During the post-epidemic period, China's economic recovery has faced difficulties associated with persistently weakening long-term demand. This unusual divergence of trends suggests that the Phillips curve in China may have inverted, evolving into a left-skewed, upward-sloping curve. An inverted Phillips curve is an alarming economic signal of unsteadiness in the state of constant output growth and price deflation. Specifically, means that the output-inflation combination will eventually shift from the lower right to the upper left along the inverted Phillips curve when the economy realizes a bottom equilibrium of low output and high inflation. This scenario is similar to the eve of “stagflation” in the United States. Hence, China's economic recovery continues to face several potential risks; accordingly, demand management and inflation governance are now the core tasks needed to maintain stable growth and guard against risks.
This paper comprehensively and mechanistically analyzes how weak economic recovery occurs during the post-epidemic period and discusses in depth how a classical economic crisis can be prevented ex ante and the appropriate guidance for economic recovery. The major conclusions are summarized as follows. First, the fundamental causes of the inversion of China's Phillips curve are constant demand contraction and inner rotation verticalization of the supply curve. Second, this paper proposes the principle of output-inflation spatial re-segmentation, in which the traditional two-dimensional space of output-inflation is re-segmented using the slope of the Phillips curve to identify the safe, crisis and early warning zones of economic operation. It shows that the Chinese economy is yet to completely escape the warning zone. Policy instruments are needed to guide the economy rapidly into the safe zone. Third, this paper proposes a new principle of Phillips curve set research. Taking a combination of loci in the y-p two-dimensional rectangular coordinate system as a benchmark, feasible empirical solutions are planned for all curve patterns based on historical combinations of output-inflation; this can serve as a reference for policy authorities when scheduling economic recovery paths. With reference to historical base effects, in the short term, medium-high to moderately high growth and appropriately weak inflation are the optimal targets for economic recovery, and 0.70 is the optimal solution for the Phillips curve slope. Fourth, this paper thoroughly compares the real-time corrective effects of various macroeconomic policy instruments and combinations on the curve slope. The policy combination that involves both expansion of the scale of social financing and tax cuts is found to be the best option to guide economic recovery.
The policy implications of this paper are summarized as follows. First, in terms of economic monitoring, policy authorities should focus on the degree of matching between output growth and inflation, as well as the unilateral risk of output or inflation. Second, in terms of guidance for economic recovery, future macro-governance efforts should focus on the coordination of fiscal and monetary policies. It is necessary to properly apply new forms of fiscal policies, such as structural tax cuts, and strengthen the appropriate support given to fiscal policies on consumption to enable the economy to eliminate deflation risk as soon as possible. It is also necessary to strengthen the supportive role of monetary policy for the real economy. Third, future macroeconomic research must focus on theoretical and empirical analysis of crisis economics, especially the ex-ante warning and prevention of a recurring classical economic crisis.

To facilitate China's industrial green transformation and meet its dual-carbon targets, the People's Bank of China has introduced a suite of monetary and macro-prudential policies. These policies aim to align with the “dual-pillar” policy objectives and include using green loans and bonds as eligible collateral in monetary operations, creating carbon reduction tools, supporting clean coal utilization, and integrating green finance into MPA assessments. However, the inclusion of green transformation goals within these policy frameworks remains controversial. This study incorporates various dual-pillar policies into a DSGE model to analyze their impacts on industrial green transformation and the mechanisms underlying this impact. It thus lays the theoretical groundwork for a dual-pillar framework aligned with carbon neutrality.
This study makes three key contributions. (1) We innovatively introduce liquidity coverage ratio constraints on the banking sector into the model, providing a theoretical framework for the central bank's evaluation of liquidity constraint policies. (2) We quantitatively compare the effectiveness of different dual-pillar policies on industrial green transformation and clarify the transmission mechanisms of these policies by integrating refinancing policy, differential reserve requirement ratio policy, differential liquidity coverage ratio constraint policy, differential risk-weighted asset policy, and central bank reserve asset allocation policy into a unified theoretical framework. (3) We conduct an expanded analysis of both countercyclical and normalized structural dual-pillar policies to assess their impacts on macroeconomics and industrial green transformation. We compare the welfare losses of residents under various exogenous shocks when different dual-pillar policies are coordinated and integrated. This research provides insights into the development of a dynamic dual-pillar policy framework aligned with carbon neutrality goals.
