In the new development stage, China will undergo a prolonged process of rapid demographic transition and deepening population aging. Whether viewed from the perspective of increasing life expectancy or phased reform of the statutory retirement age policy, the extension of working hours and raising retirement age represent fundamental long-term challenges that China will face in the long term amidst its aging population. Accurately understanding the impact of this trend on structural change and population growth holds significant importance for implementing proactive national strategies addressing population aging and promoting high-quality population development. Based on the facts in China that families are deeply influenced by family grandparenting culture and there is gender difference in the retirement age, we study in this paper the impact of raising retirement age of workers on structural change and the trend of population growth.
We first summarize the distinct economic characteristics of gender difference in market production and household fertility. Then, we incorporate these characteristics into an overlapping generations dynamic general equilibrium model featuring gender difference, grandparenting, endogenous population growth and structural change. We systematically develop a theoretical framework on how men's and women's raised retirement age affect structural change and population growth. Furthermore, we examine the robustness of these mechanisms in contexts featuring social pension funds, intergenerational differences in labor productivity and rising life expectancy.
We propose that: first, raising retirement age directly affects population growth through income growth effect and grandparenting effect. If women hold a comparative advantage in grandparenting, then due to the lower wage rate relative to men, raising retirement age for female workers exerts stronger grandparenting effect but weaker income growth effect, thereby more likely to reduce the population growth rate. Conversely, the opposite holds for raising retirement age for male workers. Concurrently, raising retirement age alters female labor supply relative to males. Given women's comparative advantage in services and men's in manufacturing, increased female relative labor supply raises manufacturing share and widens the wage gender gap, and vice versa. As women possess comparative advantages in childbearing and childrearing relative to men, wage gender gap adjustments induce co-directional changes in household fertility rate and population growth rate. Second, when men's comparative advantage in manufacturing or women's in services strengthens, raising retirement age exerts amplified effects on structural change while leaving impacts on population growth largely invariant. Enhanced female comparative advantage in grandparenting magnifies the impact of raising retirement age for female workers on population growth, and reduces the negative impact of raising retirement age for male workers on population growth, potentially turning them positive. Strengthened female comparative advantage in childbearing and childrearing weakens the impact of raising retirement age for female workers on structural change. Third, raising retirement age maintains robust impacts in contexts featuring social pension funds, intergenerational differences in labor productivity and rising life expectancy. When productivity ratios between elderly and young cohorts widen, raising retirement age amplifies effects on structural change. Under rising life expectancy, raising retirement age for female workers amplifies effects on population growth while modestly attenuating effects on structural change.
We integrate a distinct perspective on gender difference in market production and household fertility with Chinese grandparenting culture, developing theoretical research regarding the systemic interdependencies among retirement age, structural change and population growth. We derive the following policy implications from China's institutional background, featuring deep-rooted family grandparenting culture and gender difference in both market production and household fertility. As raising retirement age, policymakers must proactively refine measures to coordinate population growth with structural change. First, comprehensively protect female workers' rights and interests while substantially reducing household costs for childbirth and childrearing. Second, fully leverage demographic transition and structural change trends to promote coordinated advancement of workforce optimization and industrial upgrading.

The research motivation of this paper initially stems from the literatures' lag in capturing the development of the real world. The latest reality in China is that, with the continuous advancement of strict financial supervision, the rigid redemption of off-balance-sheet wealth management products has been broken. Independently operated wealth management subsidiaries have become the main players in this market. Wealth management is no longer an off-balance-sheet channel for commercial banks to evade regulation. This phenomenon has not yet been captured by existing literatures.
From the perspective of China's macro policy evolution, the expansion of macroprudential management is an important direction. In the past, financial supervision focused on improving microprudential supervision. In the future, how to further improve macroprudential management will be an important task. The 2023 Central Financial Work Conference proposed to comprehensively strengthen financial supervision and legally bring all financial activities under regulation. In 2024, the Macroprudential Management Bureau of the People's Bank of China pointed out that the central bank will further strengthen macroprudential management, and on the basis of taking banking financial institutions as the key objects of macroprudential management, gradually include major financial activities, financial markets, financial infrastructure and non-banking financial institutions into macroprudential management.
The research background of this paper mainly includes two aspects: First, the main investors in the wealth management market are individuals, mostly with low-risk preference, which is very similar to the deposit market. The established wealth management subsidiaries have become the main body of the wealth management market. As deposit interest rates continue to decline, the competition between wealth management products and deposits on the household side has become increasingly fierce. In terms of the use of funds, wealth management products provide a huge amount of funds for the real economy by investing in bonds, non-standardized bonds, unlisted equities and other assets, forming a complement to bank credit. Second, macroprudential management has not yet covered the wealth management market. At present, the supervision of wealth management subsidiaries mainly relies on microprudential documents such as the Measures for the Administration of Wealth Management Subsidiaries of Commercial Banks, lacking specialized macroprudential management.
