Chinese economy has become the high-quality development stage from the high growth period, which means the financial policy should de-emphasize the quality targets and measures to fully play the role of the price leverage in financial resources allocation. With the interest rate liberalization reform was preliminary accomplished, due to financial innovation and disintermediation as well as the more sophisticated financial market and products, it is urgent to transform China’s monetary policy from the quantity based mode to the price based mode, which is also the necessary step to achieve the high quality economic development.
We first elaborately review the theory of monetary policy and practices in the advanced economies. We find out that the quantity and price are the two sides of one coin and it is equivalent of the quantity based monetary policy and the price based monetary policy in theory. The quantity policy takes effects directly but is prone to contort the price mechanism and individual behaviors. The price policy takes effects with the adjustment of the individuals which needs a good financial market and interest policy transmission. The development of financial market and monetary policy channel play an important role for the monetary policy mode.
The retrospect of monetary policy in China shows that the necessary conditions for monetary policy transformation have been satisfied, but we also point out that the practice of monetary policy in modern sense lasts for only around twenty years, after abandoning the direct controls on credit behavior and turning to the quantity indirect policy with the money supply as the intermediate target in 1998. Central bank in China is always confronting the impetus of investment and credit expansion due the traditional growth-led economic mode. Because of the governmental preference to a higher growth rate, there are soft budget constraint sectors such as the local government vehicles, stated owned firms and housing industry enterprises. The supervisory affaires of the central bank in China were separated. While, due to the industry development dominance of the supervisory ideology, there are race to the bottom in the financial supervision, which promote the rapid growth of the shadow banking in recent years and financial risks are accumulated heavily. Although there is enough market breadth of the financial market, there are still too strict regulations and the market depth is relatively low. The monetary markets and bond markets are still separated, the admittance of the market, esp. the derivative markets are sill strictly controlled, the financial products are immature and there are still implicit dual interest track. The exchange rate is still lack of edacity.
So, with the problems above, monetary policy in China still needs quantity measures and we should do lots of preparations to fulfill the sufficient conditions for the monetary policy transformation. The crucial point is the development of the financial market system, including mature financial micro foundations, good guards of financial institutions and well functional financial product markets. Financial markets developments also promote the interest policy transmission and will ensure the success of the monetary policy transformation. With the deepening of the supply-side reform and reform in the difficult areas of hedge risks, esp. the improvements of the governmental debts and supervisory systems, we should vigorously promote price-based monetary policy transformation, with which to enhance economic and financial high quality development.

This paper builds a time-varying prudential index of capital flow management according to the de facto controls, and analyzes the effectiveness of Chinese capital flow management and the relationship between capital management and short-term capital flow. The results indicate that the effectiveness of Chinese capital flow management decreased before 2013 and then increased afterwards. Without the enhancement of capital flow management, it is hard to prevent the short-term capital outflow simply relying on the improvement of effectiveness in the event of unexpected shocks. Moreover, the prudential capital flow management can regulate the short-term capital flows efficiently, and the effectiveness is much more stronger in the short run.

This paper empirically investigates the impacts of financial speculation and real demand on international commodity spot prices during 2005-2015. First, we explicitly identify exogenous changes of financial speculation which has the property of informational noise. Then, we quantify and compare the impacts of financial speculation and real demand in different information environments based on dividing informational friction regimes from multiple dimensions. The results show that real demand is the main driver of commodity prices in the long run; while in the short run, the influence of financial speculation dominates and other informational noises also exhibit significant impacts. Compared to regimes of weak informational frictions, the impact of impacts of financial speculation as well as other informational noises are stronger in high -volatility, high-financial stress and high-investor sentiment regimes. Further analysis finds that financial traders’ market share is lower in regimes of strong informational frictions than in regimes of weak informational frictions. Therefore, the key to stabilizing international commodity market is to improve market transparency and reduce informational frictions.

Using principal components quantile regression(PCQR) method, we construct a systemic financial risk index that includes institution-specific risk, comovement effect as well as volatility, liquidity and credit. The empirical results indicate that our index is able to accurately predict the distribution of subsequent shocks to the macroeconomy. The bank and credit system is the major channel, through which the systemic financial risk influences the real economy. Our result also suggests that China’s systemic financial risk is rising significantly. Preventing systemic risk and maintaining the stability of credit should be China’s first priority in macroeconomic policies.

Using China Family Panel Studies(CFPS) dataset, this paper examines the effects of household leverage on household consumptions, as well as the differences of the effects among different consumptions and between urban and rural households. We show that household leverage negatively correlates with spending. However, households with higher leverage tend to spend and consume more when their wealth changes. Household leverage has a significantly negative impact on the development and enjoyment of consumption while it exerts a positive influence on survival consumption which is more sensitive to wealth fluctuations. As far as the differences between urban and rural households, leverage dampers the spending of urban households and promotes consumption especially survival consumption of rural households which is more sensitive to wealth fluctuations as leverage increases. The results implicate that increasing household income and wealth, rather than ‘adding leverage’, is an efficacious method to stimulate consumption and to optimize consumption structure.