The findings of this paper are as follows. (1) Refinancing, differential reserve requirement ratio, and liquidity coverage ratio policies guide credit allocation by reducing the banking sector's financing costs. The effectiveness of a refinancing policy hinges on the refinancing rate, the impact of a differential reserve requirement ratio policy is contingent upon the statutory reserve requirement rate, and the efficacy of a liquidity coverage ratio constraint policy is determined by the excess reserve requirement rate. By adjusting the intensity of these three types of policies, their impacts on industrial green transformation can be standardized. (2) A differential risk-weighted asset policy primarily guides industrial structural adjustments through financial leverage, which often leads to significant fluctuations in asset prices. The impact of such a policy on industrial green transformation is typically smaller than that of the refinancing, differential reserve requirement ratio, and liquidity coverage ratio policies. (3) The central bank reserve asset allocation policy often leads to competition with the financial sector in the financial market, resulting in a decrease in the credit scale allocated by banks to the green industry; consequently, the impact of the central bank reserve asset allocation policy on industrial green transformation is relatively minor. (4) Introducing countercyclical structural policies during economic and financial cycles can effectively promote industries' green transformation and improve residents' welfare. Importantly, however, long-term structural policies may have negative impacts on residents' welfare.
Based on these findings, several policy recommendations are proposed. (1) The refinancing, differential reserve requirement ratio, and liquidity coverage ratio constraint policies exhibit strong substitutability; when one policy is constrained, monetary authorities can consider using the other two policies as substitutes. Additionally, policymakers can enhance the effectiveness of these policies by lowering the refinancing, statutory reserve requirement, and excess reserve requirement rates, respectively. While risk-weighted asset and central bank reserve asset allocation policies have substantial impacts on the total credit scale, their influence on industrial structural transformation is minor; accordingly, central banks should implement these policies cautiously. (2) During economic downturns, policy authorities can increase support for green industries by implementing loose monetary policies. Conversely, during economic upturns, authorities can prioritize tightening policies on brown industries by executing contractionary monetary policies. (3) Establishing dynamic policy mechanisms to mitigate the adverse welfare impacts of structural policies is also recommended to ensure sustainable economic development.

As one of the most important components of the financial market, interbank market stability is crucial to maintaining stability throughout the financial system and guarding against systemic risks. Sudden freezes in the interbank market are precipitous declines or near-stagnation in transactional activity. Such freezes pose a significant threat to market stability, as demonstrated by historical financial events. In 2007, the subprime debt problem affecting some United States banks expanded to affect the whole market through the interbank lending network; consequently, the interbank market transaction scale shrank significantly, and interbank lending with a slightly longer maturity period almost disappeared, a typical sudden freeze phenomenon. The liquidity problem caused by this sudden freeze of the interbank market led to a rapid amplification of the financial crisis and, eventually, a serious negative impact on the whole financial system.
This paper establishes a financial network model to explicate the phenomenon of a sudden freeze in the interbank market through the lens of risk contagion. Within this network model, banks engage in mutual borrowing, with each bank facing independent liquidity shocks that may propagate throughout the banking system. Within the intricate structure of the lending network, banks internally negotiate and determine lending contracts. Our analysis reveals that risk contagion gives rise to multiple equilibria in the magnitude of bank lending. Notably, when the liquidity risk exceeds a threshold, the volume of transactions in the interbank market can decline suddenly and precipitously in response to a shift in the lending equilibrium. This finding offers a plausible explanation for the market freezes that occur during financial crises.
To effectively intervene in interbank market freezes, prudential authorities can actively adjust collateral and cash in the market through open market operations. Collateral plays a pivotal role in mitigating bankruptcy risk contagion. Replacing cash with collateral of equivalent value enhances banks' risk resilience, thus increasing the scale of interbank lending when the liquidity risk is high. However, the reduction in cash lowers the maximum amount of financing available, thereby constraining banks' borrowing capacity when the liquidity risk is low. Consequently, the optimal balance of collateral and cash is a crucial aspect of policy intervention in the interbank market. Prudential authorities should assess this balance and compare it with banks' initial endowments to decide whether to adopt collateral injection or liquidity injection policies as part of their intervention strategy.
Regulatory policies such as liquidity supervision and window guidance policies can also prevent interbank market freezes. Under liquidity supervision, banks must increase their proportion of cash. In a high lending equilibrium, banks spontaneously hold a low proportion of cash, increasing their susceptibility to regulatory constraints. Comparatively, in a low lending equilibrium, banks spontaneously hold a high proportion of cash and are thus less affected by such constraints. Thus, liquidity supervision causes banks to spontaneously choose the low lending equilibrium and focus increasingly on preventing risk contagion. Similarly, window guidance policies support market equilibrium transitions; they help avoid disruptive equilibrium jumps and hard landings in the market by moderating banks' investment return and contagion prevention incentives.
