After the collapse of the Bretton Woods system, the metal standard declined in favor of the fiduciary standard and currency crises sometimes occurred. In the international context, exchange rate pricing and maintaining exchange rate stability have always been topics of concern for academics, governments and central banks. Although the equilibrium exchange rate theory based on purchasing power parity plays an important role in exchange rate pricing, the real exchange rate is often not equal to one; the Balassa-Samuelson (B-S) effect provides a reasonable explanation for this.
The B-S effect provides a new research perspective for real exchange rate changes. However, the model's strong assumptions are unlikely to be satisfied in developing countries, implying that relaxing these assumptions is one of the most important approaches of study in the B-S effect literature. Most studies only relax one of the assumptions of the B-S model. China does not conform to the status quo because of its deviation from the Law of One Price and the segmentation in its labor market. In this paper, we allow for both of these and construct an open economy partial equilibrium model to decompose the real exchange rate of the RMB. Our model includes the deviation from the Law of One Price in tradables and the segmentation in the labor market. We use data for service industry sub-sectors and manufacturing firms in China and the U.S. from 2004Q1 to 2016Q4 to conduct a grouped empirical analysis of the B-S effect for the real exchange rate of the RMB and its transmission channels.
Our theoretical and empirical results suggest that(1) the B-S effect between China and the United States exists but the transmission channel of relative productivity affecting the price level by affecting relative wages, ultimately affecting the real exchange rate, is not signi ficant. (2) In addition to the traditional B-S effect transmission channel, we find that relative productivity affects the real exchange rate by affecting GDP, implying that productivity affects the real exchange rate by affecting the nominal GDP growth rate of both countries. (3) Industrial structure imbalances have caused the divergence between relative productivity and relative wages in China to a certain extent and the increase in relative wages has a negative (appreciation) effect on the RMB exchange rate.
There are two main contributions of this paper. (1) We provide a comprehensive analysis of the B-S effect after relaxing assumptions from both the theoretical and empirical perspectives. In addition to verifying the existence of the traditional B-S effect and its transmission channel, we consider additional transmission channels of the B-S effect. (2) Deviating from the standard approach in the literature, we analyze service industry sub-sectors, paying more attention to industry heterogeneity, and find that industries with divergent wages and productivity in China are more in line with the B-S effect.
Our findings have policy implications for China. Overall, the relative wages of the service and manufacturing industries in China are higher than those in the United States. China's relative productivity is both positive and negative, which means that China's non-tradable sector is more attractive to labor than its tradable one. We believe that this may be due to the distortion in China's industrial structure and because of other reasons that caused the deviation of relative wages and relative productivity in the service and manufacturing industries. To reduce this divergence, we need to unswervingly carry out supply-side structural reforms to improve labor productivity,realizing the coordinated development of high-end manufacturing and service industries. These reforms are needed to reverse the current distortion in the industrial structure and narrow the divergence in relative productivity and relative wages in the service and manufacturing industries.

Since the 2007-08 financial crisis, central banks and regulatory authorities have focused on establishing macro-prudential regulatory frameworks to ensure financial stability and prevent systematic risks. Macro-prudential policy and monetary policy tools are in general complementary, but how best to coordinate between the two remains an important research question. Although several studies have examined the problem from a capital regulation and countercyclical buffer perspective, little attention has been paid to liquidity regulation in a macro-prudential regulatory framework.
In 2012, the China Banking and Insurance Regulatory Commission (CBIRC) introduced the Basel III liquidity regulatory framework and set up a five-year plan for implementation. How did commercial banks respond to these liquidity regulations during the transition period？ Did their liquidity adjustment affect the transmission effectiveness of monetary policy？ By answering these questions, we obtain a better understanding of the interactions between macro-prudential and monetary policy.
From both theoretical and empirical perspectives, our paper explores the impact and mechanism of bank liquidity adjustment behavior in response to the liquidity regulation of bank lending and monetary policy transmission.
Theoretically, we extend a simple bank asset and liability management model to capture banks' asset adjustment behavior. We model a bank's profit maximization problem with three constraints: (1) a balance sheet constraint, (2) a capital adequacy ratio constraint, and (3) a liquidity constraint under the Basel III liquidity regulation (i.e., net stable funding ratio (NSFR)). Our model predicts that the bank lending channel still exists even after the introduction of the NSFR requirement. Our model also shows that different asset adjustments, namely loan versus non-loan asset adjustments, have different impacts on the effectiveness of monetary policy transmission.