This paper establishes a parallel financial structure including commercial banks and wealth management subsidiaries within a DSGE model. It uses macroeconomic time series data from the fourth quarter of 2008 to the second quarter of 2023 to conduct Bayesian estimation of the structural model, and employs counterfactual simulation methods to analyze the effects after incorporating wealth management subsidiaries into macroprudential management. The research findings show that, when macroprudential management is implemented on wealth management subsidiaries with increasing intensity, the volatilities of all major macroeconomic variables become lower. Under the dual-pillar regulatory framework, the expansion of macroprudential management will not conflict with the monetary policy, and there will be more flexible choices for the coordination between the two policies.
This paper puts forward the following policy implications: First, wealth management subsidiaries should be incorporated into macroprudential management as soon as possible, and the intensity of countercyclical adjustments should be strengthened. This adjustment can significantly reduce macroeconomic fluctuations and expand the policy space of the dual-pillar regulation. Second, an expansion mechanism of macroprudential management can be established to hedge against excessive fluctuations in the local economy, thereby better balancing long term structural adjustments and short-term economic stability, considering the continuous reduction of shadow banking under strict financial supervision and the gradual relaxation of housing financial constraints by the government. Third, further consideration should focus on incorporating non-banking financial institutions into macroprudential management in a larger scope in an orderly and steady manner.

Security is a fundamental principle for building China's new development paradigm during the 14th Five-Year Plan period, which explicitly calls for “safeguarding financial security and firmly holding the bottom line of no systemic financial risks.” As China's financial sector opens while financial licenses remain scarce and tightly regulated, an increasing number of real-sector firms have entered the financial sector by taking minority or controlling stakes in financial institutions, even establishing financial holding companies in some cases. These moves are intended to integrate industry and finance, lower financing costs, and enhance resource allocation efficiency, thereby promoting the transformation and upgrading of the real economy. However, this process can generate unintended risks. Moreover, the internal capital markets formed by such integration tightly couple the real and virtual economies, allowing financial risk to spread rapidly across equity networks and trigger systemic risk.
Events like the Baoshang Bank failure and the Evergrande crisis demonstrate that traditional instruments, including micro-prudential regulation, deposit insurance, and the central bank's lender-of-last-resort function have played a positive role in ensuring financial stability, but are insufficient to fully address the new financial risks arising from increasingly complex business activities. The national-level calls to “reinforce corporate primary responsibility and resolve potential risks through market-oriented and law-based means”, providing a clear policy basis for incorporating external governance into the financial security framework. In this context, this paper examines, from an external governance perspective, the role of external market competition in preventing and mitigating the risks for real-sector firms with stakes in financial institutions. The goal is to provide robust theoretical support and practical policy guidance for the government's efforts to construct a more effective financial safety net using market-based tools.
This study examines whether market competition, as an external governance mechanism, can effectively curb the financial risks associated with firms' equity stakes in financial institutions (including financial holding companies). To do so, we use a sample of Chinese A-share listed non-financial firms from 2009 to 2023. We first employ the Gradient Boosting Decision Tree (GBDT) , a machine-learning algorithm, to predict firms' engagement in financial institutions and identify key determinants. The results show that firm size and financial leverage have strong predictive power and are positively associated with such engagement. Furthermore, firm age and institutional ownership are stronger predictors of shareholding behavior, whereas real-sector performance and cash holdings are stronger predictors of controlling financial institutions. Further analysis indicates that both investing in and controlling financial institutions significantly increase real-sector enterprises' financial risk, with related-party transactions being the primary mechanism. More importantly, we find that greater external market competition significantly reduces financial risk of real-sector enterprises investing in or controlling financial institutions. Mechanism tests reveal that competition operates mainly through two channels: curbing related-party transactions and improving core business performance. Finally, extended analyses confirm that market competition is also effective in reducing the systemic risk of real-sector firms that invest in or control financial institutions, and this governance mechanism remains effective for firms that control financial holding companies.
This paper makes four main contributions. First, unlike prior studies focusing on internal governance, we provide new empirical evidence on post-integration risk governance from the perspective of external market competition. Second, we enrich the literature on the risk consequences of the shift from real-sector investment to financial investment, demonstrating that related-party transactions are a key risk transmission channel. This finding offers policy recommendations for improving the supervision procedures of related transactions and for facilitating the safe development of China's financial industry. Third, we extend the literature on industry-finance integration beyond traditional analyses of performance and efficiency to the core issue of risk governance. Fourth, in the literature on internal capital markets, we show that they propagate risk via related-party transactions and explore how external market governance can block this transmission, offering important insights for preventing systemic financial risks.