The main contributions of this paper are as follows. First, it introduces a novel mechanism underlying interbank market freezes, which is grounded in a financial network model. Building upon the established network framework, this paper internalizes the lending contract. Our analysis reveals that a contagious risk gives rise to multiple equilibria in the interbank market, where negative shocks can trigger abrupt shifts in lending equilibria and unexpected changes in market size. This theoretical framework offers an explanation for the sudden emergence of financial crises. Second, this paper provides crucial insights into risk prevention and mitigation policies by examining the impact of a contagious risk on banks' lending decisions. Specifically, it highlights the importance of the injection of collateral into the market by the central bank during times of heightened risk. Additionally, this paper revisits liquidity regulation and window guidance policies from the perspective of interbank lending equilibria. These insights offer a rich array of policy options for preventing and mitigating unexpected freezes in the interbank market.

Modern economic growth is driven mainly by improved production efficiency, which may be due to technical changes or improved resource allocation. The latter has attracted the attention of economists in recent years, resulting in a large volume of literature on resource misallocation. Such research echoes China's call for “high-quality development,” of which improved efficiency of resource allocation is a key component.
However, the literature on China's allocative efficiency suffers from two problems, substantially reducing its value in terms of informing policy making in China. First, most studies do not cover periods after 2008 and thus do not address important recent changes in the Chinese economy. Second, the literature neglects the interplay between industries in the production network, which might bias estimates of allocative efficiency in China. This paper helps to fill both gaps by (1) developing a misallocation accounting framework that extends the value-added framework of Hsieh and Klenow (2009) by incorporating domestic and foreign input linkages, and (2) applying this framework to a new dataset covering the years 2009-2015, enabling an assessment of allocative efficiency in more recent years than was previously available.
Our findings suggest that during 2009-2015, allocative efficiency initially fluctuated but began to improve in 2012. Over the longer term, these changes reversed the trend of worsening allocative efficiency that had begun in 2004. These findings are robust to various alternative specifications. The improvement in allocative efficiency since 2012 is probably attributable to the Chinese government's efforts to allow market forces to play a larger role in resource allocation, as well as wiser design of economic policies. When we decompose aggregate productivity growth into different components, however, we find that improved allocative efficiency plays a minor role in productivity growth, suggesting room for future improvement.
Methodologically, our analysis shows that the estimation results differ between the value-added model, which does not consider intersectoral linkages, and the gross-output model, which allows for a full-fledged production network. As argued by Hang et al. (2020), ignoring the production network when measuring misallocation introduces biases. Our empirical findings thus caution against the future use of the value-added model. Fortunately, our analysis shows that with a few minor changes, the gross-output model is as easy to implement as the value-added model.
We draw a few implications from our study. First, we find that the Chinese economy is still far from efficient. The potential output is less than 50% of the efficient level. Continued improvements in allocative efficiency will require substantial effort. On a more positive note, however, this finding demonstrates potential of the Chinese economy for fast economic growth in the near future. Second, the Chinese economy is experiencing important structural changes. Academic studies must be up to date to inform policy decisions. Therefore, Chinese economists have a responsibility to study new economic trends in a timely fashion. Third, our study emphasizes the importance of intersectoral and foreign linkages. This emphasis echoes the new developmental paradigm, which features dual circulation. Studies in this area could help build a foundation for current developmental policy making.
Still, future studies can improve on our work in several ways. First, and most obviously, the data can be expanded to more recent years to further update the research. To obtain a full picture of the Chinese economy, future studies should also look beyond the manufacturing sector and examine other sectors, especially the services sector, which is becoming increasingly important. Second, our study mainly focuses on resource allocation within industries. While the production network still plays an important role in magnifying the effects of within-industry misallocation, between-industry misallocation is an important issue and should not be ignored. Studying between-industry misallocation would elucidate the role of the production network in magnifying within-industry effects, providing very valuable information for the new developmental paradigm featuring dual circulation. Third, due to data limitations, we cannot study the misallocation of individual intermediate inputs but must take all intermediate inputs as a whole. This approach introduces an upward bias in the estimates of allocative efficiency. That is, our estimates of allocative efficiency should be considered as an upper bound. Future studies could use better data and new methods to improve our estimates.

The development of new quality productivity requires promoting the deep integration of productive services with manufacturing. A report of the 20th National Congress of the Communist Party of China proposes to increase the opening of the modern service industry and promote its deep integration with advanced manufacturing. Overall, the proportion of knowledge-intensive business services (KIBS) is increasing, and the proportion of productive services represented by KIBS will continue to increase steadily. Currently, a conspicuous shift from real to virtual productive services is ongoing, and the positive effect of productive services on manufacturing is decreasing. The level of coordinated development between productive services and manufacturing is low. Promoting the deep integration of productive services with manufacturing will enhance China's high-quality development. Whether upstream productive services can promote innovative behavior in downstream manufacturing serves as the micro basis for testing this macro proposition. Improving the levels of integration and development between productive services and manufacturing and cultivating new forces to drive growth through service innovation are currently hot topics in academic and policy circles.