Using a quarterly sample of 50 major commercial banks in China from 2012Q1 to 2018Q2 (which is the transition period for Basel III implementation in China), we test our theoretical predictions regarding the effectiveness of monetary policy transmission. We construct a panel data set and use a first-order system GMM to estimate the models. Our empirical results show that the effectiveness of monetary policy transmission improves when banks increase their long-term liquidity level by adjusting their loan structure. However, the adjustment of non-loan assets may negatively affect the transmission efficiency of monetary policy, which is consistent with our theoretical predictions. We also find that joint-stock commercial banks and city commercial banks with lower levels of NSFR tend to adjust non-loan assets to improve their liquidity, which may adversely affect the effectiveness of monetary policy transmission.
Our results have several policy implications. First, the regulatory authorities should closely monitor the asset adjustment behavior of commercial banks under macro-prudential regulation, which may impose positive or negative effects on the effectiveness of monetary policy transmission. In addition, commercial banks should improve their liquidity to meet the NSFR requirement by adjusting their asset and liability structure (such as by optimizing loan structure and expanding stable financing channels).
This paper contributes to the literature in three ways. First, it provides both a theoretical framework and empirical evidence for the interactions between bank liquidity management and monetary policy transmission. Second, it constructs a novel measure of NSFR to capture banks' liquidity management. Our identification strategy will help future researchers understand the potential impact of liquidity regulation and macro-prudential policy in general. Finally, this paper expands the literature on the credit channel of monetary policy transmission, which plays an important role in China's monetary policy practice.
However, our paper is subject to some limitations in terms of data availability and data quality, especially in the construction of different liquidity measures. In general, how banks respond to different macro-prudential policies and the unintended consequences of their behavior are important questions that need further exploration. In future research in this area, we will study the mechanism through which macro-prudential policy can affect commercial banks' behavior and open the “black box” of the credit channel of monetary policy transmission.

In recent years, the Chinese economy has been shifting from rapid growth to high-quality development. In this situation, monetary policy should adopt aggregated and structural regulations to keep liquidity at an adequate level and to help the real economy. With the rapid development of Chinese financial innovation and financial disintermediation, the effects of quantity regulation (which controls the money supply as the intermediate goal) are decreasing. In particular, Chinese interest rate marketization has entered a new stage, where the core feature is a mechanism for the formation and control of market-oriented interest rates. Monetary policy should now be transformed from quantity-based regulation to price-based regulation.
The regulation of quantity and price are interactive processes. It is necessary to maintain the balance between quantity and price. In the transformation of China's monetary policy, the combination of quantity and price regulation has played a vital role in stabilizing economic growth and inflation. A lot of studies have shown that purely quantity-regulating rules such as the McCallum rule, or purely interest rate-regulating rules such as the Taylor rule cannot fully explain China's monetary policy. Therefore, it is important to study the relationship between monetary rules regarding both quantity and price, and to explore a quantity-price admixed monetary policy. Such an admixed rule policy can help us to comprehensively understand Chinese monetary policy regulation during transformation.
In this study, we construct our model based on the Fisher equation and the money-in-the-utility model. We analyze the relationship between the monetary quantity rule and the price rule, and construct a quantity-price admixed monetary policy rule. It is of great theoretical and practical importance for interpreting the regulation of China's monetary policy. On one hand, the admixed monetary policy rule verifies the equivalence of the quantity rule and the price rule. When output deviates from potential output, or inflation deviates from the inflation target, we can regulate these imbalances through either interest rate instruments or currency instruments. Quantitative instruments and interest rate instruments complement each other. At the same time, when the currency deviates from the target level, we can also regulate the problem through interest rate instruments. When the interest rate deviates from the natural rate, we can use currency instruments. However, in terms of practice, the quantity and price of money are equivalent as two sides of a coin, so that the money supply and the market interest rate both have important roles in monetary regulation. The admixed monetary policy rule is important for analyzing the typical issues that arise during the transformation of China's monetary policy regulations.
