spillover and scale effects on enterprises' innovative decisions systematically. Hence, this paper expands the research scope of the economic effect of digital transformation and the influencing factors of enterprise innovation. Second, based on the dual perspectives of R&D investment and efficiency, this paper uses model reasoning and empirical testing to investigate the impact of digital transformation on enterprise innovation and its heterogeneity systematically. This paper explores the enhancement effect of R&D efficiency caused by the scale and spillover effects during digital transformation and empirically provides an in-depth understanding of the innovation effect of enterprises' digital transformation. Third, in terms of policies, this paper scientifically verifies the innovative effect of digital transformation, which has important implications for how to promote enterprises' high-quality development and realize the national innovation-driven development strategy and Chinese-style modernization in the digital economy era. In addition, the results also provide empirical support for the formulation and implementation of relevant policies.
This paper makes three contributions to the research literature. First, digital transformation has significantly promoted enterprises' innovation output. Second, the improvement of R&D input and efficiency is the key mechanism for digital transformation to promote enterprises' technological innovation. The improvement of R&D inputs benefits from the profit guarantee and cost control mechanisms during digital transformation, while R&D efficiency comes from the impact of the scale and spillover effects. Third, digital transformation has a more obvious promoting effect for larger-scale enterprises with fewer specific assets in addition to enterprises in areas with better property rights protection. These conclusions indicate that digital transformation can become an important driving force for improving Chinese enterprises' innovation capability under the new development plan.
This paper's policy recommendations are as follows. First, the Chinese government should speed up the construction of new digital infrastructure, vigorously promote the intelligent upgrading of physical infrastructure, and lay the foundation for enterprises' digital transformation. Second, we should continue to optimize the market environment so that it is suitable for digital economic development, improve the digital industry ecology, and coordinate the promotion of digital industrialization and industrial digitalization. Finally, enterprises should speed up their construction of technical, organizational, and operational support for digital transformation. By improving their value and innovation performance, these enterprises should give full play to the promoting role of digital transformation in corporate governance and technological innovation. In addition, they should further promote the cost reduction, quality improvement, and efficiency improvement of digitally empowered enterprises.

The construction of a social security system with Chinese characteristics must meet the requirements of China's new stage, concept, and paradigm of development. As a socioeconomic stabilizer and booster, the development of an insurance system plays an important role in the construction of a multilevel pension security system, in addition to the strategies of rural revitalization and “Healthy China.” The constructed system is a key aspect of China's accelerated construction of a new development paradigm featuring “dual circulation,” in which the domestic and overseas markets can reinforce each other, with the domestic market as the mainstay. Accelerating the development of commercial health insurance in China, deepening the supply-side structural reform of the insurance industry, and constantly developing new insurance tools to meet households' diversified health insurance needs will help to alleviate the precautionary savings motive and allow household consumption to continue expanding. Hence, it is of great practical significance to explore the effects of commercial health insurance on households' precautionary savings and consumption expenditure in detail, as well as the mechanisms of these effects.
Based on 2015, 2017, and 2019 panel data from the China Household Finance Survey (CHFS), this paper empirically analyzes the role of commercial health insurance allocations in promoting household consumption expenditure by reducing precautionary savings. The main conclusions are as follows. First, commercial health insurance premium expenditure has a clear role in increasing the level of household consumption expenditure, but there are differences in its effects on different consumption categories. Considering the possible endogeneity problem, this paper uses the instrumental variable method to estimate the benchmark model and discusses the possible estimation biases caused by omitted variables, reverse causality, and self-selection in detail, and then deals with these biases. The results are consistent with those of the benchmark regression. This paper tests the robustness of the benchmark regression results by changing the core explanatory variables, sample groups, and estimation methods. The results still support the conclusion that commercial health insurance premium expenditure promotes household consumption. Second, our mechanism analysis shows that the allocation of commercial health insurance mainly reduces the level of household precautionary savings and thus promotes household consumption expenditure by alleviating the precautionary motives triggered by expenditure uncertainty in addition to subjective and objective health uncertainty. Third, the impact of commercial health insurance premium expenditure on household consumption is heterogeneous among households with different characteristics. In addition, the impact is generally more significant in households with low risk resistance, high background risk, low financial availability, and high financial exclusion.
