Under the China's New Normal Economy, the structural change in economic growth and the accompanying reduction of inflation pressure create conditions for the central bank to implement more strict inflation control (i.e., the reduction of inflation target). From the view of the practice of monetary policy, if the economic situation changes, the policy authority will adjust the policy target accordingly, and then carry out policy announcements as well as policy operations to promote the economy to get closer to the target state. Then, as China's economy enters to the New Normal Economy, how will the change in the inflation target affect the macroeconomy？ And how can the policy authority improve the policy effectiveness by using inflation expectation management？ Also, what is the role played by policy credibility in the performance of inflation expectation management, such as the realization of policy objectives and the dynamic operations of economy during the policy target adjustment？ These questions all need to be answered to improve inflation expectation management under the China's New Normal Economy.
While there are many literatures investigating the effect of policy credibility, most of these studies are based on static/comparative static analysis or partial equilibrium analysis (e.g., analysis based on game theory), which makes it difficult to analyze the dynamic operations of economy as well as the related transmission mechanisms, and let alone discuss the dynamic structural changes in the process of policy target adjustment. The analysis of the latter requires the establishment of dynamic general equilibrium model including regime shifts, but there are very few studies on this aspect. In addition, existing literatures also don't pay enough attention to the role played by policy credibility during the adjustment of policy target or in the process of economic transition.
Therefore, in order to shed new light on the questions above, this paper analyzes the structural changes during the adjustment of inflation target and discusses the role played by policy credibility in these structural changes by building a regime-switching DSGE model. Besides, we further analyze the effect of policy credibility on macroeconomic fluctuations in the process of inflation target adjustment. The results show that, when the policy authority adjusts its targets, main economic and financial variables will finally reach their equilibrium level over the target period if market participants expect this policy adjustment to be credible; on the contrary, if policy authority lacks credibility, the divergence between the policy objective and market participants' expectation will cause the main economic variables to deviate from the target equilibrium level. Moreover, we also find that policy credibility not only helps to achieve policy targets, but also has a regulation effect to reduce macroeconomic fluctuations during the policy target adjustment, thereby reducing the cost of policy implementation. And this regulation effect of policy credibility on macroeconomic fluctuations is more obvious in the medium and long term. In addition, our estimation on the structural change under the China's New Normal Economy also indicates that China's economy seems to experience a regime switching from high inflation to low inflation in 2013. Based on these results, a direct policy implication that can be drawn from our analysis is that policy authority should attach great importance to the policy credibility in the adjustment of policy target, as the reduction in the divergence between market expectations and policy objectives will make it possible to achieve better policy effects at a lower cost in the process of policy implementation.
The main contributions of this paper can be concluded as follows: first, by introducing regime-switching into the traditional NK-DSGE model, this paper captures the dynamic structural changes in the process from high inflation regime to low inflation regime. Second, by comparing the case of anticipated structural change where agents' beliefs coincide with reality and the case where agents’ beliefs about the timing of the structural changes are different from the actual dates, this paper analyzes how policy credibility affects regime shifts and policy effectiveness in the process of inflation target adjustment. Third, this paper not only investigates the effect of policy credibility on the achievement of policy target, but also examines the effect of policy credibility on the cost of policy implementation, thus comprehensively analyzing the role played by policy credibility in the process of policy target adjustment. Last but not least, the analysis by using regime-switching DSGE model in this paper also enriches the related literatures and provides some new ideas as well as a new method for future studies on how policy credibility and expectation management work in the process of economic transition.

In recent years, China faces the challenges of reduced economic growth and an increased macroeconomic leverage ratio. Thus, boosting the economy while stabilizing the leverage ratio has become an important issue for monetary policy authorities. However, no consensus has been reached about whether an expansionary monetary policy can balance these factors, as the effects of the macroeconomic leverage ratio on the monetary policy have rarely been considered. The effects of the normal state (a relatively lower macroeconomic leverage ratio) and a high leverage state on the transmission of monetary policy may differ substantially. Thus, whether an expansionary monetary policy can simultaneously stabilize the economy and the macroeconomic leverage ratio depends on which state the economy is in.