We make some inferences based on our admixed monetary policy. First, we find that under equilibrium conditions, the directions of quantity regulation and of interest rate regulation are opposite. If the interest rate is lower than the natural interest rate's level, then the actual growth rate of the money supply will be greater than the optimal growth rate. This inference explains the fact that although our interest rate is controlled at low levels, and our money supply exceeds the potential level, the Chinese economy has not experienced severe inflation. Second, we construct a modified Taylor principle that is suitable for China's monetary policy. With the admixed quantity-price rule, when the money supply's rate of growth exceeds the potential level, the adjustment of interest rates can be less than the change of the inflation rate, and the prices can also be stable. This inference explains why the standard Taylor principle is not established in China. Therefore, with a distorted interest rate, we can also achieve price stability. Third, we analyze the liquidity effect in China. We find that with the admixed rule, if the growth rate of the money supply is smaller than the optimal level, the interest rate's fluctuation will be larger than that indicated by the principle Taylor rule. However, when the money supply's rate of growth is higher than the optimal level, the interest rate will be stable. This inference explains the fluctuations of interest rate with the changes to the liquidity conditions, and especially the growing fluctuations of interest rates seen since 2011. The study's empirical analysis verifies the assumptions of our model and our inferences.
It is urgent to transform our monetary policy from a quantity-based to a price-based system of regulation. In the future, the central bank should further improve open market operation and develop innovative liquidity management tools, so as to effectively regulate the interest rates, thereby creating a favorable financial environment for high-quality development of the Chinese economy.

Maintaining sustainable economic growth is a severe challenge facing policymakers in China. Obviously, the sustainability of growth is determined not only by growth rates, but also by growth stability. A typical fact related to China's economic growth that cannot be ignored is that the growth dynamics of regional economies exhibit rather substantial differences. Focusing only on economic growth rates may cause one to ignore this important fact and its inherent logical and theoretical implications. Meanwhile, fiscal system reforms with the central theme of “decentralization of power and transfer of profits” are generally considered one of the most important institutional changes since China's reforms and the opening up of its markets, and it is an important perspective to deeply understand China's economic sustainability. However, few studies explore the effects of fiscal decentralization on both economic growth and economic stability, and thus, on growth sustainability, using a relatively unified analytical framework. Studies on the characteristics of China's sub-provincial regional economic growth dynamics and the effects of fiscal decentralization on these dynamics are also relatively inadequate.
This paper aims to comprehensively analyze the impact of fiscal decentralization on regional growth dynamics and, thus, on the sustainability of growth in China. Specifically, based on a panel dataset of 245 prefecture-level cities in China for the period from 1978 to 2014, we first study the dynamic characteristics of economic growth in these prefecture-level cities by using a Markov regime-switching clustering model from the perspective of regime switching and clustering; identifies different dynamic growth patterns; and reveals their differences in average growth rates, growth states and duration, growth volatility, and, ultimately, growth sustainability. Then, we use the logit panel model to investigate the effects of fiscal decentralization on growth sustainability from three dimensions: impact of fiscal decentralization on the belonging probabilities of growth modes, on the differences in growth states across growth modes, and on the occurrence probability of high growth states within each growth mode.
We find that the growth dynamics of prefecture-level cities in China present three typical modes that differ significantly in terms of average growth rates, duration of growth states, growth volatility and, thus, their sustainability. Expenditure decentralization significantly increases the prefectural cities' probabilities of being clustered into the low-growth-and-high-volatility growth mode and, thus, reduces the sustainability of economic growth. However, it has relatively positive effects on the sustainability of economic growth after the reform of the tax-sharing system in 1994. Revenue decentralization is beneficial for the sustainability of economic growth overall, but after the tax-sharing system reform, its positive impacts are weakened due to increasing vertical fiscal imbalance. We also find that increasing fiscal self-capacity enhances the sustainability of economic growth.
The above findings provide important insights for optimizing and improving the fiscal system to effectively promote sustainable economic growth in China. Although the decentralization of fiscal expenditure has played a positive role in enhancing the sustainability of economic growth after the reform of the tax-sharing system in 1994, it remains necessary to realize that the current expenditures undertaken by local governments in China are heavy, that the mismatch between revenue and expenditure responsibilities is growing, and that the local vertical fiscal imbalance is increasingly adversely affecting the sustainability of economic growth. Therefore, in the future, China should appropriately reduce the expenditure responsibilities of local governments and increase their autonomy over fiscal revenues to build a fiscal system that improves the match between revenue and expenditure responsibilities and provides a clearer arrangement of powers and responsibilities.
Compared with existing studies, the main contributions of this paper are as follows. First, from a relatively new perspective, namely the Markov regime-switching and clustering view, this paper incorporates economic growth and economic volatility into a relatively unified analytical framework. Second, the application of the Markov regime-switching and clustering model is conducive not only to endogenously identify different nonlinear dynamic growth patterns of prefecture-level cities and better reveal the multidimensional differences in the growth sustainability of these dynamic growth modes, but also to facilitate a multifaceted analysis of the influences of fiscal decentralization. Finally, by using long panel data of China's prefecture-level cities spanning nearly 40 years (1978-2014), this paper enriches research on the dynamic mechanisms of China's regional economic growth.