This paper makes three main contributions to the literature. First, we construct a two-period model including social insurance, commercial insurance, health risk, negative wealth shocks, and insurance claims to theoretically analyze the relationship between household commercial insurance premium expenditure and household consumption and savings behavior. The results provide strong theoretical support for the follow-up empirical research design and analysis. Second, this paper closely focuses on the entry point of the precautionary savings motive using subjective and objective health uncertainty, in addition to expenditure uncertainty and precautionary savings level as the mechanism variables. In addition, we examine the impact of commercial health insurance on household consumption expenditure in detail by reducing the precautionary savings motive based on CHFS microdata. The results deepen research into the impact of commercial insurance on household consumption behavior and provide a new perspective on the “mystery of household savings” in China. Third, according to individual, family, and regional characteristics, this paper examines the heterogeneous effects of commercial health insurance premium expenditure on different types of household consumption expenditure in detail, focusing on household risk resistance ability, background risk level, financial availability, and financial exclusion intensity. The results enrich the commercial insurance and household consumption literature. This paper also provides a realistic background and strategic orientations for building the new development paradigm of “dual circulation” and deepens our knowledge of the supply-side structural reform of the insurance industry in China, with a view to providing solid and effective empirical evidence and support for further improving commercial insurance protection, constructing a multilevel social security system, and allowing household consumption to continue expanding.

“Institutionalizing retail investments” is one of the most important focuses of financial academia and regulators in the Chinese stock market. Regulators are concerned about whether mutual fund behaviors, as the main channel for institutionalizing, improve market pricing efficiency. This is the top priority that guarantees the positive effect of institutionalizing on the quality of the stock market. Intuitively, considering the downward-sloping demand curve for stocks, mutual funds should improve their pricing efficiency by discovering and holding undervalued stocks, which should ensure that the mutual funds earn positive excess returns. However, the literature does not provide evidence supporting this hypothesis. Instead, studies show that, on average, stocks that are heavily held by mutual funds do not outperform their counterparts with little mutual fund ownership. The results cast serious doubt on the effectiveness of mutual funds' behavior in institutionalizing retail investments and thereby improving market quality.
Based on the idea of mutual funds' heterogeneous abilities, this paper shows that some high-quality mutual funds improve the pricing efficiency in the stock market. However, the stock holdings of those high-quality mutual funds are swamped by the majority of mediocre mutual fund holdings. As a result, the mutual funds' aggregated holding weight loses its predictive power for stock returns. Therefore, instead of focusing on overall mutual fund holdings, this paper constructs the mutual fund holding quality (MFHQ) of stocks and investigates its predictive power for their future performance. By employing Chinese market data from 2005 to 2020, we measure the MFHQ of stocks by aggregating the ability measure at the fund level (e.g., the 1-year CAMP alpha) to the stock level weighted by the number of shares holding. The empirical results show that stocks with higher MFHQ significantly outperformed their counterparts with lower MFHQ or stocks without mutual funds holding. The annualized return difference between the top and bottom quintiles in the MFHQ portfolio is about 14%, which cannot be explained by the various risk factor loadings from Liu et al. (2019) and Fama and French (2015). After conducting a Fama-MacBeth regression, the results show that the predictive ability of MFHQ cannot be explained by the mutual funds' holding weights or other traditional return predictors in China. The implication is that the stocks held by mutual funds with effective ability outperform the market, which is circumstantial evidence for the pricing efficiency improvement.
In addition to the solid return predictive ability of MFHQ, this paper investigates the mechanism of our MFHQ observations and proves that high-quality funds can discover stock mispricing and contribute to improving pricing efficiency. First, we find that the prediction of MFHQ cannot be explained by the future price pressure caused by herding mediocre funds. On the one hand, there is no long-term reversal in the MFHQ portfolio return, indicating that the portfolio return is a mispricing coverage process. On the other hand, the MFHQ also predicts future fundamentals and their innovations. Second, we also provide solid evidence for the representativeness of funds' historical performance to measure ability by showing their persistence and positive relationship with future fund flows. Finally, we show that the MFHQ positively predicts the measures of stock-level price efficiency, such the coefficient of determination in a capital asset pricing model. The results show that some mutual funds with outstanding managerial ability continually improve pricing efficiency. Because of the inflow of those outstanding funds, the mutual fund channel to institutionalize retail investments is of great significance for the long-term quality of the stock market.