The policy implications are clear: the government should foster a fair and competitive market environment, leveraging market forces to induce firms to voluntarily optimize their risk controls, thereby effectively reducing the financial risks arising from their engagement with financial institutions. In sum, this study underscores the critical role of external governance in strengthening financial regulation, provides a novel perspective on preventing and resolving systemic financial risk, and contributes to building China into a financial powerhouse, ensuring stable and healthy national economic development.

Following the 2008 financial crisis, the fragility of the dollar-dominated international monetary system became evident, prompting global calls to enhance the voice of emerging market currencies and drive the system towards multipolarity. While many economies are reducing dollar reliance through commodity de-dollarization, building independent cross-border payment systems, and adjusting foreign exchange reserves, factors such as expanded Fed dollar swap agreements, rising demand for US Treasuries amid geopolitical risks, and dollar stablecoins may reinforce the dollar's status. The “Resolution” adopted by the Third Plenary Session of the 20^th Central Committee of the CPC and the 2025 PBOC Work Conference both emphasized “steadily and prudently advancing RMB internationalization, enhancing the functions of the RMB as an international currency, developing offshore markets and utilizing the functions of currency swaps and clearing banks”. As a key policy driving RMB internationalization, do RMB bilateral currency swap agreements (RMB BSAs) enhance the RMB's status among major international currencies？ Do they promote a multipolar system away from dollar dominance？ What are the mechanisms？ Exploring these questions offers significant academic and practical value for understanding the impacts of currency swaps and guiding RMB internationalization steadily and prudently.
By the end of August 2024, the PBOC had signed RMB BSAs with 42 central banks or monetary authorities, with a total scale exceeding 4.1 trillion yuan. While prior studies show that the RMB BSAs are associated with increased amount and probability of RMB usage in international payments (Bahaj and Reis, 2022; Song and Xia, 2020), scant research explores their effect on RMB's share in international trade, its standing among major currencies, and the mechanisms influencing the international monetary system's evolution. Using trade data from 143 economies between October 2010 and February 2018 provided by a major global trade information database and treating PBOC's RMB BSAs as quasi-natural experiments, this paper classifies BSAs into Type I BSAs (trade-focused) and Type II BSAs (trade and financial stability-focused) according to manually collected official signing announcements. Employing a staggered DID model, we analyze how different types of RMB BSAs affect the usage of RMB and USD in international trade. We further examine the channel via offshore RMB trade financing costs, assessing its role in elevating RMB's international status and promoting a multipolar monetary system.
We find that signing Type I BSAs increases the RMB share in bilateral trade between the signing economy and China, while the USD share shows no significant change. However, signing Type II BSAs leads to both a significant rise in the RMB share and a notable decline in the USD share. Specifically, economies that signed Type II BSAs show an approximately 4.00% increase in the RMB share in imports, along with a significant decrease of about 3.00% in the USD share, compared to those that did not sign. In the long run, the effects of Type II BSAs persist, with a cumulative increase in the RMB share of over 15.00% and a cumulative decline in the USD share of about 6.00% after 48 months. Mechanism analysis shows that Type I BSAs primarily enhance the availability of RMB financing, and thus do not significantly affect the USD share. By contrast,activation conditions of Type II BSAs focus on maintaining financial stability, which helps reduce offshore RMB financing costs. Therefore, counterpart firms are more likely to use RMB rather than USD for trade financing. Moreover, the positive effect of Type II BSAs on the elevation of RMB's international status is more pronounced in economies with closer import trade ties with China, lower levels of financial stability, and during periods of U.S. raising interest rates.
The main contributions of this paper are as follows: First, it innovatively leverages variations in the official announcements of RMB BSAs to better identify the causality between the swap agreement and RMB usage in international trade finance, and further explores the underlying mechanisms. Second, it provides empirical evidence on how RMB internationalization reshapes and promotes the evolution of the international monetary system, filling the gap in the relevant literature. Third, this study explores the policy effects of RMB BSAs across multiple dimensions, including economic characteristics and time periods, thereby providing various perspectives for research on the impact of currency swap agreements on RMB internationalization. Amid heightened geoeconomic risks, global financial volatility, and stablecoin-driven re-dollarization, advancing RMB internationalization requires leveraging Type II BSAs as strategic pivots to expand the bilateral RMB swap network, enhance the offshore RMB's safe-asset attributes, and deploy trade financing to accelerate the multipolar monetary system evolution.