This paper theoretically extends Foster et al.'s (2008) benchmark model by introducing innovation behavior and the upstream opening of foreign investment in productive services. It reveals the mechanism of innovation behavior in downstream manufacturing from the supply side and demand side and under general equilibrium conditions. According to a comparative static analysis, the impact of opening foreign investment in productive services on manufacturing innovation yields a U-shaped curve. Specifically, the opening of knowledge-intensive services affects the innovation behavior of downstream manufacturing firms through a cost-saving effect, a preference complementarity effect, and a competition intensification effect, while the opening of transportation services affects the innovation behavior of downstream manufacturing firms through a cost-saving effect and a competition intensification effect.
This paper yields the following findings. (1) Overall, the opening of foreign investment in productive services significantly improves the quantity, quality, and efficiency of patent innovation in Chinese manufacturing firms. (2) Mechanistically, the opening of foreign investment in productive services has a positive cost-saving effect and preference complementarity effect and a negative competition intensification effect on downstream manufacturing innovation behavior. The total effect depends on the sum of the above effects. The opening of foreign investment in productive services yields a U-shaped relationship with the degree of manufacturing innovation, and a threshold value of openness with a positive innovation effect is revealed. (3) Several types of policies are conducive to expanding positive innovation effects, namely accelerating the opening of knowledge-intensive service industries such as communication, commerce, and technology to foreign investment; improving the technological level and management efficiency of manufacturing firms; optimizing the degree of regional marketization; and promoting the synergy and complementarity of measures outside and within the border. This paper may serve as an important reference in terms of expanding the opening of foreign investment in productive services, promoting Chinese manufacturing firms' innovative behavior, and exploring institutional opening paths for the development of new quality productivity.
The potential marginal contributions are as follows. (1) Theoretically, this paper extensively incorporates analysis of the complementary effects of demand-side preferences and finds that the complementary effects of productive services and manufacturing enhance the degree of firms' product appeal. Simultaneously, this paper draws on the general equilibrium solution to analyze the overall impact of the opening of foreign investment in productive services on changes to cut-off costs in manufacturing. This paper incorporates a cost-saving effect, preference complementarity effect, and competition intensification effect into the unified theoretical framework to analyze the mechanism by which the opening of foreign investment in productive services affects manufacturing innovation. (2) Empirically, this paper extends the methods used to identify and portray firms' innovation behavior and the opening of foreign investment in productive services. Due to the lack of firm-level data on the intermediate inputs of services, the literature uses domestic input-output tables to measure the degree of industry-level service openness based on the assumption of homogeneous proportions. However, this approach cannot effectively reflect the impact of a specific manufacturing on the upstream domestic and foreign components of productive service calls. This paper distinguishes between the proportions of domestic and foreign intermediate input into productive services, using the WIOD's non-competitive input-output tables to accurately measure the extent of the impact of foreign investment openness policy shocks in productive services at the industry level. Using patents as the core indicator of innovation output and information from the Annual Survey of Chinese Industrial Firms and Innovation Survey Database, this paper provides an effective measure of patent quality and innovation efficiency. (3) In terms of policy implications, this paper provides micro-foundational and theoretical support for realizing the deep integration of advanced manufacturing with modern services and demonstrates the importance of promoting the real economy by moderately pre-opening productive services. This paper explores feasible measures for promoting innovative behavior in Chinese manufacturing by opening foreign investment in upstream productive services and provides a path for optimizing innovation-driven development strategies with the systematic opening of the productive service industry and other fields. It thus provides optimized paths toward the development of new quality productivity.

On January 1, 2018, the Chinese government fully implemented the Environmental Protection Tax Law of the People's Republic of China. An environmental tax can help correct an imbalance in the economic structure that favors heavily polluting industries, while reducing environmental pollution. However, such an asymmetrical policy can also suppress economic activities in heavily polluting industries, leading to output losses and negatively impacting economic and environmental coordination. Therefore, an exploration of how the environmental economic policy toolbox can be fully utilized under different economic conditions and the timely selection of an optimal combination of environmental economic policies is urgently needed. Such research would support efforts to adjust resource allocation and the economic structure, incentivize green production vitality to improve efficiency, and reduce environmental pollution.