Our paper makes three major contributions to the literature. To the best of our knowledge, this paper is the first to provide direct evidence that mutual fund holdings positively predict stock returns in China. This result implies that only some of the mutual funds in the market effectively manage their assets, which improves the quality of the market. In addition, our work contributes to the asset pricing literature in China by discovering a valid return predictor, that is, the MFHQ formed by mutual fund holdings. Finally, the empirical evidence shows that improving capital allocation efficiency in the mutual fund industry is crucial to amplify the positive effect of institutionalizing retail investments on market quality.

Stock exchanges implement merger and acquisition (M&A) comment letters as an important regulatory arrangement to protect the interests of individual investors during M&A activities. Unlike postevent supervision through financial report comment letters, M&A comment letters mainly intervene during the stage when listed companies submit their M&A proposals. These companies must respond to the letters within a specified period and failure to follow the requirements within the deadline puts them at risk of terminating their M&A deals. However, more than half of the companies that receive M&A comment letters cannot complete their responses within the specified period and must apply for an extension. Against this background, this paper investigates whether the delays in responses from listed companies to M&A comment letters presents any significant information and whether these delays can potentially impact the major shareholders' expropriation of interests during M&A activities.
Using a cost-benefit analysis framework, we argue that companies with a high (low) suspicion of shareholders' expropriation tendencies are more (less) likely to request an extension to respond to M&A comment letters. Previous studies have shown that companies' timely responses alleviate adverse capital market reactions to M&A comment letters; therefore, companies have a strong incentive to respond promptly to facilitate M&As. However, the cost of timely responses varies between companies. On the one hand, companies with a higher interest expropriation tendency may face stricter inquiries from regulators, which results in increased remediation costs and makes it more challenging to respond within the designated time. On the other hand, exchanging comments prompts enhanced external monitoring and companies may need to invest more time and effort into hiding and manipulating information, which incurs higher information disclosure costs. In contrast, companies with a lower interest expropriation tendency are only required to provide additional disclosures and explanations about their M&A-related information, which reduces their information disclosure costs.
We use the interactive Q&A data for the M&A comment letters from the Shanghai and Shenzhen stock exchanges about the M&A events of A-share listed companies from 2015 to 2019 to empirically test whether a delayed response to these comment letters signals major shareholders' interest expropriation. In addition, we show how the M&A comment letters can help to identify and suppress major shareholders' interest expropriation behavior during M&A activities.
We find that companies with more related party transactions, fund occupation, higher value-added rates, and premiums in the proposed M&A deals are more likely to delay their response to M&A comment letters. Companies that delayed their responses face a higher risk of passive or initiative termination. Even if the M&A restructuring succeeds, their long-term risks are higher, while their returns are lower. Furthermore, our extended analysis verifies the specific mechanism from the perspective of corporate information packaging. We find that companies with higher suspicion of interest expropriation implemented more information packaging about the M&A deal; therefore, they are more likely to delay their responses to M&A comment letters.
The two main contributions of this paper to the literature are as follows. First, we enrich research on the functional mechanism of M&A comment letters from the perspective of the interaction between the listed company and the regulatory agency. In addition, we comprehensively research the screening mechanism and governance effect of M&A comment letters on the major shareholders' interest expropriation during M&As from the perspective of pre-and in-process control. Second, we expand the literature on the timeliness of information disclosure and the encroachment of major shareholders' interests during M&As and provide new evidence for the effectiveness of the first-line supervision of China's capital market.
Our findings have several practical implications. The simple indicator of whether a listed company responds to the comment letter in time can be clearly and effectively perceived by ordinary investors in the capital market, which provides some reference for these investors' investment practices. Exchanges can simultaneously pay more attention to the timeliness of responses from listed companies when implementing front-line supervision, and they can further identify and confirm suspicious clues from companies with delayed responses to improve their supervision efficiency.