Amid the unprecedented transformations in the global landscape, the global political and economic order is undergoing profound changes, and the increasingly complex political and economic relations between China and the United States have significantly increased the uncertainty of the supply chains of the two countries. In particular, the intensifying competition in critical technologies and “bottleneck” areas has emerged as a crucial factor shaping the strategic rivalry between the two nations. In this context, technological innovation serves not only as a cornerstone of strategic competition among major powers but also as a key driver of resilience in industrial and supply chains. By strengthening technological innovation, countries can safeguard national security and economic stability more effectively, reduce dependence on external technologies, and enhance the autonomy, controllability and risk resistance of their industrial chains. Moreover, technological innovation is an essential engine for developing new quality productive forces, enabling countries to occupy the commanding heights of technology and industrial development in the global competition and further enhancing the country's comprehensive economic strength and international discourse power. Therefore, how Chinese firms embedded in cross-border supply chains respond to the shocks of China-US supply chain uncertainty has become a critical issue for enhancing the resilience and security of industrial and supply chains and ensuring high-quality economic development.
This study constructs a China-US supply chain uncertainty index based on textual analysis of over 700,000 analyst reports on U.S. listed companies and more than 200,000 analyst reports on Chinese listed companies. Combining this index with unique firm-level supplier-customer relationship data along the China-US supply chain, we systematically examine the impact of the China-US supply chain uncertainty on innovation activities of Chinese firms. As an external source of uncertainty, China-US supply chain uncertainty is theoretically analyzed and predicted within the theoretical frameworks of real options theory and investment irreversibility theory. Real options theory emphasizes that firms should maintain strategic flexibility under uncertainty and adjust their decisions dynamically as actual future conditions unfold, while investment irreversibility theory posits that irreversible investments require a careful trade-off between potential returns and risks. Accordingly, heightened uncertainty often leads firms to postpone investment decisions, waiting for more information or clearer market conditions before acting. Therefore, we expect that rising China-US supply chain uncertainty significantly suppresses both innovation input and output of Chinese firms embedded in the supply chain.
Our China-US supply chain data is drawn from the FactSet Revere database; U.S. analyst reports are sourced from the Thomson Reuters database; Chinese analyst reports come from Eastmoney; Chinese listed firms' financial data is from the China Stock Market & Accounting Research (CSMAR) database; patent data is from the Chinese Research Data Services (CNRDS) database; and macroeconomic data is obtained from various editions of the China Statistical Yearbook. Empirical results indicate that China-US supply chain uncertainty increases firms' risk aversion, leading them to reduce innovation input and thus reduce innovation output out of prudence. This finding remains robust after a series of robustness checks. Mechanism analyses further reveal that the negative effect operates primarily through two channels: enhanced investment irreversibility and deteriorated financing conditions. Heterogeneity analyses show that high-tech firms are better able to sustain innovation investment in the face of rising China-US supply chain uncertainty compared to non-high-tech firms, and that government support can mitigate the adverse impact of such uncertainty on firm innovation.
This study makes several contributions. First, it extends the existing literature by offering a novel perspective on economic and political uncertainty. Previous studies have primarily relied on the economic policy uncertainty index developed by Baker et al. (2016), which focuses on measuring a country's overall economic policy uncertainty and does not capture uncertainty in inter-country relations. By conducting textual analysis of U.S. and Chinese analyst reports, this study constructs a bilateral supply chain uncertainty index, providing a new quantitative approach to measure uncertainty. Second, it enriches the literature on the impact of uncertainty on micro firms by examining the effects of cross-national rather than purely domestic uncertainty, using high-granularity micro-level supply chain data from both China and the U.S. and analyzing the asymmetric innovation responses of suppliers and customers, thereby broadening the perspective on supply chain research. Third, this study provides policy relevant empirical evidence for policymakers. As the most important and enduring source of global economic policy uncertainty, China-US relations continue to exert far-reaching effects on the security and resilience of China's industrial chains at present and into the foreseeable future. Our findings suggest that the government can enhance firms' capacity to cope with external uncertainty and foster innovation upgrading by more effectively employing tax, fiscal, and industrial policies, thereby safeguarding supply chain security and strengthening overall economic resilience.

As a widely adopted transaction method, trade credit serves as a significant external financing channel for enterprises. However, its unsecured and interest-free nature may also lead to payment defaults. Severe defaults not only disrupt regular business operations but also impede the smooth circulation of industrial and supply chains, while undermining the stability of the financial system. To address this issue, the 20th CPC Central Committee Third Plenum explicitly called for improving the legal and regulatory framework for the settlement of overdue corporate receivables.
Despite increasingly comprehensive legislation in China, the challenge of insufficient judicial resource allocation has become increasingly prominent, with the most salient conflict being the imbalance between the large volume of cases and the scarcity of judicial personnel. To alleviate the tension between the high caseload and limited judicial resources within the legal system, and to enhance the efficiency and quality of civil litigation, the Supreme People's Court implemented a two-year reform of the division between complex and simple cases in 2020.
