“Stabilizing growth” refers to maintaining steady economic growth, while “risk prevention” refers to safeguarding against financial risks. Finance is at the core of the modern economy, and maintaining financial stability while preventing financial risks is crucial for ensuring high-quality economic development. Conversely, stable economic development helps to prevent and resolve various risks that may arise during economic operations. However, achieving the goals of stabilizing growth and preventing risks is challenging.
First, the goal of “stabilizing growth” faces challenges. In recent years, China's economy has experienced some downward pressure, making it urgent to ensure healthy and stable economic growth, highlighting the need to identify economic downturn risks especially important. In terms of investment, since the onset of the “new normal” in the economy, the country's growth rate has shifted gears, and corporate profitability has declined, reducing corporate investment willingness. On the consumption side, the slowdown in residents' income growth has led to a deceleration in consumption growth.
Second, achieving the “risk prevention” goal should not be taken lightly. The negative impacts of the global pandemic have not yet dissipated, and geopolitical conflicts continue to escalate, exacerbating financial fragility risks globally. Financial markets, as high-frequency trading markets, are highly susceptible to external shocks, with risks rapidly rising in a short period.
This paper proposes two objectives: First, to dynamically monitor the risk status and risk spillovers in the real economy and financial markets and, from a network perspective, identify periods of high risk in both, thus determining whether a focus on stabilizing growth or preventing risks is needed during different periods. Second, after identifying the policy regulation targets for different periods, this paper explores the effects of various macroeconomic policies to implement the optimal regulatory policies during each period.
To achieve this, the paper first employs a mixed-frequency risk spillover approach to construct risk spillover indicators, using these indicators to assess the spillover relationship between the financial market and the real economy. Second, it uses the Markov regime-switching model to identify high-and low-risk states in both the financial market and the real economy. By combining the net risk spillover indicators between the financial market and the real economy with high-risk state indicators, the paper identifies other periods for “stabilizing growth” or “preventing risks” to address risk warning issues over time. Finally, the paper uses a TVP-VAR model to examine the regulatory effects of different types of macroeconomic policies during various periods, providing recommendations for policymakers on implementing macroeconomic policies.
The main contributions of this paper include two aspects: First, it explicitly defines the conditions for “stabilizing growth” and “preventing risks” periods. The paper argues that two prerequisites must be met: 1) stabilizing growth cannot come at the cost of significantly increasing financial risks, and preventing risks must also consider stable economic development, with coordination between the two objectives; 2) policymakers should focus on extreme risks when implementing regulatory measures and avoid frequent interventions. Second, it compares and analyzes the effects of different types of policies during various periods. The paper innovatively uses the TVP-VAR model to examine how monetary and fiscal policies affect risk spillovers and volatility between the financial market and the real economy during different periods. By comparing the implementation effects of different economic policies, the paper contributes to providing theoretical guidance for macroeconomic policy regulation aimed at “stabilizing growth” and “preventing risks.”
Based on the empirical analysis, the paper suggests that, in the short term, efforts to prevent systemic risks in the economic and financial network should focus on the financial market, while in the long term, the emphasis should shift to the real economy. For short-term regulation of systemic risks, attention should be directed toward the frequent fluctuations of the financial market. Conversely, for long-term regulation, the focus should be on the long-term trend changes in real economy risks. Additionally, during “stabilizing growth” periods, efforts should primarily focus on stabilizing industrial growth, while in “preventing risks” periods, priority should be given to preventing risks in the stock market. Finally, volatility and net risk spillover indicators can be combined to provide timely risk warnings. To ensure the effectiveness of policy regulation, interventions should target relatively extreme risks and should not be too frequent, with different focuses during different periods.

The complicated economic situation at home and abroad has led to a significant increase in China's economic uncertainty, and maintaining stability while pursuing progress has become the general tone of economic development in China. In this context, studying the impact of monetary policy communication and fiscal policy communication on economic uncertainty is of great practical significance for improving the effectiveness of policy implementation and ensuring the smooth operation of the macroeconomy. In this paper, we empirically examine the impact and mechanism of policy communication on economic uncertainty at three specific time points: the international financial crisis, the European sovereign debt crisis, and the Sino-US trade friction using the TVP-VAR model. The main conclusions are as follows.
Policy communication can significantly reduce economic uncertainty during the international financial crisis, the European sovereign debt crisis, and the Sino-US trade friction. Policy communication can provide the public with an “information advantage”, which is conducive to enhancing the public's acceptance of policy information and guiding public behavior to converge towards policy objectives. In addition, the economic stabilization effect of policy communication is remarkably sustainable. We re-examine the impact of policy communication on economic uncertainty at different time points by changing the calculation method of economic uncertainty and replacing the construction method of the policy communication index, and verify the robustness of the benchmark estimation results.