We examine this issue by developing a dynamic general equilibrium model with a high-leverage environment and considering a firm's debt rollover. We find through a comprehensive model simulation that the effects of an expansionary monetary policy on stabilizing the economy and the macroeconomic leverage ratio in the normal state and a high-leverage state are very different. We test the model prediction using the state-dependent local projection (LP) method. The empirical results are consistent with the model prediction, suggesting that an expansionary monetary policy has very different effects in terms of stabilizing the economy and influencing the macroeconomic leverage ratio.
Our empirical analysis confirms that the effects of the monetary policy are substantially different in normal and high-leverage states. In the normal state, an expansionary monetary policy can stimulate the economy while keeping the macroeconomic leverage ratio relatively stable in times of economic downturn so that the two targets can be managed simultaneously. In a high-leverage state, however, the effects of an expansionary monetary policy on stimulating the economy are greatly reduced. This also increases the macroeconomic leverage ratio and therefore is not able to achieve debt stabilization, as most debtors must pay back their interest expenses to roll over their debt in the high-leverage state, which weakens the transmission of the expansionary monetary policy. Most of the liquidity injected by the expansionary monetary policy then goes into the financial market instead of the real economy, thus weakening the stimulating effects on the real economy.
Our findings have several policy implications. Our conclusions suggest that China should adopt a sound monetary policy to achieve the dual targets of stabilizing the economy and the macroeconomic leverage ratio. The monetary policy should remain modest and, unlike U.S., which entered a deleveraging phase after the 2008 global financial crisis, quantitative easing should not be applied. In the future, the authorities should also coordinate the fiscal policy and other macro policies to manage the dual targets of stabilizing the economy and the macroeconomic leverage ratio.
Our study makes two main contributions. First, we distinguish the normal state from the high-leverage state and reveal that the effects of the monetary policy are substantially different in these two states. The various impacts of the macroeconomic leverage ratio on the monetary policy have rarely been examined in the literature. Second, on the basis of our theoretical analysis, we test the model's prediction that the effects of monetary policy are substantially different in the different states using the LP method. Our empirical results provide comprehensive evidence that stabilizing the economy and the macroeconomic leverage ratio simultaneously is challenging under an expansionary monetary policy in the high-leverage state. Overall, our paper extends the literature and provides theoretical and empirical support for China's recent sound monetary policy stance. Our study also has policy implications in terms of improving the effectiveness of China's monetary policy.

The rapid development of China's economy since its reform and opening up has also brought many deep-seated structural problems. One such problem is overcapacity, which seriously reduces the efficiency of economic operation and poses a challenge to the long-term sustainable development of China's economy. This paper takes the large-scale foreign capital liberalization triggered by the revision of the Catalogue for the Guidance of Foreign Investment Industries by the Chinese government in 2002 as a quasi-natural experiment and uses a difference in differences (DID) method to explore the impact of foreign investment on the capacity utilization rate of domestic enterprises.
The main finding of this paper is that foreign capital opening improves the capacity utilization rate of domestic enterprises in the same industry. The mechanism test shows that production efficiency, export expansion, and foreign direct investment are important channels through which foreign capital opening affects domestic enterprises' capacity utilization rate. A heterogeneity analysis shows that foreign capital opening has a greater effect on the capacity utilization rate of private enterprises, general trade enterprises, enterprises with strong absorptive capacity, and enterprises in coastal areas, and that the regional institutional environment enhances the capacity utilization rate improvement effect of foreign capital opening. This paper also examines the relationship between foreign capital opening and the capacity utilization rate from the perspective of upstream and downstream forward and backward correlation and finds that in addition to the horizontal spillover effect of foreign investment in the industry, domestic enterprises also obtain positive forward flow from foreign investment in upstream and downstream industries. The effect of backward correlation and backward correlation has significantly improved its own capacity utilization rate. Finally, this paper examines the impact of the foreign investment opening policy on the overall capacity utilization rate of the manufacturing industry, and finds that foreign investment opening has significantly promoted the growth of the overall manufacturing capacity utilization rate through resource reallocation channels. Foreign investment opening also promotes the elimination of enterprises with backward production capacity, thereby improving the efficiency of resource reallocation and promoting the overall capacity utilization rate of the manufacturing industry.