Utilizing this reform as a quasi-natural experiment, this study employs a sample of A-share listed firms from 2015 to 2023 to examine the causal effects of optimized judicial resource allocation on trade credit using a difference-in-differences (DID) model. The findings reveal that, firms in pilot areas of the streamlining reform experienced a significant reduction in trade credit appropriation. This result indicates that the impact of the streamlining reform on corporate trade credit demonstrates a stronger governance effect relative to a promotion effect. Mechanism tests identify that this governance effect operates through increasing the frequency of lawsuits and the amounts involved, thereby reducing firms' speculative demand for trade credit. Further analysis shows that the reform exerts a more pronounced governance effect on large-amount, long-term trade credit, as well as on both “passive delinquency” and “active delinquency” behaviors. Tests on economic consequences demonstrate that the governance of trade credit through the reform not only mitigates the agency costs of delinquent firms but also inhibits their overinvestment.
This paper makes several potential contributions. First, it examines how judicial reform affects trade credit from a governance perspective. We find that the reform of the division between complex and simple cases effectively disciplines trade credit, thereby extending and enriching the literature both theoretically and empirically. Second, by focusing on the reallocation of judicial resources, the study complements the literature on judicial reform and firm behavior. The procedural optimization analyzed here is a Pareto improvement that neither increases the number of courts nor raises costs, rendering it economically significant, and the evidence on its efficacy can inform judicial or other reforms under resource constraints. Thus, we provide direct empirical evidence on the effectiveness of the reform. Third, the paper offers a novel methodological and conceptual lens for studying how legal‐system development shapes trade credit. Disentangling demand and supply channels, we propose a new theoretical framework that elucidates the mechanisms through which judicial reform influences trade credit, which helps reconcile divergent findings in prior studies and charts a path for future research. Fourth, we contribute to the nascent literature on the corporate‐governance role of trade credit. When legal institutions are weak, the “hard” disciplinary effect of trade credit as debt can degenerate into a “soft” constraint, fostering managerial opportunism. Our post‐reform evidence provides initial empirical support for the governance role of trade credit. Finally, from a policy standpoint, echoing the 20th Central Committee's call to “improve laws and judicial mechanisms for clearing arrears owed to enterprises,” our findings provide empirical guidance for building a robust corporate credit system through judicial channels and offers policy reference for future rounds of judicial reform.
Future research can be extended along three dimensions. First, scholars should exploit more granular data on the incidence and magnitude of corporate arrears to advance a deeper understanding of the phenomenon. Second, accounts payable and notes payable are subject to distinct legal constraints, subsequent studies could disentangle the heterogeneous effects of judicial procedure reform on these two instruments. Third, government arrears constitute a particularly severe segment of the trade-credit problem; future work may therefore examine the governance of public-sector delinquencies from a judicial perspective.

Currently, the increasingly complex domestic and international environment, coupled with the impact of a new wave of technological revolution and industrial transformation, imposes new requirements for establishing a scientifically sound and efficient development framework for Government Investment Funds.Government Investment Funds have emerged as a distinctive policy instrument that combines “government guidance” with “market operations,” leveraging fiscal resources to mobilize large-scale private capital. These funds enable targeted investment in critical segments of industrial and supply chains, especially in key, high-innovation firms. Beyond supporting individual investee firms, they can have systemic spillover effects: Revitalizing local markets, enhancing industry competitiveness, and reshaping regional economic dynamics. Based on the new context and the redefined role of Government Investment Funds, exploring how such funds influence the regional and sectoral innovation and entrepreneurship environment through targeted investments in specific firms, and how this, in turn, affects micro-level firm entry decisions, is of great significance. Answering these questions can deepen the understanding of government investment funds, optimize their institutional design and implementation pathways, and promote high-quality economic development in China.
This study investigates the broader systemic impact of Government Investment Funds at the regional and industry level, particularly focusing on how such investment activities affect firms' expected entry returns and costs, and thereby shape firm entry decisions. Using enterprise registration data from the China National Business Registry Database and investment data from the Zero2IPO database, the study aggregates the data at the year-city-industry level and employs a negative binomial regression (NBRM) model for empirical analysis. The results demonstrate that Government Investment Funds significantly promote new firm entry in local industry sectors. Mechanism analysis suggests two main channels: industrial agglomeration effects, driven by targeted investments in key, high-innovation firms that strengthen local industry chain development; and capital allocation effects, whereby policy signaling and government credit support help attract financial resources to strategic sectors and partially correct local capital misallocation. The organic coordination of “government guidance” and “market operations” plays a vital role in stimulating local market vitality and optimizing resource allocation. Heterogeneity analysis reveals that this positive impact is weaker in regions with higher levels of marketization and stronger social credit systems, suggesting diminishing returns where private investment mechanisms already function effectively. Additional analyses indicate two further findings: first, as the overall intensity of Government Investment Fund investment rises nationwide, the marginal impact on new firm entry declines; and second, these investments can generate competitive pressures that encourage the exit of inefficient incumbent firms, thereby raising regional innovation capacity. Based on these findings, the paper offers two policy recommendations: (1) adopt regionally differentiated strategies to implement Government Investment Fund policies, accounting for local variation in market conditions; (2) improve coordination among local governments to balance differentiated industry targets with the need for broader policy coherence.