The results of the mechanism test show that, regarding the policy tools implementation mechanism, the impact of expansionary monetary policy communication leads to an increase in money supply and a decrease in the benchmark interest rate, and active fiscal policy communication sends a policy signal of expanded government spending and reduction of tax burdens. Therefore, policy communication uses the way of strengthening the implementation effects of policy tools to form an effective macroeconomic adjustment. For the public policy attention mechanism, the impact of policy communication on public policy attention is significantly positive, indicating that policy communication can strengthen the public's attention to economic policies and promote the adjustment of public policy expectations in the direction of policy objectives, so as to achieve the unity of policy objectives and economic operation directions.
Compared to the existing research, the possible contributions of this paper are that, first, we discuss the mechanism of policy communication on economic uncertainty from the perspective of expectation adjustment, and form a logical chain of “policy communication to expectation adjustment to economic stability”, which provides empirical evidence for optimizing policy communication and strengthening expectation management. Second, supervised machine learning methods are used to quantify both policy communication and expectation guidance. Specifically, the TF-IDF method is used for text vectorization, Word2Vec for keyword expansion, and support vector machines for text classification, effectively enabling accurate extraction of policy text information. Third, we use a supervised machine learning method to measure the fiscal policy communication index, to achieve the accurate measurement of fiscal policy communication of the Ministry of Finance, which has important reference value for improving the accuracy and effectiveness of fiscal policy.
Based on our findings, the government should pay attention to both the direct adjustment function of policy communication and the role of expectation guidance, and further improve the mechanism of policy communication. In addition, the government should also focus on strengthening the synergistic effect of policy mixes on macroeconomic operations and implement differentiated communication strategies for different policy instruments. Following a holistic and systematic approach, the government should optimize the coordination mechanism of policy communication from different departments which is significant to form economic expectations and achieve stable growth goals.

Information asymmetry and insufficient data remain persistent barriers limiting access to external finance for small and medium-sized enterprises (SMEs) worldwide. Unlike large firms, many SMEs operate informally, avoiding the costs associated with formal registration, such as administrative procedures, time, taxes, and regulatory inspections. However, the absence of formal business records prevents SMEs from building credible credit histories, which are essential for securing bank loans. Even when some data exist, financial institutions often face high costs and technical difficulties in collecting and processing the information required to assess SMEs' creditworthiness. Moreover, SMEs frequently lack sufficient physical collateral, further exacerbating their financing constraints.
Against this backdrop, market-oriented credit reporting bureaus, as key components of the data factor market, theoretically hold significant potential in mitigating the information asymmetry faced by SMEs. Unlike public credit registries, which primarily focus on maintaining financial stability and have relatively limited data collection scopes, market-oriented bureaus operate under market-based mechanisms and leverage technological innovations to expand the breadth and depth of information acquisition. This facilitates the circulation and utilization of data and information, enabling the development of richer and more multidimensional credit profiles for individuals and enterprises. Such capabilities not only help alleviate the information asymmetry encountered by financial institutions when granting credit to SMEs but also offer new possibilities for reducing the reliance of lending decisions on collateral.
Motivated by these considerations, this paper employs the latest World Bank Enterprise Surveys data covering over 70000 enterprises globally and manually matches data on credit reporting institutions across 98 economies to empirically investigate the impact of market-oriented credit reporting bureaus on enterprise financing constraints, providing internationally comparable insight for China's current reforms. Empirical results show that the establishment of market-oriented credit bureaus significantly reduces financing constraints for SMEs, while having no significant effect on large firms. In contrast, public credit registries do not exhibit significant effects on alleviating financing constraints for either SMEs or large enterprises. These findings remain robust across alternative variable definitions, placebo tests, and after addressing potential endogeneity concerns.
Further analysis reveals the mechanisms through which market-oriented credit reporting bureaus affect SME financing. These bureaus promote both the collection and accumulation of enterprise-related information, not only expanding the availability of data itself but also encouraging SMEs to register formally and extend their duration of formal operations. Moreover, by integrating multidimensional and diverse data sources, market-oriented credit bureaus are better able to reach underserved and low-tier segments of the market, building more comprehensive credit profiles for SMEs and helping reduce banks' dependence on collateral in credit decisions. These mechanisms collectively explain why market-oriented credit reporting bureaus play a unique role in easing financing constraints for SMEs, whereas public credit registries have been less successful in achieving similar outcomes.
This paper contributes new empirical evidence regarding the role of market-oriented credit reporting bureaus in mitigating SMEs financing constraints. Compared to the existing literature, it further explores the specific channels through which market-oriented credit reporting bureaus alleviate challenges unique to SMEs. While prior studies have established that credit reporting systems can reduce information asymmetry and lower firms' financing costs, few studies have directly examined how market-oriented bureaus help address issues such as insufficient collateral or limited credit histories that particularly affect SMEs. This paper investigates these specific pathways, enriching our understanding of how market-oriented credit reporting bureaus influence SME financing outcomes.