We first conduct an empirical analysis based on Chinese firm-level data to clarify the characteristics of pollution control and credit allocation among Chinese firms affected by the environmental tax. We then construct a dynamic general equilibrium model that includes both pollution-intensive and clean industries, introduce an environmental tax, and endogenize the intensity of the accompanying policies. Finally, we quantitively study the impacts of different environmental policy combinations on total factor productivity (TFP) in terms of misallocation and TFP losses caused by pollution. Our study shows that although an environmental tax can alleviate environmental pollution exacerbated by credit discrimination, a higher tax rate may excessively suppress the output of polluting enterprises, resulting in a new resource misallocation bias favoring clean industries. However, polluting enterprises can effectively reduce this distortion by bearing pollution control costs to equalize the marginal output across industries, thus promoting an improvement in overall efficiency. The study proposes that implementing complementary policies, such as clean production subsidies and green credit interest subsidies, can increase the likelihood of realizing the triple dividend of an environmental tax: correcting misallocation, improving efficiency, and reducing pollution.
By distinguishing three scenarios based on varying credit discrimination levels and environmental tax rates, this study simulates the effects of different policy combinations under various scenarios and ranks the optimal policy combinations. First, under a high environmental tax rate, imposing complementary policies, such as clean production subsidies and green credit interest subsidies, on both pollution-intensive and clean enterprises can incentivize pollution-intensive enterprises to increase their pollution control investment, thus mitigating the negative effects of the environmental tax. Second, under a low environmental tax rate, with limited tax revenue and a weak accompanying policy intensity, the effectiveness of policies imposed on both pollution-intensive and clean enterprises in terms of optimizing resource allocation is inferior to issuing directly subsidies to clean enterprises. Third, when credit discrimination is weak, optimal resource allocation can feasibly be achieved by imposing an environmental tax, without requiring other complementary policies. Therefore, allocating tax revenues directly to green investments can enable an improvement in environmental quality from a good to an excellent level.
The main contributions of this study are as follows. First, this study delineates the characteristics of firms' behavior under the condition of an environmental tax and simulates the effects of this tax and associated policy combinations in the Chinese context, thus enriching understanding of pollution phenomena and environmental policy formulation in China. Second, this study considers pollution control investment, a crucial factor in classical tax and subsidy theoretical research, and thus expands the explanatory power of classical tax theories to the environmental field. Third, this study focuses on resource allocation distortion caused by an asymmetric environmental tax and provides theoretical references regarding the design of asymmetric policy through counterfactual analysis. Fourth, by endogenizing different levels of accompanying policy intensity, this study enables comparison of the effects of different policies, thus providing an analytical framework for evaluating the coordination effects of environmental policies. This approach has certain theoretical and practical implications in terms of effectively utilizing the environmental economic policy toolbox to systematically construct an environmental-economic governance system.

China is vigorously promoting the development of ecological civilization, leading to sweeping, historic, and comprehensive advances in ecological and environmental protection. The effective application of environmental regulation policy tools, such as environmental punishment, supports the modernization of the ecological system and governance capabilities.
Against this backdrop, the spillover effects of environmental penalties on corporate productivity have substantial and significant academic and normative implications. Examining these spillover effects of environmental penalties enables us to enhance the research framework regarding the impact of these penalties on businesses and add new empirical evidence to the literature on environmental regulation. However, only a small proportion of enterprises are actually penalized; therefore, focusing solely on their responses may lead to underestimation of the effectiveness of the underlying environmental policies. Therefore, a better understanding of these spillover effects can shed light on the comprehensive outcomes of China's environmental penalties, thereby improving the regulatory efficiency of environmental policies in practice.
To examine the spillover effects of environmental penalties on non-penalized peer firms within the same city and same industry as penalized firms, we obtain firm-level environmental penalty data from QuantData and focus on the complete sample of A-share mainboard-listed companies in China. We further estimate the total factor productivity (TFP) of peer firms using the Olley-Pakes (OP) method and measure the intensity of environmental penalties by the number of penalized companies. Our baseline results show that environmental penalties reduce the productivity of non-penalized peer firms, and this effect is both statistically significant and economically sizable.
We further explore the economic mechanisms of our main findings by delving into the pivotal role played by green innovation. Increased environmental punishment pressure provides non-penalized peer firms with incentives to engage in green innovation to improve their environmental performance. However, green innovation may not be profitable in the short term. Rather, it may crowd out other profitable and productive firm activities, leading to a decline in firm-level profitability and productivity.
To examine the above mechanism, we use the number of green patent applications as a proxy for incentives to engage in green innovation. In line with this hypothesized mechanism, we find that environmental punishment significantly increases the green innovation incentives of non-penalized peer firms, and that its negative spillover impact on productivity is mainly concentrated in firms pursuing green innovation. Additional analysis reveals two important aspects of this mechanism. First, firms face considerable uncertainty when translating green patents into tangible benefits. Second, an in-depth examination of firms' input-output data confirms that green innovation may crowd out other productive and profitable activities. Taken together, these findings suggest that the crowding-out effect of green innovation elucidates how environmental punishment has a negative spillover impact on productivity.