This paper contributes to the literature in two key ways. First, while prior research has shown how Government Investment Funds affect the strategic behavior of investee firms as an important source of venture capital and private equity, their broader systemic impacts at the regional and industry levels have received less attention. This study fills that gap by analyzing how such investments shape firm entry dynamics through industrial agglomeration and capital allocation effects. Second, existing literature often treats government intervention and market efficiency as separate or opposing forces in explaining firm entry. The dual nature of Government Investment Funds, as both a government policy tool and a market-based mechanism, provides a unique context to examine their coordinated effects on resource allocation efficiency and entrepreneurial dynamics, thereby offering new insights into industrial policy and regional development strategies.

Guiding firms toward effective emissions reduction has become an important pillar of the green transition in the process of realizing the carbon neutrality goals. The 20th National Congress of the Communist Party of China emphasized that green and low-carbon development is key to achieving high-quality growth. As a market-based policy tool with both environmental and economic benefits, the emissions trading scheme (ETS) aims to establish an effective carbon price through market mechanisms and incentivize firms to phase out outdated production capacity and pursue green transition. The effectiveness of this market-based system hinges on how efficiently financial resources are allocated to support corporate decarbonization efforts. When capital flows to firms with low abatement efficiency, firms' incentive to curb carbon emissions can be weakened and the effectiveness of the ETS can be undermined. Conversely, allocating capital to high-efficiency firms can facilitate emission reductions, ultimately strengthening the policy effect of the carbon market. Therefore, understanding how ETS participation affects corporate financing costs is essential for designing effective green finance policies, enhancing the role of financial institutions in supporting carbon markets, and achieving efficient financial resource allocation.
Existing research on carbon markets mainly focuses on ETS-related risks and the impact on emission reductions, total factor productivity, innovation, and macroeconomic outcomes. Few studies examine how carbon markets affect financial resource allocation. There remains a significant gap in understanding how firms adjust their financing behavior in response to carbon policies, particularly regarding capital allocation efficiency at the firm level. For example, several key questions remain underexplored: Do firms included by the ETS receive improved financial support？ Does participation in the carbon market influence their carbon disclosure and financing costs？ Do observable and unobservable aspects of environmental performance have equal impact on financing costs and capital allocation efficiency？ And ultimately, does the ETS improve the efficiency of financial resource allocation？
To answer these questions, we manually collect and compile a list of firms that participated in China's regional carbon emissions trading markets between 2010 and 2021. We then trace these firms to their controlling listed entities and match them with listed firms on the Shanghai and Shenzhen A-share markets, thereby constructing a firm-level panel dataset. Using this dataset, we employ a difference-in-differences (DID) model to examine the impact of ETS inclusion on firms' debt financing costs. We find that firms' debt financing costs significantly decline after being included in the ETS. Further analysis shows that the reduction is driven by improvements in carbon disclosure and environmental performance. We further distinguish between observable (e.g., ESG ratings, green patents) and unobservable (e.g., carbon emission intensity, low-carbon patents) dimensions in environmental performance. The decline in financing costs is concentrated in firms that experience improvements in observable environmental performance. Regarding the unobservable dimension, we find no significant reduction in financing cost, particularly for direct and supply chain emissions. We also find significant heterogeneity in the effects of ETS participation. For instance, firms with stronger corporate governance, more efficient information transmission, and carbon allowance surpluses experience greater reductions in financing costs.
This study contributes to the literature in four aspects. First, it provides firm-level evidence on the effectiveness of ETS from the perspective of financial resource allocation efficiency, expanding the literature on the interaction between market-based environmental regulation and finance. Second, we identify ETS participation at the firm level, circumventing the limitations of region-based identification, and match the sample with Trucost carbon emission data to examine the policy effects. Third, we propose and empirically test multiple channels through which ETS affects debt financing costs, focusing on the roles of information disclosure and environmental performance, and further differentiate between observable and unobservable dimensions. These findings offer novel perspectives on the financial implications of carbon pricing mechanisms. Fourth, we further contribute by using firm-level capacity utilization data to infer firms' long/short positions in carbon trading markets.

As the core subject of innovation, high-tech enterprises need to bear the high risks and uncertainties of technology research and development.The uncertainty of R&D has greatly dampened the R&D motivation of enterprises, making their innovation decisions more conservative. Therefore, to encourage technology innovation in enterprises, it is necessary to pay sufficient attention to the current risk predicament of enterprise innovation. The equity network of an enterprise has the nature of risk-sharing, which enables the equity network to effectively promote technology innovation by mitigating the R&D risks of the enterprise.