Trade friction between China and the United States (US) broke out in early 2018. We can foresee that with the gradual improvement of China's international economic status, Sino-US economic and trade relations will continue to be affected by various forms of friction and conflict. Moreover, it is likely that such frictions and conflicts will exist cyclically in the long run, which will eventually have significant and profound impacts on China's macro-economy. Therefore, it is necessary to analyze the following questions in depth: how will trade frictions affect China's macro-economy？ To what extent can China open up its economy?
According to international trade theory, a country can impose tariffs to improve its terms of trade and promote net export growth. Therefore, tariff measures are often used as the most direct policy tool when trade frictions occur between two countries. This article introduces tariff shocks, foreign exchange risk premiums, and monetary policy cost channels into a two-country open economy dynamic stochastic general equilibrium model to study the macroeconomic fluctuations caused by trade frictions and analyze relevant policy options for the economic opening of markets. This article decomposes the real exchange rate fluctuations caused by tariff shocks into “direct effects” and “indirect effects” and clarifies the transmission channels and theoretical mechanisms through which tariff shocks affect the terms of trade and the real exchange rate.
First, the log-linearization of the real exchange rate equation shows that an increase in tariffs directly triggers the devaluation of the domestic currency. However, these exchange rate changes cannot fully offset the price distortion caused by tariff shocks. Second, after expressing the terms of trade as an equation of the relative output levels of the two countries, tariffs, and foreign exchange risk premiums, we find that tariff shocks deteriorate the terms of trade, which triggers the appreciation of the domestic currency. Therefore, tariff shocks affect the real exchange rate through direct and indirect channels.
The results of impulse response analysis show that tariff shocks change the terms of trade and the real exchange rate. Under the current status of China's trade openness, foreign tariffs will not only deteriorate the country's terms of trade, leading to a decline in exports and output, but will also depreciate the country's exchange rate, leading to an increase in exports and output. Overall, for the macro-economy, tariff shocks will induce a minor increase in domestic output and a decline in home inflation, as well as a decline in foreign output levels and an increase in foreign inflation.
Moreover, if the domestic government strengthens its control over cross-border capital flows during trade frictions, the terms of trade will deteriorate and cause the real exchange rate to appreciate, which will negatively affect exports and output. A loose monetary policy can directly stimulate output growth and, simultaneously, indirectly increase domestic economic output by depreciating the exchange rate and improving the terms of trade.
The results of economic welfare analysis suggest that the government's choice of trade openness and capital account openness significantly affect macroeconomic fluctuations. First, a moderate increase in domestic trade openness leads to a slight increase in economic welfare losses, while the foreign country faces greater welfare losses; an excessive increase in domestic trade openness leads to a sharp increase in domestic welfare losses, which reach a value greater than the welfare losses incurred by the foreign country. Second, in trade frictions, a moderate relaxation of capital controls improves the terms of trade, which depreciates the real exchange rate and increases output. Finally, an increase in foreign tariffs will trigger the devaluation of the domestic currency. The moderate depreciation of the domestic currency helps hedge against the negative impact of tariffs, increase exports, and boost domestic economic output. In conclusion, in the face of the trade frictions, the domestic government should adhere to the principle of increasing trade openness within an appropriate scope and steadily promote capital account liberalization to avoid substantial economic welfare losses. In addition, implementing a loose monetary policy and relaxing the exchange rate daily trading band can help mitigate the negative impacts of trade frictions.

In this work, we study the impact of “going global” on the financing constraints faced by enterprises. Two facts about the Chinese economy motivate us to study this topic. First, since the implementation of the “going global” strategy, enterprises' pace of participation in the international market and the scale of outward direct investment have increased. The “Belt & Road” initiative proposed in 2013 encourages enterprises to improve their level of internationalization and to make better use of domestic and international markets. Second, enterprises, especially private enterprises and small and medium-sized enterprises, frequently face financing constraints. According to a survey conducted by the World Bank, 75% of China's private enterprises report financing difficulties as the main obstacle to their development. In the process of “going global,” the convenience with which private enterprises access financing has greatly improved, but with the existing modes of financing, it remains difficult for enterprises to fulfill their capital needs.