The marginal contributions of this paper are threefold. First, we introduce a new dataset of environmental penalties collected from the official websites of various government departments using QuantData. The authoritative sources, extensive timespan, and comprehensive coverage enable us to effectively avoid sample selection bias. Second, the focus on non-penalized firms provides a novel perspective and a more comprehensive framework, thus broadening our understanding of the policy impact of environmental penalties. Third, our results suggest that environmental policies may affect the productivity of non-penalized peer firms via the channel of green innovation. Collectively, our main findings and the proposed economic mechanism provide new insights into how environmental regulations influence firm policies and performance.

The 20th National Congress of the Communist Party of China advocates expediting the shift toward an increasingly green development mode, with green finance being a pivotal tool in attaining this objective. In 2017, the People's Bank of China integrated green credit into its macroprudential assessment (MPA) system, aiming to incentivize banks to support enterprises undergoing a green transition and upgrading through “greening” financial assessments. In this paper, we use this policy to establish a quasi-natural experiment. We use the intensity difference-in-differences model and a sample of pollution-intensive industry firms listed on the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) from 2013 to 2020 to examine the impact of integrating green credit into the MPA system on firms' green merger and acquisition (M&A) behavior, as well as the underlying mechanism.
Our results are reflected in the following four main aspects. First, the integration of green credit into the MPA escalates the propensity of pollution-intensive industry firms to pursue green M&As. Specifically, each one-standard-deviation increase in industry pollution density is associated with a 22.77% increase in the likelihood that firms will engage in green M&A. Second, the impact of the green prudential regulatory policy on green M&As primarily incentivizes firms with undervalued stock prices and robust fundamentals. Firms' green M&A announcements elicit positive stock market reactions, indicating that firms seize the opportunity to signal their commitment to and capacity for green transition to the capital market, thereby rectifying stock price undervaluation. Third, the effects of green prudential regulatory policies on green M&A are stronger for larger firms and those with fewer financial constraints. This finding implies that firms may engage in green M&As not to alleviate financing limitations, but rather to signal their positive green intentions, thereby bolstering their market performance and curbing capital costs. Finally, over the long term, firms involved in green M&As witness a substantial uptick in profitability and green innovations, underscoring the positive role of greening financial assessment. These effects facilitate firms' achievement of a green transition, ultimately amplifying firms' value and contributing to sustainable development goals.
This paper contributes to the literature in the following ways. First, we contribute new evidence to the literature on the signaling effect of M&As. The literature finds that, unlike other markets, valuation repair is the primary motivation for signal-based M&As in the Chinese market. In this paper, we further explore the impact of policy traction effects on firms' signal-based M&A behavior. Second, this paper contributes a new analytical perspective to the literature on green finance and firms' green practices. The literature mainly focuses on the influence of green finance monetary policy on firms' investment, financing, and green innovation. Our study provides a major contrast by mainly exploring the impact of green macro-prudential regulatory policy on firms' investment decisions from the perspectives of green finance assessment and signaling effects. Third, we marginally contribute to understanding of the synergistic effect of M&As on green innovation. The literature mainly assumes that firms achieve green development through internal innovation. However, our paper points out that through green M&As, firms may directly obtain green technology from external sources and may complement their advantages with target companies during the M&A integration process, ultimately achieving a rapid transition and upgrade. Our paper also provides a new analytical perspective on how to use greening financial assessment to guide green development in the real economy, and it provides empirical evidence to guide high-quality development using green macro-prudential regulatory policies.

A multi-tier pension system with Chinese characteristics is an essential component of China's social security system in the new era. The Tier 2 enterprise annuity system is a type of supplementary pension insurance based on a fully funded personal account. This system represents an important strategy for addressing the challenges posed by population aging. International experiences show that enterprise annuities have become a major source of pension funds for middle-income populations by mitigating longevity and economic risks. The development of enterprise annuities can not only improve the social security system but also promote steady financial growth related to aging and positive interactions with the financial market. Although China's enterprise annuity system has made steady progress since its establishment in 2004, its coverage and fund accumulation are not sufficient, leaving much room for expansion and growth.
Additional research is needed to better understand the operating mechanism and effects of enterprise annuities and expand their coverage. Currently, the literature on enterprise annuities is limited and focuses primarily on macro policy analysis. Some studies investigate the factors affecting the rates of participation in enterprise annuities, but few studies examine the socioeconomic impact of such programs.