Based on Cabrales et al. (2017), this paper further introduces innovation decision-making into the game equilibrium framework of enterprise equity network, focuses on studying the influence of the equity network and its topological structure on micro-enterprise innovation, and then analyzes the formation mechanism of the topological structure of the equity network. Taking the data of listed companies on the main board of China A-share market from 2004 to 2023 as samples, this paper conducts very detailed empirical tests on the risk mechanism by which equity networks affect innovation. The test results confirmed our basic theoretical conclusion.
Our findings show that equity network and its large branches can promote innovation. The innovation decision will not only affect firm's own benefits and risks, but also affect related firms through the equity network. Therefore, the Nash equilibrium will determine the equilibrium state of innovation decisions. However, when firms cannot effectively form a stable equity network, due to the lack of risk sharing, firms can only choose a relatively low level of innovation to ensure security. Therefore, equity network promotes innovation through risk sharing. We also find that, within the large branches, large firms have high centrality (core), while small ones have low centrality (periphery), which forms a core-periphery structure (micro topology structure). The large firms have low innovation level, while the small ones have a higher level. This is because the internal topological structure directly determines the heterogeneity of the degree of risk contagion among firms with different scales. Therefore, firms located in the center need to have a more stable earnings and lower degree of innovation, in order to act as the “Ballast Stone” to maintain the stability of the whole branch, thus reducing the risk impact of internal firms; while the peripheral firms can have a higher degree of innovation.
Based on this, we put forward the following policy suggestions: The government can provide more policy support and guidance to large enterprises with a higher degree of centrality in the equity network, and take early preventive measures against the possible risk contagion of these important large enterprises to avoid a sudden increase in risks that could affect overall innovation in the network. In addition, the government can further improve the information disclosure mechanism and property rights trading system, and proactively guide enterprises of different types to carry out complementary cooperation in various forms such as equity links.
The possible contribution of this paper can be divided into three parts. Firstly, different from the non-institutional risk-sharing mechanisms by which social networks influence innovation in existing studies, this paper takes the enterprise equity network as the research subject, and explores the institutional risk-sharing mechanism, making up for the deficiencies of existing research. Secondly, this paper focuses on exploring the entire network economy system formed by enterprises through equity associations, rather than limiting the attention to the risk-sharing mechanism of the internal equity structure of a single enterprise in existing research. Thirdly, existing studies have focused more on the theoretical relationship between centrality and enterprise scale. On this basis, this paper further introduces the innovation behavior of enterprises and expands the endogenous formation mechanism of the equity network, clarifying the mechanism by which highly stable large enterprises occupying the central position of the network act as ballast stones, promoting technology innovation by reducing the risk level of the overall network branch. Based on the research in this paper, future studies can discuss the dynamic characteristics of the internal topological structure of the equity network, further internalization processing, and the uniqueness of enterprise attributes.

The shortage of collateral constitutes a binding constraint on financial and economic development. Banks are the financial institutions that most efficiently and economically utilize collateral(created loans) to generate liquidity. When banks' credit assets, under conditions of high quality and safety, are further securitized, they can be transformed into liquid and safe assets, thereby contributing to more complete financial markets.
Based on cutting-edge collateral equilibrium theory within incomplete markets, this paper theoretically shows the complementarity between banks and securitization. It then exploits a unique quasi-natural experiment, the 2015 reform of China's loan-to-deposit ratio regulation, and exploit the fact that this exogenous policy differentially affected large banks (state-owned and nationwide joint-stock banks) versus small and medium-sized banks (urban and rural commercial banks). Utilizing panel data from 119 commercial banks between 2013 and 2023, and applying DID and DDD models, the paper cleanly identifies changes in off-balance-sheet behavior associated with credit asset securitization, as well as the causal effects and transmission mechanisms of such behavior on high-quality development in the banking sector. The study finds that proper securitization reduces banks' risk-taking behavior and enhances operational stability. In terms of mechanisms, securitization not only improves the asset quality and profitability of the banking system through collateral transformation, promotes credit and liquidity creation, but also provides collateral and creates safe assets for the economy. This demonstrates that proper securitization makes financial market more complete and represents a Pareto-improvement financial innovation.
This study has significant policy implications. First, it shows that asset securitization serves as a market-based solution to liquidity shortages by alleviating collateral scarcity and upgrading collateral quality, highlighting that the nature of liquidity is collateral transformation and intermediation. As financial innovations and economic activity expand, increased financial promises generate endogenous shortages of eligible collateral. This paper verifies that financial innovations such as credit asset securitization, by transforming bank loans into asset-backed debt, can effectively utilize such loans as collateral to mitigate banks' liquidity risk and enhance their stability.