The silverization of currency has epoch-making significance in Chinese and world history. The inflow of silver in Ming and Qing dynasties caused many changes in currency forms and trading modes, which profoundly impacted various issues such as monetary system, productivity and price level, handicraft industry and commodity economy development, fiscal and tax system, international trade balance, etc. However, most previous studies were based on specific problems in certain periods, which were numerous and disorganized. Besides making it difficult to sort out the clues, some reviews also focused on Ming or Qing dynasties separately, failing to form an overall understanding of the short-and long-term effects of silver flow. Therefore, this paper extends the study of silver flow trends to the end of Qing Dynasty based on existing scholars' global perspective on the division of two silver cycles before the middle of Qing Dynasty. This paper discusses, summarizes and comments on Chinese and foreign scholars' research from four aspects: (1) Self-production, inflow and stock estimation of silver; inflow reasons and paths; monetization motivation; (2) The influence of silver flow on monetary and financial systems; price and economic fluctuations; (3) The impact of silver flow on international trade; (4) The impact of silver flow on fiscal and tax systems; policy effects.
This paper divides Ming and Qing dynasties into six periods based on the inflow or outflow of silver, excluding the early and middle Ming Dynasties. (1) From 1540s to 1630s, world silver production increased greatly, and silver from South America and Japan flowed into China through trade. This was the first great cycle of silver flow. (2) After 1640, the inflow of silver declined. (3) In the second cycle from 1700 to 1790, silver mining in Mexico and production in America continued to increase, resulting in a large amount of silver flowing into China again. (4) After 1800, world silver output declined significantly. Coupled with opium trade, the inflow of silver decreased and turned into a large-scale outflow after 1830 until 1856. (5) After 1857, silk tea export increased significantly, exceeding opium import. Coupled with another increase of world silver production, silver turned from outflow to inflow. (6) After 1873, countries switched to gold standard. Although silver price dropped dramatically, it did not improve trade terms; on the contrary, trade deficit existed until the end of Qing Dynasty. By sorting this out, we extend Flynn and Giráldez's (2002) division of the silver cycle: The second cycle should be extended to at least around 1790; while around 1860-1880 could be called the third cycle.
In these six periods, the literature review also found that price, economy, financial system and trade in Ming and Qing dynasties experienced corresponding cycles. (1) In the first cycle, currency silverization existed at the monetary level, and it triggered market development and commercial prosperity in the economy. It was even called “the germination of capitalism”. On the financial system, it was the tax system reform of “one whip law”. (2) Between the first and second cycles, there was a recession. The decline of silver inflow in late Ming Dynasty led to a sharp rise in domestic silver-copper exchange ratio, deflation, economic recession, coupled with natural disasters and other factors, which eventually led to Ming Dynasty's fall. However, in early Qing Dynasty, silver inflow was still limited; with sea embargo's impact, economy did not recover and develop quickly. (3) In the second cycle from 1700 to 1790, economy prospered again and a prosperous situation appeared. A large amount of silver flowed into China again; prices continued to rise and even produced a “price revolution” in China; foreign trade continued to surplus. During Yongzheng era in Qing Dynasty, financial reforms such as “Incorporation of poll tax into land tax” and “Regularization of miscellaneous taxes” were also carried out at this time. (4) After 1800, inflow and even outflow of silver led to price deflation and economic depression. The difference is that United Kingdom and Western European countries did not fall into recession but produced industrial revolution and embarked on continuous economic growth road. So far China and West moved towards “great divergence”. (5) After 1857 due to silver inflow “Tongzhi Zhongxing” was ushered.
These conclusions indicate that reviewing and evaluating existing studies on silver flow in Ming and Qing dynasties in globalization context can enable us to better link up complex and diverse studies and obtain a clearer review. Through review and evaluation, we also found many issues worthy of further study and discussion, such as monetary system's role in great divergence between China and West, how to design monetary system combining advantages and disadvantages of gold standard and legal currency system, how to design fiscal system's stabilizer role, and study of monetary competition and optimum currency area theory under Ming and Qing dynasties' background. It provides a certain direction for further study of monetary history of Ming and Qing dynasties and even Republic of China.