Our study examines the impact of enterprise annuities on the urban consumption, savings rate, and allocation of financial assets among urban employees' households, based on the development of China's enterprise annuity system over the past decade. According to the life-cycle theory, the impact of an enterprise annuity on a household's current consumption and savings rate depends on the household's saving motives and degree of credit constraints and the expected returns of the annuity. From a life-cycle perspective, an enterprise annuity can increase a household's expected pension wealth and lower the risk of retirement income, thus reducing private savings and precautionary savings against aging and promoting current consumption. However, contributions to an enterprise annuity might reduce a household's current disposable income, leading to decreased consumption and an increased savings rate, especially for households facing credit constraints and having targeted saving motives. Risky financial assets are an important form of diversified household savings. While the effect of enterprise annuity contributions on household income may lead credit-constrained households to reduce their investments in risky financial assets, participation in an enterprise annuity may increase households' investments in risky assets due to substitution between retirement income risk and financial market risk, as well as improved financial literacy. Because these different mechanisms offset each other, theoretical estimates of the net impact of enterprise annuity are ambiguous, necessitating empirical research.
This study uses data from the China Family Panel Studies during 2012-2020 and employs a two-way fixed effects model and the instrumental variable method to mitigate endogeneity. We find no evidence that participation in an enterprise annuity system affects the current consumption expenditure and savings rates among urban employees' households; however, such participation increases the likelihood that a household will participate in risky financial investments, and the value of those investments, particularly in households with a higher education level and homeownership. Further analysis shows that the effect of enterprise annuity system participation on investment in risky financial assets is stronger for households with a greater reduction of background risks in old age. Additionally, participation in an enterprise annuity improves employees' financial literacy, providing empirical evidence to support the mechanisms underlying the positive effect of enterprise annuities on households' investments in risky financial assets.
This study makes the following three contributions. First, it enriches the literature on enterprise annuities and provides new empirical evidence regarding the socioeconomic consequences of the enterprise annuity system in China. This information adds to understanding of the implications of enterprise annuity expansion and the establishment of a multi-tier pension system to support China's retirement savings in pension funds, family welfare, and financial development. Second, it broadens the literature's perspective on households' financial asset allocation, providing insights for policy-making to promote urban families' participation in risky financial asset investments on both the extensive and intensive margins and increasing their property income. This study also provides policy implications for forming positive interactions between enterprise annuities and financial market development. Third, our results regarding households' consumption and savings rate suggest that the role of enterprise annuities in mitigating precautionary savings against aging should be strengthened, thus supplementing the literature on pension insurance and household consumption and savings in China.

China's capital market has long struggled with the problem of an inadequate initial public offering (IPO) pricing function. Despite improvements in the registration system, there are still many instances of extreme IPO overpricing or underpricing in the science and technology innovation market (STAR) and growth enterprise market (GEM). Furthermore, the underpricing of IPOs in China's capital market is typically significantly higher than that in developed countries such as the United States and United Kingdom. Excessive underpricing significantly raises financing costs, which in turn distorts firms' investment decisions and seriously undermines the investment and financing functions of the capital market. Therefore, investigating practical approaches to improving the efficiency of IPO pricing that are relevant to China's institutional background is a crucial task that must be undertaken in the current reform of China's capital market, especially in light of the complete implementation of the registration system.
In theory, regulation intelligence (hereinafter reg-intel), which heavily leverages artificial intelligence (AI) technologies such as machine learning (ML) and natural language processing (NLP), could be a useful tool for increasing the efficiency of IPO pricing. By reducing the cost of regulators' information integration, reg-intel can assist regulators in identifying and highlighting suspicious information and thus can bolster the credibility of IPO firms' information. Reg-intel also can assist regulators in finding and unlocking idiosyncratic information about the IPO firms, thus reducing information asymmetry for investors and improving the efficiency of IPO pricing. In practice, in September 2020 the SSE investigated the application of the intelligent assisted review platform (IARP), which uses AI technologies such as ML and NLP to facilitate IPO reviews. Using the IARP as a quasi-natural experiment and adopting the difference-in-differences method, this paper systematically analyses and tests the effect of reg-intel on the efficiency of IPO pricing and the underlying mechanism for the first time.
This paper reports the following findings. (1) IPO pricing efficiency improves significantly when the IARP is introduced. (2) The results hold after a series of robustness tests. (3) There is no evidence of an ex-ante trend of changes in pricing efficiency, supporting the validity of the parallel trend hypothesis and a causal interpretation of the results. (4) The IARP exerts its effects through two channels: it strengthens the credibility of the IPO firm's information and reduces information asymmetry for investors. (5) The IARP is more effective for IPOs with poorer information environments and stronger technological attributes. (6) The IARP significantly reduces the first-day stock turnover rate and post-listing price correction volatility of IPOs.