Treating the Belt & Road initiative as a quasi-natural experiment, we perform a difference-in-differences study of the impact of “going global” on the financing constraints faced by enterprises in China. Based on data from listed companies, the estimation results show that the financing constraints faced by enterprises participating in Belt & Road construction activities have not been alleviated. Instead, the financing constraints faced by private enterprises located in key provinces and in key industries are likely to worsen when participating in Belt & Road construction activities, which is not the case for state-owned enterprises. In terms of mechanism, preliminary evidence shows that private firms participating in Belt & Road construction activities have not accrued any advantage in terms of credit resources, profitability, and productivity due to the short observation period and other factors. From a policy viewpoint, we need to further broaden our thinking, provide more effective financial support to private enterprises, and improve the sustainability of Belt & Road construction activities.
The Belt & Road initiative is an important symbol of China's reform and opening up of its markets in the new era, which provides opportunities for enterprises to “go global.” However, in the Belt & Road construction process, private enterprises have not received effective external support. In response to this situation, we propose five policy suggestions. First, it is necessary to optimize the commercial financial support provided to enterprises involved in Belt & Road construction activities. Overreliance on indirect financing is unhealthy and expanding the use of direct financing is necessary. Ownership and scale discrimination should be further eliminated, and financial support for private enterprises and small and medium-sized enterprises should be enhanced. Rating agencies and other institutions should be invited to participate in Belt & Road construction activities to reduce the information asymmetry between financial institutions and enterprises. Second, it is necessary to strengthen the support of policy finance to enterprises involved in Belt & Road construction activities. Belt & Road construction is a pioneering and long-term cause. The activities that these enterprises are engaged in are exploratory and can produce positive externalities. It is not enough to rely solely on commercial finance, and the participation of policy finance is also necessary. Third, it is necessary to expand international financial support to enterprises involved in Belt & Road construction activities. The Belt & Road initiative is a platform for international cooperation. The participation of Chinese financial institutions alone would be inadequate to cover the requirements. Enterprises should find ways to secure financing support from countries covered by Belt & Road projects and other international financial institutions. Fourth, other policy instruments can be used to support enterprises involved in Belt & Road construction activities. In addition to financial instruments, tax authorities, customs, and other governmental departments should implement some measures to provide support. Fifth, it is necessary to enhance the complementarity between the government and the market in supporting enterprises involved in Belt & Road construction activities.In accordance with their respective conditions, local governments should guide qualified enterprises to participate in Belt & Road construction activities. The government should return to its position as soon as possible after “paving the way and building a platform,”and make market forces play a major role.

What role should the government play when faced with a banking crisis？ Should it intervene in the banking industry？ What impact will government intervention have on the banking industry？ These questions have attracted attention for a long time, with many studies attempting to answer them from different perspectives. The academic community has two main views on the role of banking organizations in the face of a crisis: one is that the existence of banking organizations expands the scope and influence of the crisis; the other is that banking organizations can share some of the crisis risk. It is not easy to answer this question accurately because it is difficult to find a case in which two similar banking organizations exist, while one of which implements a free competition system and the other implements a government intervention system separately in the same economy at the same time. However, the events of the 1930s in Shanghai and Tianjin provide us with a rare opportunity to observe this phenomenon. This article uses the financial information of Tianjin and Shanghai banks during the 1930s in combination with the political and cultural backgrounds of the two places to examine the different performances of the most important financial organizations in the two cities in that period and analyzes the role of financial organizations in response to a crisis.
Banking associations emerged as regional banking organizations after the banking industry reached a certain stage of development. In the beginning, their main function was to organize the heads of various banks to socialize regularly and exchange information. With the continuous development of modern banking and financial industries, the complexity of banking business increased and these banking associations assumed more important roles. Around the 1920s, banking associations were established in many places in China. Among them, the largest and most influential banking associations were those in Shanghai and Tianjin. However, the banking associations in these two cities were quite different. The Shanghai Banking Association was reorganized in 1931 under the promotion of the national government, and the influence of the government and chambers of commerce on this association increased. Although the Tianjin Banking Association was similar to the Shanghai Banking Association in terms of regulation and organization, it always had strong autonomy until the outbreak of the War of Resistance in 1937.