The findings also carry important policy implications. First, the results provide empirical support for the positive externalities associated with the marketization of data as a production factor. The study finds that globally, government-led public credit registries have not significantly reduced firms' financing constraints, nor does market-oriented credit reporting bureaus increase the financing burden on firms; instead, it is precisely the market-oriented credit reporting bureaus that effectively mitigate these constraints. Second, the paper's analysis of SMEs-specific channels offers practical policy recommendations for addressing SMEs financing difficulties. The analysis in this paper indicates that the development of market-oriented credit reporting bureaus can help reduce banks' collateral requirements for SMEs. Accordingly, one feasible approach to promoting SMEs financing within the data factor market is to enhance the cooperation between these credit reporting bureaus and banks. By leveraging the strengths of market-oriented credit bureaus in credit product development, joint efforts can be made to introduce credit loan products based on large-scale credit data.

Tax and fee reductions are crucial measures in China's current phase to alleviate the burden on various business entities and stimulate market vitality. The “Comprehensive Plan for Reducing Social Insurance Premium Rates” implemented in 2019 represents the most significant social security contribution reduction policy since the establishment of China's social security system. As social security contributions constitute a major component of firm labor costs, this policy directly impacts corporate hiring behavior. While extensive research exists globally on how social security contributions affect firm employment, most existing studies focus solely on formal employment, neglecting informal employment forms such as labor outsourcing. This oversight may lead to biased conclusions. In practice, labor outsourcing offers a relative cost advantage due to its simpler cost structure; client firms are not required to bear social security costs for outsourced workers, allowing them to effectively transfer social security contribution burdens while meeting labor demands. Consequently, informal employment methods like labor outsourcing are becoming increasingly important choices for firms. Between 2012 and 2023, the proportion of labor outsourcing among Chinese listed companies surged from 6.79% to 34.73%. However, whether firms adjust their choices between formal and informal employment in response to changes in social security contribution pressure remains unexplored.
Addressing this gap, this paper exploits the implementation of the “Comprehensive Plan for Reducing Social Insurance Premium Rates” as an exogenous shock, and employs a Difference-in-Differences (DID) model, distinguishing between treatment and control groups based on the pre-policy (2018) social security contribution pressure of sample firms, to examine the impact of the reduction on firms' choice between formal and informal employment. We find that, compared to firms facing lower social security contribution pressure, the implementation of the reduction policy significantly decreased the use of labor outsourcing by firms under higher pressure. This suggests that labor outsourcing serves as a mechanism for firms to transfer social security contribution burdens. Mechanism tests reveal that the contribution reduction influences firm hiring choices through two primary pathways: First, “cost-driven effect”: the policy significantly lowers the social security cost burden of formal employment, narrowing the explicit cost gap comparing with labor outsourcing, thereby alleviating short-term labor cost constraints and prompting firms to reduce outsourcing. Second,“benefit-driven pathway”: the policy dividend strengthens firms' long-term development orientation, encouraging them to allocate more resources to formal employees possessing specific human capital, aligning with long-term strategic needs such as quality control. Furthermore, we find that the contribution reduction policy promotes firm investment in formal employees regarding hiring, compensation incentives, knowledge and skills, and capability development, contributing to enhanced Total Factor Productivity (TFP). Third, heterogeneity analysis indicates that the impact of the contribution reduction on employment choices is more pronounced for firms with higher labor intensity, facing a greater burden from the contribution base, or operating under stronger external social security contribution enforcement.
The innovations and contributions of this paper are as follows: First, by analyzing the dynamic adjustment process of firm employment modes, it systematically examines the labor economics effects of the social security contribution reduction policy, addressing the limitations of existing research. Utilizing China's policy implementation as an exogenous shock and incorporating labor outsourcing into the analytical framework, this paper not only demonstrates that outsourcing is a key method for transferring contribution pressure but also innovatively reveals the dynamic shift from informal to formal employment driven by the reduction policy, moving beyond traditional static analysis and expanding the theoretical framework of how social security systems influence firm labor decisions. Second, this study enriches the literature on the determinants of informal employment from the perspective of social security policy. Labor, as a core factor of production, and the influences of its allocation decisions are central academic concerns. However, constrained by data availability, existing literature primarily focuses on formal employment, paying insufficient attention to labor allocation in informal contexts. The limited research on informal employment determinants also tends to focus on economic policies and legal systems, overlooking the more direct factor of social security institutions. This research contributes to a more comprehensive and profound understanding of the impact of social security policies on firm employment. Finally, the paper offers practical implications. It demonstrates that the contribution reduction promotes firm investment in formal employment scale, compensation incentives, and skill training through dual pathways and significantly enhances TFP, providing empirical support for the social security reform direction of “lower rates, broader base, stricter collection.” Moreover, the study highlights the prevalent issues of unequal pay for equal work between informal (e.g., outsourced) and formal employees, alongside a lack of incentives and essential protections for the former. As China's flexible workforce expands, safeguarding the basic rights of informal workers—such as social security coverage—and providing fair and reasonable compensation and benefits are crucial for advancing common prosperity.

Corporate compliance constitutes a fundamental pillar of high-quality firm development and serves as the microfoundation for stable capital markets and sustainable economic growth. While government regulation remains the primary instrument for deterring corporate misconduct, the digital era has witnessed increasingly sophisticated, diverse, and concealed violations that strain traditional regulatory approaches. This regulatory dilemma underscores the urgency to cultivate firms' intrinsic incentives for compliance.