This paper makes four contributions to the literature. First, from a research perspective, this paper not only examines the impact of FDI industry spillovers on the capacity utilization rate of domestic enterprises, but also analyzes it from the perspective of correlated industries, which makes up for the sin gle perspective from which the capacity utilization effect of foreign investment opening has been studied, thus enabling a more comprehensive evaluation of the impact of foreign investment opening on the manufacturing capacity utilization rate. Second, in terms of identification strategy, this paper takes the large-scale foreign capital liberalization caused by the revision of the Chinese government's 2002 Catalogue of Industries for Guiding Foreign Investment as a quasi-natural experiment and uses a DID method to conduct empirical research, which helps overcome the endogeneity of the model in the literature and allows more reliable research conclusions to be obtained. Third, this paper deeply examines the mechanism through which foreign capital opening affects the capacity utilization rate of domestic enterprises from multiple dimensions, allowing a deep understan ding of the internal relationship between foreign capital opening and the capacity utilization rate. Finally, this paper studies the impact of foreign investment opening policies on the overall capacity utilization rate of the manufacturing industry at the industry level and finds that foreign investment opening has significantly promoted the growth of the overall manufacturing capacity utilization rate through resource reallocation channels. Foreign investment opening promotes both the reallocation of market share from surviving companies with backward production capacity to companies with relatively advantageous production capacity and the elimination of backward production capacity companies, thereby improving the efficiency of resource reallocation and promoting the overall production capacity utilization rate of the manufacturing industry. This novel discovery has important policy implications for helping solve China's overcapacity dilemma from the perspective of foreign policy adjustment.

In recent years, house prices and real estate loans in China have risen sharply, and the volatility of real estate loans in China is mainly driven by the volatility of residential mortgages. Studying how the macro-prudential policy aimed at enhancing the stability of the whole financial system should deal with the rise of house prices and the related debt risk is of great significance for China to prevent and resolve major financial risks. Existing research does not consider the choice of and coordination issues between monetary policy with financial stability as the second goal and the macro-prudential policy to address house price fluctuations and related debt risk. To fill this gap, this article incorporates the monetary policy, macro-prudential policy targeting household sector loan-to-value (LTV) and macro-prudential policy targeting the capital adequacy of financial institutions in a unified analysis framework, analyzes the transmission mechanisms and policy effects of these three policies, and studies policy choice and coordination issues.
First, this article constructs a DSGE model containing heterogeneous households, heterogeneous vendors and financial institutions. The theoretical analysis shows that for patient households, only the monetary policy responding to expected house prices can directly curb their housing demand. For impatient households and financial institutions, both the monetary policy responding to expected house prices and the macro-prudential policy responding to expected house prices can curb the rise of house prices and credit expansion. Different policies have different scopes and different effects on financial stability and economic stability. A monetary policy responding to expected house prices can curb not only housing demand and credit supply but also consumer demand and aggregate output, while a counter-cyclical LTV policy and a counter-cyclical capital adequacy policy responding to expected house prices are more targeted in dealing with the financial stability issues arising from house price volatility.
Second, based on the quarterly macroeconomic data of China from 2000 to 2021, this article adopts a Bayesian approach to select the economic model with the best fitness. The results show that the policy portfolio of the economic model with the best fitness is a monetary policy responding to expected house prices combined with a macro-prudential policy of counter-cyclical LTV. The variance decomposition shows that the volatility of the main macroeconomic variables, such as aggregate output, aggregate consumption, aggregate investment and inflation, is mainly affected by monetary policy shock, while the volatility of the main macro-financial variables, such as loan size, household sector LTV, financial institution leverage ratio and macro leverage ratio, are mainly affected by shocks from house transaction cost, financial institution regulatory and household sector LTV. In addition, shocks from house transaction costs and monetary policy explain more than 95% of house price fluctuations.