By collecting and sorting banking financial statement data and other related archives of the banking associations of Tianjin and Shanghai from the 1930s, we discuss the results of the different political environments of the two places. First, the information transparency of the two banking associations was different. The Shanghai Banking Association was subject to stricter supervision by the government. Under the requirements of the Ministry of Finance, financial information had to be regularly disclosed to the public and was subject to government review. In Tianjin, there was no external force to urge members of the banking association to disclose their accounts. Therefore, the operation of the Tianjin banking industry was extremely mysterious. Even if the government required members to disclose their accounts, such a move was resisted by local bankers. When the crisis erupted, due to the information asymmetry in Tianjin's banking industry, depositors did not understand the situation of other banks within the banking association. The run on individual banks spread rapidly within the banking association, eventually spanning the entire banking association organization and leading to a wider panic. In contrast, due to the different information transparency of the Shanghai Banking Association, the public fully understood the bank's reserve information when the crisis hit, and there was no largescale run on the association.
Second, the governmental obligations assumed by members of the banking associations in the two places were different. In Tianjin, the banking association was mainly controlled by local bankers. Therefore, when the government's requirements were not in line with the interests of the banks, the Tianjin Banking Association had no incentive to support government policies. After the 1930s, the Shanghai Banking Association was more often affected by the government. The influence of the authorities served the government's goals to a greater extent through major decisions. When the economic crisis emerged, the Shanghai Banking Association increased its investments in industry and agriculture in line with the government's request. Members of the Shanghai Banking Association had more counter cyclical operations, while those of the Tianjin Banking Association significantly reduced investment lending at this time to avoid financial risk.

In recent years, expanding import trade has become a new trade strategy in China. The outline of the 13^th Five-Year Plan in 2016 clearly defines the strategic importance of expanding the import scale, optimizing import structures, and improving import quality. The expansion of imports can improve people's well-being. The active expansion of imports can increase supplies more effectively and directly to better meet people's growing needs for a better life. Moreover, the growth of residents' incomes and the reduction of the income gap are the premise and foundation for realizing the welfare effect of imports. In this context, I seek to understand the effects of import trade on labor income. In China, the study of the effects of import on employees' wages is related not only to the domestic income distribution system, but also to the competitiveness of manufacturing enterprises and the sustainable development of the Chinese economy. In other words, it is important to study the impact of import trade on the labor market in China.
In the current severe situation characterized by the rapid development of China's import trade, rising labor costs, and declining labor income, it is imperative to focus on the impact of import trade on the wages and salaries of enterprise employees to formulate industrial policies and change the mode of import trade in the future. In addition, it is important to determine the coordinated implementation of policies related to import trade and talent given the increasing pressure of labor costs. However, so far, the ways in which import trade affects the average wages of employees has not attracted adequate attention from scholars at home and abroad, with few studies directly discussing the relationship between import trade and the average wages of employees. In this light, I first comb the relevant mechanisms by which import trade affects enterprise income. Then, I construct a measurement model using matching data from China's industrial enterprise database and customs database for the 2000-2013 period to comprehensively and systematically investigate the impact of imports on the average wage level and the share of labor income in enterprises. Based on this benchmark analysis, I further use the mediating effect model to test the mechanism of the effect of imports on the average wage level. Then, I use the difference-in-differences method and instrument variables to confirm the robustness of the above conclusions.
The results show that at first, imports significantly increase employees' average wages, but the positive wage spillover effect is not persistent. Second, the mediating effect test shows that the “competition effect” and “incentive effect” are important channels through which imports affect the average wage in enterprises. In addition, these effects are significantly different across firms with different characteristics, including different ownership structures and different export decisions. Moreover, the magnitude of these effects differs by the type of product imported and the source of importation. Finally, although imports significantly increase the average wages of enterprise employees, they significantly reduce the share of labor income in enterprises. Specifically, imports not only increase the average wages of enterprise employees, but also induce a greater increase in labor productivity, thus completely offsetting the “wage increase” effect.
The main contributions of this study are as follows: (1) this study is different from most studies on the impact of trade liberalization on the income of enterprise employees. This study directly discusses the economic effects of imports from the perspectives of wage level and share of labor income, divides it from the perspective of capital goods and intermediate goods, and enriches the literature on the evaluation of the trade welfare effect. In addition, it systematically and comprehensively investigates the effects of imports on the wage level and share of labor income of enterprise employees to provide a basis for understanding the import activities of Chinese enterprises. (2) This study not only examines the current impact of import trade on the wages and salaries of enterprise employees, but also explores the dynamic impact of imports on the wages and salaries of enterprise employees. (3) Considering the heterogeneity of enterprises in reality, this study investigates the effects of imports on the wages and salaries of employees of manufacturing enterprises with different characteristics and compares and analyzes the effects of different types of imports.