Second, collateral shortages lead to safe asset scarcity, which in turn triggers financial stability and macroeconomic concerns. Currently, credit asset securitization, firms' ABS, and asset-backed commercial paper are promising private-sector attempts to create safe (collateralizable) assets, while sovereign bonds issued by the public sector remain the highest-quality collateral in the financial system. An adequate supply of government bonds reduces financing costs for the real economy, supports monetary policy implementation, and enhances financial system stability. However, sovereign bonds, as safe assets, face supply inelasticity and are constrained by fiscal revenues. Thus, market-based creation of safe assets, such as through securitization, is indispensable. A dual approach combining government bonds and securitization can better address safe asset shortages, support the construction of secure and efficient financial infrastructure.
Finally, the findings of this paper also provide academic support for designing a robust financial system and promoting high-quality development of both the banking system and capital markets. By examining the financial contract-completion and market-completion functions of banks and capital markets, the paper argues that proper securitization under market incompleteness constitutes a Pareto improvement in financial innovation. Therefore, during this phase of high-quality development, it is essential to harness the complementary strengths of capital markets and banking system. Financial innovations like securitization should be used to gradually refine a system of specialized and cooperative financial institutions.

With the steady advancement of China's multi-tiered capital market, quantitative hedge funds driven by algorithmic trading have experienced rapid growth over the past decade, becoming a critical component in fostering robust financial institutions and effective financial regulation. Leveraging the wealth management capabilities of quantitative hedge funds while enhancing their risk resilience, all while cultivating internationally competitive financial institutions and safeguarding against systemic risks, has emerged as an important issue for regulators.
However, there remains a lack of systematic empirical analysis regarding the actual risk exposures and performance of quantitative hedge funds. Compared to qualitative hedge funds and mutual funds, quantitative hedge funds possess stronger technical capabilities, employing algorithmic trading, high-frequency strategies, complex short-selling techniques, and high-leverage designs. These characteristics may allow them to target non-traditional risks more effectively. Consequently, their wealth management approach may differ significantly from that of traditional institutions. Due to the lack of comprehensive empirical studies, there is still considerable divergence in how regulators, market participants, and other stakeholders perceive quantitative hedge funds, often sparking heated discussions on related topics.
This study conducts the first empirical analysis of the risk and performance of Chinese quantitative hedge funds, shedding light on their distinct characteristics within the Chinese context. Specifically, we utilize the widely adopted Suntime database, which offers robust coverage of Chinese quantitative hedge funds, enabling a systematic investigation of their risk and performance. Based on monthly data from 6,784 stock-strategy quantitative hedge funds between July 2015 and June 2024, we first examine their systematic tail risk. Our findings reveal several key insights. First, the quantitative hedge fund industry as a whole exhibits positive exposure to the systematic tail risk factor. Second, this systematic tail risk factor carries a risk premium that cannot be fully explained by the Carhart four-factor or Fama-French six-factor models. After accounting for exposure to this factor, the average alpha of funds decreases further. Additionally, through Fama-MacBeth regressions, we find that funds with higher systematic tail risk achieve higher excess returns. These results consistently indicate that Chinese quantitative hedge funds are indeed exposed to systematic tail risk, with the associated risk premium potentially serving as a key driver of its performance. Further analysis confirms that funds with higher systematic tail risk suffer more severe losses during market tail risk events, warranting heightened regulatory attention due to their potential adverse impact on the market. Moreover, we find that quantitative hedge funds exhibit greater exposure to systematic tail risk compared to qualitative hedge funds, and their risk levels are correlated with the characteristics of fund managers and clients. These results underscore the importance of strengthening regulation of quantitative hedge funds to mitigate major financial risks.Beyond the risk premiums derived from risk exposures, we also explore funds' ability to generate alpha. Our analysis reveals that the Chinese quantitative hedge fund industry, on average, does not produce significantly positive excess returns or alpha.
This study makes three key academic contributions. First, it significantly enriches the literature on securities investment funds by providing the analysis of risk exposures and performance in Chinese quantitative hedge funds, revealing their unique characteristics in China. This addresses gaps in understanding their wealth management and risk resilience capabilities. Second, it advances the literature on systematic tail risk by extending its study to asset management, demonstrating that quantitative hedge funds are affected by systematic tail risk and highlighting its spillover effects on financial institutions from a new perspective. Third, it contributes to the literature on quantitative trading. While academic research on quantitative trading is well-developed abroad, it has only recently gained traction in China, where there is still considerable room for improvement in the corresponding market infrastructure. By examining quantitative hedge funds, a key player in China's quantitative trading landscape, this study elucidates their performance and underlying risks, providing policy insights for better managing and guiding the development of quantitative trading in the future.