Reputational mechanisms, as a market-based disciplinary force, theoretically influence corporate behavior through the accumulation and depletion of reputational capital. Yet existing literature presents a paradox: the “maintenance hypothesis” posits that strong reputations deter misconduct, whereas the “opportunism hypothesis” suggests established reputations may instead shield wrongdoing. The effectiveness of reputational governance is closely tied to the external economic conditions—a relationship that remains underexplored. The rise of digital infrastructure offers an ideal setting to re-examine this issue, as in digital contexts, reputational signals are more authentic, widespread and widely applied, better aligning with the ideal conditions assumed by the reputation maintenance theories. Drawing on China's digital transformation as a natural laboratory, this study examines how technological and market evolution shape the efficacy of reputational mechanisms, using corporate misconduct as the empirical lens.
Utilizing a comprehensive dataset of Chinese A-share listed firms from authoritative databases including Datago, CSMAR, and CNRDS, this study documents the limited deterrence effect of reputation in traditional economic settings, where high-and low-reputation firms exhibit statistically indistinguishable violation probabilities, suggesting the ineffectiveness of reputational descipline. However, China's “Broadband China” initiative—a nationwide digital infrastructure rollout—provides a quasi-natural experiment that reveals striking heterogeneity. Employing a triple-difference design spanning 2009-2022, we find that regions with more enhanced digital infrastructure, reputational mechanisms exert greater constraint on corporate misconduct. Firms headquartered in pilot cities with advanced digital networks demonstrate markedly lower violation probabilities conditional on reputation levels. This disciplinary effect intensifies among firms with greater market visibility, those in competitive industries, and those producing goods with low product transparency. Mechanism tests indicate digital development operates through dual channels: (1) amplifying the economic value of reputation by easing financing constraints, and (2) intensifying external monitoring through reputational “spotlight effects” that increase detection risks. Event studies further confirm heightened market penalties for violations in digitalized environments, with reputational damage triggering more severe stock price declines.
Three actionable insights emerge for policymakers and firms: First, regulators should integrate reputational mechanisms with conventional oversight through technology-enabled solutions. Blockchain and big data analytics can optimize the collection and disclosure of reputational information, and explore a reputation-based, tiered regulatory model that embeds reputation assessments into public procurement and credit policies, thereby fostering market-driven compliance incentives. Second, safeguarding the integrity of reputational markets requires coordinated efforts to ensure transparent public oversight channels, combat information manipulation, and establish digital traceability systems with strengthened platform accountability. Third, corporations should prioritize reputation management as a strategic asset. Integrating reputation stewardship into long-term planning through (1) compliance culture building, (2) public opinion monitoring systems, and (3) proactive ESG disclosures enables organizations to systematically mitigate reputational risks while accumulating valuable reputational capital. This holistic approach strengthens competitive positioning in the digital economy where intangible assets increasingly determine market value.
This study advances the literature in three dimensions. Theoretically, it transcends the static “effective-ineffective” dichotomy of reputational discipline by unveiling its dynamic evolution amid technological change, particularly how digitalization recalibrates information efficiency in governance. Practically, this study proposes a novel “digital empowerment+reputational incentives” framework to address the regulatory trilemma of rising enforcement costs, sophisticated violations, and limited resources—a contribution with immediate policy relevance for emerging digital economies. Lastly, as China emerges as a global digital pioneer, this research offers an empirically grounded, institutionally informed analytical framework that enriches cross-border understanding of corporate governance innovation in the digital age. The findings demonstrate how developing economies can leverage technological leapfrogging to build market-disciplined regulatory regimes, providing transferable insights for international governance reform.

The real economy is the foundation of a country's economy, the fundamental source of wealth creation, and an important pillar of national strength. However, for a period of time, a large number of non-financial entities have been experiencing a trend of capital “shifting from real to virtual” under the short-term profit motive, leading to an accelerated manifestation of the economic and financial pattern. Previous studies have shown that financialization of physical enterprises not only suppresses the development of core businesses at the micro level, squeezes research and development innovation, reduces production efficiency, and further exacerbates overcapacity; It will also have a negative impact on the stability of financial markets and the control of risk spillovers between industries at the macro level. The governance of enterprises' transition from reality to virtuality is an important task to prevent and resolve major financial risks, improve the quality and efficiency of financial services to the real economy.
Current academic research primarily focuses on strengthening internal and external corporate governance and blocking potential pathways to financialization. While enhanced financial regulation can effectively curb capital diverging from the real economy in the short term, the persistence of substantial profit disparities between real and financial sectors may fuel speculative arbitrage motives through various “financial innovations,” ultimately eroding regulatory effectiveness. Therefore, achieving sustainable governance of corporate financialization necessitates shifting focus toward improving the core operational performance of real-economy enterprises to proactively bridge the real-financial return gap, thereby curbing capital flight from the real sector. Especially under the wave of industrial digitalization and intelligent transformation, how to effectively inhibit the “transition from real to virtual” while actively promoting the digital and intelligent transformation of enterprises has become an important issue with theoretical value and practical significance.