The impact of new technologies and automation on the optimization and upgrading of labor structures has received significant attention in academic circles. Studies indicate that the upgrade of production technology (including the introduction of technology and technological innovation) is closely related to changes in the labor structure (Ning and Lin, 2014; Kim et al., 2019). As the upgrade of production technology is inseparable from the demand for capital, the capital market affects the technical composition of the labor force through firms' investment and financing behaviors. At the same time, M&As are an important resource allocation activity of the capital market that receives a lot of attention from academia, industry, and government. Some studies, including Chen et al. (2015), Zhang et al. (2017), and Xian and Ming (2018), examine the relationship between M&As and technological upgrading. If M&As affect firms' technological upgrading and technological upgrading affects firms' demand for labor, how do M&As affect firms' technical labor demand？ This issue is important both for academia and for practice. However, it has not received adequate attention in the literature. This paper fills this research gap by examining the effect of M&As on the labor force.
This paper investigates the impact of M&As on target firms' labor structure upgrades. Using panel data from Chinese A-share firms listed on the Shanghai and Shenzhen exchanges from 2000 to 2016, we find that after controlling for firm, regional, industry, and other factors as well as labor-related policies and firm and year fixed effects, M&As significantly increase the percentages of non-routine skilled and highly educated employees in firms and significantly decrease the percentages of routine skilled employees. Furthermore, we find that M&As reduce firms' financial constraints and promote production technology upgrades, thereby accelerating firms' labor technology upgrades.
Heterogeneous tests show that M&As have a stronger impact on labor technology upgrading for firms whose payment includes cash, and firms with low performance before the M&A. These findings suggest that M&As play an important role in promoting firms' technological upgrading of labor skills. Our results are robust to using instrumental variables, PSM-DID, and shortening the M&A window.
This paper makes the following contributions to the literature. First, it belongs to the interdisciplinary field of finance and labor economics, its research topic currently being a frontier in this field.
Second, the literature on M&As mainly examines their effect on “narrow stakeholders” (such as shareholders or management) and other corporate governance behaviors, whereas there is little research on how M&As affect “broad stakeholders” (such as the labor force). In addition, the literature on the effect of M&As on Chinese firms is limited to the effect of foreign M&As, and previous research on the effect of M&As on technological upgrading mainly focuses on the technological innovation of firms. Our sample includes both foreign and domestic M&As. And we find that the optimization and upgrading of the labor force structure is caused by the upgrade of production technology, and production technology upgrading includes not only technological innovation but also the purchase of advanced technology and equipment and the introduction of technology-related intangible assets (such as patents, advanced system software, etc.), which means that our sample is more comprehensive and our conclusions are more universal. Moreover, most studies on the demand for labor and technology focus on population and regional factors. This paper examines the effect of M&As on the capital market and fills a gap in the relevant literature.
Finally, as described by Cheng et al. (2019), the amount of intelligent equipment used for production in China is increasing year by year, so it is of great practical significance to study the technological upgrade of China's labor market.

Data of analysts' earnings per share (EPS) forecasts are widely used in empirical studies as a proxy for analysts' predictions of target companies' future fundamentals. However, EPS forecasts depend not only on analysts' predictions of companies' future net profits, but also on predictions of companies' future total number of shares. If a target company's equity expansion after the release of analysts' earnings forecasts exceeds analysts' expectations, EPS forecasts no longer represent analysts' predictions of the company's future fundamentals. However, the extant domestic empirical literature does not adequately cover this problem. This paper proposes an adjustment method that can truly reflect analysts' predictions of a company's future fundamentals. Using our adjusted EPS forecasts, we show in two specific empirical research scenarios that when using EPS forecast data, if the impact of unexpected equity expansion is not excluded, erroneous empirical results may be obtained.
First, when evaluating the optimistic bias and forecast error in analysts' EPS forecasts, if we neglect the effects of unexpected equity expansion, the optimistic bias and forecast error of EPS forecasts are systematically overestimated. We find that the relative optimistic bias and relative forecast error of the original EPS forecasts are significantly higher than those of the adjusted EPS forecasts. Second, when investigating the factors affecting the optimistic bias and forecast error of EPS forecasts, if we ignore unexpected equity expansion, we may obtain biased empirical results. In this study, we use optimistic bias and forecast error as the explained variables to construct two pairs of regression models. The results indicate that after excluding the impact of unexpected equity expansion, the significance levels and even the sign of the regression coefficients of the explanatory variables change.