This paper makes three contributions to the field. First, it enriches and extends research on the efficiency of IPO pricing in the context of the registration system. This paper provides the first evidence that reg-intel can effectively improve the efficiency of IPO pricing in this context, thus contributing new ideas and evidence to the relevant literature and providing theoretical references and directions for the practice of reg-intel in China's capital market. Second, this paper enriches and extends research on reg-tech in China's capital market. This paper is the first to discuss the advanced stages of AI-based reg-tech and the resulting impact on the cost of information integration for regulators. It thus adds both a new perspective on the role of reg-tech and new evidence to support the evaluation of reg-tech's real efficacy in China's capital markets. Third, this paper enriches and extends research related to the impact of AI technology on the financial industry. Unlike previous literature, which mainly examines financial intermediaries, this paper focuses on the use of AI by capital market regulators, thus adding new evidence and suggesting new directions.
The results of this paper suggest that reg-intel can significantly improve the efficiency of IPO pricing. Therefore, to improve IPO pricing efficiency, authorities should further expand and deepen the construction of reg-intel in China's capital market and formulate a categorized, stratified, focused, and coordinated review strategy. Simultaneously, the authorities could also consider more imaginative answers to the problem of sensible capital market pricing in China. For example, an interactive platform where regulators and investors could exchange information might directly lower retail investors' costs associated with processing information.

China's stock market is facing a severe problem of excessive stock price volatility. The mutual fund industry in China has experienced remarkable growth over the past two decades. In April 2022, the China Securities Regulatory Commission (CSRC) issued opinions promoting the high-quality development of the mutual fund industry and emphasized the importance of mutual funds in serving the capital market. However, anecdotal reports of panic selling by mutual funds raise concerns about the potential impact of public mutual funds on the stock price crash risk.
Research primarily focuses on the role of information asymmetry in explaining stock price crash risks, suggesting that institutional investors influence this risk through mechanisms such as corporate governance, collusion, or information mining, which affect the transparency of the information environment and the release of negative news (Chen et al., 2001; Jin and Myers, 2006; Callen and Fang, 2013). However, another direct mechanism, namely competitive trading behavior in response to negative news, may be at play.
To illustrate this new perspective, the paper first constructs a continuous-time trading model with multiple institutional investors. The real-time asset price is set to consist of three important components. The first component represents the trading needs of uninformed noise traders and is modeled as white noise with no drift term. The second component captures the permanent price impact, which is related to inventory in the hands of institutional investors. The third component captures the transitory price pressure from instantaneous trading. Each institutional investor with a mean-variance utility function determines their individual trading speed to maximize the expected payoff in a given period of time. The optimal dynamic trading trajectory for each participant is derived, and the asset price dynamics are characterized as a result of aggregation. Given the total position adjustment for the group of institutional investors, the asset price skewness is then easily obtained as an equilibrium outcome. Using the model, we then study a case wherein the optimal liquidation position for each participant can be endogenized and explore whether the stock holdings distributed among institutional investors may affect the stock price crash risk.
We empirically test hypotheses derived from the theoretical model using quarterly data on reported holdings of stock mutual funds in China from 2010 to 2022. The results show a significant positive correlation between the proportion of fund ownership and the stock price crash risk. When negative signals such as downgrades of stock ratings or earnings forecasts by sell-side analysts occur, funds tend to reduce their holdings. Moreover, a higher proportion of joint ownership among funds leads to a stronger negative market reaction and greater stock price crash risk. To further illustrate the competitive selling mechanism among mutual funds, we analyze the impact of the number of funds holding stock and the concentration of their ownership on stock divestments. Our findings reveal that a higher number of funds holding a stock indicates a stronger willingness to sell in response to negative news, while a higher concentration among holding funds is associated with a lower propensity for competitive selling.
Consistent with the predictions of the theoretical model, we examine how fund characteristics and stock features influence the relationship between fund holdings and the stock price crash risk. The results indicate that the impact of fund holdings on stock price crash risk is stronger when a larger number of funds hold the stock and their shares are more evenly distributed. Additionally, a long investment horizon and reduced short-term performance pressure among holding funds help mitigate the impact of fund holdings on the stock price crash risk. Furthermore, we find that stock return volatility dampens the influence of fund holdings on the stock price collapse risk.
This paper contributes to the literature in several ways. First, it provides a new perspective on how the competitive selling behavior of mutual funds in response to negative information increases the stock price crash risk, thereby contributing to the academic debate on the role of institutional investors. Second, it develops a competitive selling model for investors to assess the impacts of fund holding concentration and stock volatility on the stock price crash risk. Third, it finds that the investment horizon and short-term performance pressure are important factors influencing the relationship between fund holdings and the stock price crash risk. These findings not only enrich the empirical discussion on whether mutual funds exacerbate or mitigate the stock price crash risk but also provide valuable insights into the regulation of the mutual fund industry.