Computing power—integrating information processing, network transmission, and data storage capabilities—represents a new form of productive force. Since the advent of the digital-intelligent era, the computing power supply system has evolved into essential infrastructure driving production mode transformation. It plays a pivotal role in accelerating the deep integration of emerging digital technologies with enterprise production, organization, and management activities. This integration enhances product market competitiveness, improves core operational performance, and crucially, actively narrows the investment return gap between real and financial sectors.
Data centers, serving as physical facilities housing computing chips, servers, networking equipment, and storage systems, constitute the core hubs and critical carriers within computing power infrastructure, occupying a dominant position in the entire supply system. Leveraging public ICP license data for various data centers from China's Ministry of Industry and Information Technology service platform, this study pioneers a regional-level quantification of computing power infrastructure development. Furthermore, it constructs a theoretical framework analyzing computing power infrastructure's impact on corporate financialization through two dimensions: digital technology foundation and fintech empowerment, empirically examining its effects, mechanisms, and heterogeneity on firms' financialization. Empirical findings demonstrate that regional computing power infrastructure significantly inhibits corporate financialization, a result robust to endogeneity concerns and sensitivity tests. Mechanism analysis reveals dual pathways: (1) Reducing DI transformation barriers and guiding digital asset investments to curb capital “disengagement from the real sector”. (2) Supporting fintech applications and alleviating financial misallocation to reduce motivations for “shifting toward the virtual economy”. Heterogeneity analysis indicates stronger inhibitory effects for non-SOEs, core digital industry firms, and enterprises in regions with superior data ecosystems, and regarding short-term financial assets. This research provides micro-level evidence on computing power infrastructure's role in governing corporate financialization, contributes to financialization literature, enhances understanding of digital infrastructure's microeconomic effects, and offers theoretical and policy insights for local governments to strengthen new infrastructure development, advance digital-real integration, and manage corporate financialization.

Terminal infrastructure, exemplified by courier service points, constitutes a critical factor for developing countries in advancing major construction projects, establishing social credit systems, and sustaining national economic growth (Devoto et al., 2012; Wang et al., 2022; Cao et al., 2023). Existing research has identified large-scale infrastructure such as airports, railways, and highways as pivotal for building integrated national markets (Donaldson, 2018; Zhang et al., 2018; Liu et al., 2019). However, little literature has examined the role of terminal infrastructure in fostering such unified markets. In reality, as a crucial carrier of terminal infrastructure, express delivery logistics has become a vital channel for transporting agricultural products to urban markets and delivering consumer goods to rural areas. Notably, the formation of rural logistics networks benefits villages previously excluded by large-scale infrastructure, not only bridging the “last-mile” gap for consumption in remote and underdeveloped villages but also serving as the “first-mile” channel for agricultural products entering urban markets.
This paper makes two primary contributions. Firstly, while existing studies analyze the economic effects of large-scale hub-type infrastructure like roads, railways, ports, and bridges (Aschauer, 1989; Demurger, 2001; Brueckner, 2003; Zhang X., 2012; Giroud and Mueller, 2015; Zhang et al., 2018), research on terminal infrastructure remains inadequate. This study helps fill this gap by providing causal evidence demonstrating that terminal infrastructure construction substantially impacts rural growth. Secondly, prior research using field experiments shows E-commerce platforms alleviate rural logistics barriers and reduce living costs (Couture et al., 2021). However, limited sample sizes and short observation periods raise concerns about external validity and generalizability (Deaton, 2010; Li et al., 2020). Leveraging comprehensive courier service points data matched with China's Rural Fixed Observation Point Survey, we construct a high-quality household-level panel dataset characterized by extensive geographical coverage and a large sample size. This enables richer heterogeneity analysis and explores the micro-mechanisms through which terminal infrastructure promotes growth over extended periods.
Using this combined dataset, we employ a staggered Difference-in-differences (DID) approach to assess terminal infrastructure's impact on rural growth. Results indicate that courier service significantly boosts the income growth of rural residents, particularly improving wealth in economically disadvantaged villages, thereby advancing inclusive growth in China. In terms of mechanisms, courier service access increases farmers' online consumption participation, reducing household expenditure and accelerating wealth accumulation. Convenient logistics expands consumer markets, diversifies agricultural sales channels for rural enterprises, and creates employment and income opportunities. We conduct rigorous checks and address endogeneity. To mitigate biases in staggered DID estimation, we apply methods by Callaway & Sant’Anna (2021) and Sun & Abraham (2021). To exclude confounding factors such as extended pre-treatment windows, E-commerce Demonstration County initiatives, digital finance development, service area changes, high-speed rail openings, agricultural surveys, and village size disparities, we employ sample trimming, additional controls, and placebo tests. The results support the above conclusions.