The nature of agricultural production and the widespread information asymmetry easily trigger financial moral hazards resulting from random incidents. Consequentially, the moral hazards may lead to systemic financial risk through the economy of scale, the economy of scope, herding and fallacy of the agricultural supply chain. Based on this argument, this paper uses a sequential game and empirically shows the possibility of the amplification of moral hazards based on the decision-making of leading enterprises in an agricultural supply chain. To prevent the risk, commercial banks should cooperate with leading agricultural enterprises to adopt make-to-order production, strengthen closed-off management and actively integrate a cultural value system into the agricultural supply chain. In the meantime, macro-prudential and micro-prudential supervisions of the agricultural supply chain finance should be reinforced.

This paper assesses the impacts of agricultural tax abolition reform on agricultural productivity, rural incomes and local public finance in China using data covering 1997 Chinese counties and the period from 1999 to 2009 spanning the abolition of agricultural taxation in 2003-05. The abolition was shown to have increased agricultural productivity and rural incomes, but led county governments to reallocate land from the agricultural sector to industrial and commercial uses, which gives them extra-budgetary revenue to compensate for the budgetary loss. These findings illustrate the importance of general equilibrium framework in policy evaluation.

Chinese SMEs have spearheaded the integration of the Chinese economy with the world economy through their close involvement and partnership with the Asian regional and global production networks and supply chains. Several factors contributed to this, of which a significant improvement in China's transport infrastructures was a key one. This paper reviews and analyzes the rise and development of modern regional and global production networks and supply chains thanks to increased extents of production fragmentation, with a focus on the status and role of SMEs, in particular those from developing countries. A pre-condition for SMEs to play their role is adequate transport infrastructures. Using a set of Chinese provincial panel data, our empirical investigation verifies the strong impact of transport infrastructures on the performances of Chinese SMEs by promoting their integration, and thereby the integration of the Chinese economy, with regional and global production networks and supply chains.

Breaking and eliminating market segmentation, establishing an unified and open market system, and promoting rational flow and optimal allocation of production factors are important tasks in the transitioning China. This paper investigates the price behavior of services in the framework of the law of one price, and focuses on the roles of provincial border and dialect border in the short-run price disparities. We find that:(1) the provincial border effects are significant in education and medical industries, while they are weak in the other service industries;(2) the dialect border also plays a positive role in the education service, especially in the primary, junior high, and senior high school study;(3) we construct a model involving heterogeneity effect and sample selection effect to re-estimate the sample, and the results are robust. The above results reflect that the hukou system attached to the administrative boundary increases the implicit costs of cross-province mobility by influencing education and medical benefits, and regional differences in dialects further increase the resistance to cross regional mobility of the labor by influencing the education of their children.

The frequent issuance of inquiry letters by regulators is becoming an important regulatory tool in China's capital markets. This paper investigates the information content and the regulatory role of the no-penalty regulation. Based on the financial report inquiry letter, the authors document that the market reaction to the receipt announcement is significantly negative, while the market reaction to the reply announcement is significantly positive. The announcement of the financial report inquiry letter has information content and the market recognizes the regulatory role of inquiry letters. Moreover, the characteristics of the listed company and the financial report inquiry letter will affect the market reaction. These findings suggest that inquiry letters play a role in information disclosure regulation.

Based on related data of firms listed on A-share market during 2003-2017, this paper investigates the relationship between the share pledging of controlling shareholders and dividend policies of listed firms. We document that, compared to firms without controlling shareholder pledging their shares(non-pledgors), there is an increasing likelihood of stock dividends(including stock splits) and a decreasing cash dividends among those firms with share pledging by the controlling shareholder(pledgors). Meanwhile, such relationship is more pronounced for firms with controlling shareholder pledging more shares or being faced with a higher risk of margin call. Based on the pledging activities of the insiders and considering their incentives, the paper reexamines the issue of dividend policy choice of firms, and provides incremental evidence of investors’ different preference to large stock splits over cash dividends.

Based on the data of 1542 listed firms for the period of 2014-2016 and the DID method, this paper takes the implementation of market maker system in NEEQ market as research background to study the impact of choosing market making on liquidity. We find that the market maker system has not improve the liquidity, which suffers from “Liquidity Paradox”.It’s favorable for the large-cap stocks if they choose market making transaction, while it is unfavorable for small-cap stocks. Therefore, NEEQ should focus on the matching of trading system development and market regulation, increase the number of market makers, and lead the companies to choose market making transaction.