In fact, ignoring the impact of unexpected equity expansion will cause other severe problems in empirical research. First, ignoring any unexpected equity expansion may lead researchers to misunderstand analyst forecast revisions, which are generally considered as adjustments to the predictions of a company's future fundamentals, but may in fact result from the company's equity expansion. Second, ignoring unexpected equity expansion may lead one to overestimate the dispersion of analysts' EPS forecasts. Differences in different analysts' EPS forecasts may be the result of their differing information on the equity scale, rather than differences in their predictions of company fundamentals. Third, ignoring unexpected equity expansion may lead to an underestimation of the research capabilities and information quality of analysts who release their EPS forecasts early. Analysts who release their EPS forecasts later than others not only have more accurate information about company fundamentals, but also more accurate information on the equity scale. Therefore, analysts who publish later than others may have more accurate EPS forecasts, but this does not mean that these analysts' forecasts of company fundamentals are more accurate. More accurate EPS forecasts can be generated when more accurate information on the equity scale is available.
The contributions of this paper are as follows. First, data from analysts' EPS forecasts are widely studied and used in empirical research. However, these data rely on analysts' predictions of a company's future net profits and future total number of shares. Therefore, after analysts make their predictions, if the company undergoes capital expansion that exceeds analysts' expectations, then the predicted EPS will not represent analysts' forecasts of the company's future fundamentals. In general, the domestic empirical literature does not account for this problem. This paper constructs a new indicator called “adjusted EPS forecast” to represent analysts' real forecasts of a company's future fundamentals. Second, under two specific empirical research scenarios, this paper proves that when using EPS forecasts in empirical research, if the impact of unexpected equity expansion is ignored, erroneous empirical results may be obtained. Finally, this paper points out the errors that may be caused by ignoring unexpected equity expansion in other empirical research scenarios.From a practical perspective, this paper provides a method for the financial industry to accurately interpret and use analysts' EPS forecast data.

Explicit incentives based on the salary contract and implicit incentives based on reputation and vocational development are the most common incentives for company executives. In recent years, due to the unexplainable paradox between low explicit executive compensation and rapid business growth, scholars have increasingly examined the role of implicit incentives in executive contracts, especially the reputation and vocational development incentives. In particular, due to the salary ceiling, executive compensation in state-owned enterprises (SOEs) and management fees are strictly controlled. However, executive positions in SOEs have great professional appeal, making it necessary to examine the role of compensation contracts in corporate governance and the special role of executive incentive mechanisms.
As an ancient Chinese adage goes, “the heart of a scholar and the idea that the world is for all.” Based on that notion, intellectuals often serve society by joining the bureaucracy. Serving in an SOE is another way to improve one's public status and gain social recognition.Since the beginning of China's reform and opening up, especially in the 1990s, some officials have given up their positions to go into business, creating a culture of pride in business. In the context of the current economic transformation and market prosperity, many people are no longer attached to the idea of “serving in a government department” and believe that they could gain a professional reputation and realize their value by holding a position in a company.
Based on the implicit-explicit contract incentive research paradigm, this paper investigates the effect of corporate reputation on executive compensation and its mechanism of influence. Using data from non-financial A-share listed firms from 2009 to 2017, the main conclusions of this study are as follows: (1) corporate social reputation is a valuable resource that can satisfy the reputation preferences of senior executives such that they are willing to accept lower explicit compensation. (2) Under the special institutional background of “ambition to public service” and “pride in business” in China, different types of corporate social prestige have different effects on executive compensation. (3) Using a DID model to investigate changes in executive compensation after companies enter and exit the ranks of prestigious companies, we find that companies with high social prestige pay low executive compensation. After propensity score matching, the regression results support our hypothesis. (4) The results also show that after working in a company with a good reputation, senior executives not only have a greater reputation incentive but also have greater future career interest. Compared with those working at general listed companies, such executives are more likely to be promoted.
The main contributions of this paper are as follows. First, this paper is motivated by the research perspective of personal reputation and examines the influence of personal reputation on executive motivation from the perspective of corporate reputation, expanding the literature on the influencing factors of explicit executive compensation. Second, based on the traditional concept of public service and preferences for obtaining professional reputation, we discuss two mechanisms of the influence of corporate social reputation on explicit executive compensation. Third, the results show that corporate social reputation can be used as compensation or as a substitute for monetary compensation for senior executives, enriching the literature on the internal substitution factors of executive compensation. In addition, in the context of compensation regulations, this study provides a better understanding of corporate reputation and executive compensation bargaining power, and provides a meaningful reference for companies to improve their governance efficiency and design effective compensation contracts.