This paper has significant policy implications. Terminal logistics is essential for urban-rural goods flow. It is therefore important to further simplify the courier service points registration procedures and promote online filing, which will accelerate integrated national market development. Terminal infrastructure deployment requires government-market coordination. Enhancing joint distribution systems by integrating postal services, express delivery, transportation, supply chains, and commercial resources in rural areas—through models like postal-express and express-express collaboration—is critical. Alongside terminal infrastructure, expanding network infrastructure and educational resources is vital. Improving rural human capital and internet access ensures farmers efficiently benefit from courier services.

The bankruptcy system governs the rescue and orderly exit of market entities and constitutes an indispensable foundation for refining market mechanisms. For decades, China had in place only the Enterprise Bankruptcy Law, leaving personal bankruptcy system conspicuously absent. Consequently, “honest but unfortunate” individuals, burdened by overwhelming debts and financial distress, remained unable to resolve their difficulties through bankruptcy proceedings, thereby facing objective constraints on any attempt at a fresh start. This incomplete legal framework has been colloquially termed as “half-a-bankruptcy-law.” As China's development entered a new phase, the confluence of mounting, largely unrecoverable personal indebtedness and the long-standing absence of bankruptcy relief has placed significant strain on judicial capacity while simultaneously constraining the entrepreneurial re-entry of countless “honest but unfortunate” debtors. To address this, under the impetus of the central government, China initiated pilot reforms for personal bankruptcy across multiple regions starting in 2019.
Personal bankruptcy refers to a legal framework where, upon an “honest debtor's” inability to repay maturing debts due to various reasons, judicial authorities intervene to exempt certain liabilities under specific conditions, facilitating bankruptcy liquidation, reorganization, or settlement. As a landmark reform in China's bankruptcy system development for the new era, the implementation of personal bankruptcy effectively alleviates the crushing burden on debtors by providing partial debt relief through legal procedures. While the protective benefits for debtors are evident, resolving debt issues inherently involves balancing the interests of both debtors and creditors. Thus, the impact on creditors warrants equal attention. Given China's bank-dominated financial system where banks act as primary creditors in personal bankruptcy proceedings, the promotion of personal bankruptcy inevitably influences bank credit behavior.
On the one hand, from the perspective of market credit demand, personal bankruptcy enhances debtor protection and support. This may increase borrowers' risk-bearing capacity, encouraging them to leverage to undertake high-value, high-risk investments, thereby fostering a more lenient environment for innovation and entrepreneurship. Such activities inherently require substantial financial backing, potentially amplifying demand for bank loans among individuals. On the other hand, personal bankruptcy legally permits reasonable debt discharge, leading banks to anticipate lower recovery values on claims. This alters their risk perception, dampening credit extension willingness. Furthermore, the introduction of personal bankruptcy may heighten opportunistic behavior among borrowers, further increasing banks' lending risk and constraining their lending volumes.
To resolve this theoretical divergence regarding personal bankruptcy's impact on bank credit behavior, this study employs a sample of local commercial banks from 2015-2022. By manually compiling data on regional personal bankruptcy pilot programs and utilizing bank-level data from CSMAR, Wind and CNRDS databases, we apply a multi-period DID approach to examine the system's effect on local bank credit supply. Results indicate that personal bankruptcy makes banks more conservative, reducing their willingness to grant credit. Following the pilot rollout, banks shift their portfolios toward mortgages, pledge loans, and short-term credit, and reduce unsecured loans, guarantee-backed loans, and medium-to-long-term loans, consequently impairing financing access for small-scale enterprises. Importantly, the study identifies mitigating measures: optimizing regional credit environments, developing the association of bankruptcy administrators, promoting online investigation and control systems, establishing government-court coordination mechanisms, and advancing bank digital transformation can effectively alleviate these adverse effects.
This paper contributes in three dimensions:
First, it enriches the economics literature on personal bankruptcy. At present, discussions on the personal bankruptcy system in China are still mainly confined to legal studies, while earlier studies in countries such as the United States center on household finance and entrepreneurship. Our findings broaden the understanding of the system's economic consequences and offer evidence from a transitional economy for law and economics research.
Second, it deepens scholarly understanding of factors influencing bank credit behavior. While prior studies explore how creditor protection shapes credit allocation through legal channels, drawing on the legislative intent to protect “honest but unfortunate” debtors, we show that the introduction of personal bankruptcy reduces banks' credit supply, thereby offering new evidence on resource allocation in China's credit market.
Finally, it provides policy-relevant guidance for realizing the system's intended benefits. As a nascent institution in China facing limited public understanding, this study finds that although the personal bankruptcy system protects debtors, it simultaneously dampens bank credit supply. However, optimizing regional credit environments, developing the association of bankruptcy administrators, promoting online investigation and control systems, establishing government-court coordination mechanisms, and advancing bank digital transformation can effectively alleviate these adverse effects. These conclusions offer valuable references for policymakers designing complementary mechanisms to optimize bankruptcy system reform.
Economic research on China's personal bankruptcy system remains scarce. While achieving its core objective of debtor protection, the system simultaneously imposes heightened risk management demands on creditors. The impact of this institutional innovation will inevitably be multidimensional. Future research should delve deeper into micro-level impacts on individuals, investors, and enterprises, thereby enriching academic discussions and providing insights for fully leveraging the positive potential of personal bankruptcy in the new era.

The report of the 20th National Congress of the Communist Party of China explicitly stated that it is necessary to “improve the market-oriented allocation system for resources and environmental factors”. Under the climate governance targets of carbon peaking and carbon neutrality, establishing the status of carbon emissions rights as a production factor and strengthening the construction of the carbon market is crucial for guiding the green-oriented resource allocation in the financial market and promoting the green transformation of economic and social development. The carbon emissios trading regulation strengthens the connection between carbon emissions, low-carbon transition capabilities and corgorate value creation, while also increasing the transition risks for carbon-intensive enterprises. Consequently, investors may incorporate carbon risk into the assessments of issuers' credit risk, and require higher risk premiums of carbon-regulated firms.
This study investigates how carbon emissions trading regulation affects corporate bond financing costs based on the quasi-natural experiment of China's carbon emissions trading pilots. Based on the staggered difference-in-differences(DID) approach, we find a significant increase in credit spreads of bond issuers subject to carbon emissions trading regulation, indicating a carbon premium in the bond market. Mechanism analyses support the coexistence of a credit risk channel and a risk assessment uncertainty channel, suggesting that the construction of carbon market not only raises default risks but also increases the difficulty in risk assessment, leading investors to require excessive risk premium. Issuers with stronger credit quality and greater pollution reduction and carbon mitigation capabilities can significantly mitigate the pricing effect of carbon emission trading regulation. Additionally, this pricing effect is more pronounced for bonds with longer maturities or during periods of high carbon price volatility. Further analyses show that low-carbon collaborative governance in aspects such as local government environmental regulation, public environmental awareness, and global impact investment initiatives can amplify the pricing effect of carbon risks. Moreover,the carbon emissions trading regulation drives the green orientation of the bond market through market-based mechanisms: it raises the financing costs for carbon-intensive firms while lowering financing costs for green initiatives. Carbon prices, as a key signal for carbon risk exposure of regulated firms, significantly increase their credit spreads. The main findings remain robust after addressing endogeneity concerns and conducting a set of robustness tests. We also exclude the alternative explanations of financing demand or the policy compliance behavior of financial institutions.
Our study mainly contribute to three strands of literature. First, this study supplements empirical evidence on the economic consequences of carbon emissions trading regulation on credit spreads, validating its green-oriented function. We find that carbon emissions trading regulation plays a significant signaling and incentivizing role in differentiating financing costs between high-carbon and low-carbon firms in financial markets. Second, we supplement the pricing of climate risk, particularly carbon transition risk. From an institutional perspective based on China's carbon emissions trading pilots, we characterize carbon risk and support the carbon premium through two channels: increased credit risk and greater uncertainty in risk assessment. Third, we reveal a significant positive impact of carbon pricing on bond credit spreads, providing micro-level empirical evidence on the spillover effects of carbon price volatility on other financial markets.
We provide valuable insights for China's carbon emissions trading market construction and the high-quality development of green economy and society. First, governments need to send clear policy signals supporting green transition while establishing market-based carbon trading mechanisms, fully leveraging the price discovery function of carbon markets. Second, firms should proactively enhance carbon risk management and green transition capabilities, seize low-carbon development opportunities, and subsequently gain financial support from environmental-friendly investors. Third, investors are called upon to strengthen investment risk management related to carbon factors while responding to sustainable investment initiatives, thereby directing capital flows toward low-carbon and environmentally friendly sectors.

In the context of intensifying global innovation competition, China is undergoing a pivotal shift from quantity-led to quality-driven innovation. Despite topping global rankings in metrics such as patent counts and R&D spending, the persistent lag in innovation quality remains a structural bottleneck to achieve high-quality economic growth. While existing research has highlighted the decisive role of capital market pricing efficiency in allocating innovation resources, prior studies have largely centered on market premiums associated with innovation inputs (e.g., R&D investment) or output volumes (e.g., patent applications), overlooking the pricing mechanism of innovation quality, a key dimension.
Based on the special situation of China's capital market, this study systematically examines the existence and formation mechanism of innovation quality premium. By constructing a novel composite innovation quality index—integrating patent citation network metrics with advanced text mining techniques—we identify a significant and distinct premium associated with innovation quality, which is different from the innovation input premium and output quantity premium. This premium is economically meaningful and statistically robust, remaining consistent after changing the index construction method, replacing the time interval and controlling the potential influencing variables. Mechanism analysis reveals that conventional explanations—such as market frictions or investor behavioral biases—fail to explain the observed premium. Instead, our findings point to investor-required risk compensation for high risk exposure as the primary driver. This risk exposure arises from the dual characteristics of growth options embedded in high-quality innovation. While such innovation enhances long-term firm value, it simultaneously elevates operational volatility and project discontinuation risks, which ultimately transmit through capital markets into firms' systematic and higher-moment statistical risks. Heterogeneity analyses further reveal: (1) The U.S.-China trade war significantly intensified innovation-related risk exposure, particularly for tech-intensive firms; and (2) private enterprises are more sensitive to innovation risks than their state-owned counterparts. Distinct from the U.S. market, China's innovation premium reflects a unique interplay between the high-risk nature of innovation and the capital market's pronounced risk aversion—a pattern shaped by two structural constraints: short investment horizons and underdeveloped risk-hedging mechanisms.
To address these challenges and promote quality-driven innovation, we propose a three-pronged policy framework: (1) Establishing a capital market evaluation system centered on innovation quality to improve market recognition and pricing of substantive technological breakthroughs; (2) Developing mechanisms to cultivate long-term capital and optimizing the structure of capital supply, including tax incentives and investment mandates for institutional investors, to counteract corporate myopia; and (3) Implementing more inclusive market mechanisms—such as differentiated listing standards and mechanisms for tolerating failure in innovation—to reduce trial-and-error costs and encourage risk-taking in R&D. Collectively, these policies aim to dismantle systemic barriers to quality-based innovation and mitigate excessive market risk aversion.
This study makes three key contributions to the literature. First, this study breaks through the limitations of existing research on innovation quantity dimensions by systematically revealing the pricing effects of quality dimensions for the first time. Second, it identifies significant differences in the formation mechanisms of innovation premiums between Chinese and the U.S. markets. The inherent high-risk nature of innovative activities and market participants' strong risk-averse tendencies jointly establish the dominance of risk compensation mechanisms. Third, it proposes an institutional innovation pathway to transform risk premiums from “market phenomena” into “policy tools”. Together, these insights provide a novel framework for addressing China's persistent “quantity-quality paradox” in innovation-led development.

Though becoming the world's second-largest bond market, China's bond market faces challenges like poor overall liquidity, weak price discovery. Notably,low liquidity, particularly in the exchange bond market accessible to retail investors, increases corporate financing costs and bond market volatility, restricting its development. To enhance liquidity and market-oriented pricing ability, China Exchange Bond Market piloted a market maker system in February 2022 and formally launched it in February 2023, later than its adoption in international markets and China's interbank market. Empirical research on the impact of the market maker system in the exchange bond market is lacking.
This paper examines the effect of the quote-driven trading mechanism (i.e., the market maker system) on bond pricing by using its implementation in China's exchange bond market as a policy shock within a difference-in-differences (DID) model. The results show that quote-driven trading provided by the market maker system reduces secondary market bond credit spreads. Mechanism analysis reveals that the market maker system achieves this reduction by improving liquidity and alleviating information asymmetry. Moreover, a greater number of market makers for the same bond and closer geographical distance between market makers and the issuers could strengthen the information discovery effect, further reducing information asymmetry and narrowing credit spreads. Additional analysis indicates that the system also lowers credit spreads for non-market-making bonds sharing the same issuer, industry, or region with market-making bonds. It also reduces primary market issuance spreads for subsequent bonds from issuers with market-making bonds. Crucially, the market maker effect is more pronounced for dealer-selected bonds and bonds with AA+issuer ratings. Policies should thus encourage market makers to diversify their selections. Overall, the market maker system in China Exchange Bond Market lowers bond financing costs and promotes high-quality development in the bond market.
Contributions of this paper are threefold: First, it enriches the research on market maker system effects, specifically in China Exchange Bond Market, while existing studies primarily analyze its effects in China Interbank Bond Market. This paper adopts a difference-in-differences design to analyze the impact of whether exchange-traded bonds are market-made on their subsequent secondary market pricing at the first time. The conclusions find that the market maker system not only reduces the secondary market spread of market-made bonds but also further decreases the subsequent primary market bond issuance spreads of the issuers of market-made bonds. Therefore, this paper confirms the positive effects of the market-making system from the perspective of the China Exchange Bond Market. Second, it enriches the research on the influencing factors of bond spreads. The existing literature on the influencing factors of bond spreads mostly discusses from the perspectives of macro policies and micro enterprise characteristics, with scant empirical literature to explore the impact of market makers in China Exchange Bond Market on bond spreads. This paper, however, enriches the impact of the implementation of the market maker system in China Exchange Bond Market on bond spreads from the perspective of bond intermediary institutions. Third, this paper uses the externality theory to evaluate the positive effects and limitations of the market maker system, and puts forward corresponding policy suggestions for these limitations, thereby further expanding the space for the functional effects of market makers to be exerted.
As an early empirical analysis of the market maker system in China Exchange Bond Market, this paper provides evidence for the system's positive effects. Authorities should refine the system to improve liquidity and price discovery in the bond market, thereby better serving high-quality development of the real economy. Given the stronger effect on dealer-selected bonds and AA+rated issuers, exchanges should encourage market makers to expand their selections across sectors/regions maximize these market benefits and foster high-quality development in the bond market.