Finally, this article explores the issue of policy choice and coordination using impulse-response analysis and welfare analysis. The impulse-response analysis reveals that a counter-cyclical LTV policy and a counter-cyclical capital adequacy policy are more effective in responding to expected house prices when facing a house transaction cost shock, while a monetary policy responding to expected house prices may hurt economic stability. Given a monetary policy shock, a monetary policy responding to expected house prices is more effective than a macro-prudential policy responding to expected house prices. In sum, both macro-prudential policies and a monetary policy that respond to expected house prices contribute to financial stability. The result of the welfare analysis suggests that when economic fluctuations originate from demand shocks, a fixed LTV policy combined with counter-cyclical capital adequacy policy and a monetary policy not responding to expected house prices perform best, while a fixed LTV policy combined with counter-cyclical capital adequacy and a monetary policy responding to expected house prices perform best during economic fluctuations that originate from supply shocks.
Our research has important policy implications for China's macroeconomic regulation. First, the regulation principle of houses being for living in and not for speculation should be strictly implemented to highlight the attributes of housing as a consumer good and weaken its attributes as an investment good. Second, it is necessary to analyze the transmission mechanism and policy effect of different macroeconomic policies, such as macro-prudential policies of counter-cyclical LTV and counter-cyclical capital adequacy and a monetary policy responding to expected house prices, and to strengthen the coordination and cooperation between various policies. Finally, to prevent and resolve major financial risks, it is necessary to accurately identify the sources of economic volatility and optimally combine different policies according to their characteristics and the sources of economic volatility.

The modern financial system still faces the problem of limited commitment to a certain extent, as co mmercial banks still need enterprises to reduce their loan risk by providing guaranteed future income (i.e., safe assets). Meanwhile, land assets not only have the value of being difficult to replace but are also quasi-safe assets. Therefore, the land mortgage financing mode provides a way for the physical sector to win the trust of commercial banks at a low opportunity cost, which provides an important boost to the growth of the economic aggregate in a specific stage. However, it also binds the credit of the whole society (mainly reflected in the deposit money supply) to a single asset: land. When the land asset price bubble bursts, it will severely damage the financial credit of the whole society. In fact, the deep correlation between land asset prices and the financial credit is one of the important reasons for the creation of the land asset bubble: this is the systemic financial risk implied by the price fluctuation of land assets.
Studying the relationship between land asset prices and the liquidity supply is helpful to understand not only the collateral and investment demand information reflected in the asset price that must be considered in the central bank's liquidity investment process but also the sources of the systemic financial risks related to land assets and the solutions to these risks. The research on this topic can be traced back to the positive feedback mechanism between land asset prices and the liquidity supply discussed by Kiyotaki and Moore (1997). To better understand the financial risk of the asset bubble caused by land mortgage leverage, this paper also introduces the mortgage asset price analysis represented by Geanakoplos (2010, 2014). In addition, as China's banking system is the center of its financial system, this paper discusses the ability of the base money supply led by the central bank to eliminate the land asset price bubble by restricting mortgage leverage and the impact of credit asset securitization on this ability.
To address these issues, this paper establishes a theoretical model framework, the core setting of which is that land assets have the dual attributes of productive capital and quasi-safe assets, while bank loans are subject to the triple constraints of loan demand, mortgage assets and credit lines. The conclusions of this paper are as follows. First, when land asset prices are lower than a critical value determined by the base money supply, they are positively correlated with the deposit money liquidity supply. This is consistent with the enterprise leverage cycle because land asset prices not only affect the collateral value of enterprises but also reflect the social investment demand to a certain extent. Second, the correlation between land asset prices and the deposit money liquidity supply is based on the mortgage mechanism, which makes its change have the characteristics of expected self-realization. Third, the base money supply can guide the change in land asset prices by affecting the bank credit line and then by limiting the role of leverage. The premise is that the central bank should be able to grasp the reasons for the exogenous change in land asset prices. Finally, credit asset sec uritization will not only improve the correlation between the deposit money supply and land price but also weaken the ability of the base money supply to guide the land price. Some important conclusions are verified by characteristic fact analysis.
This paper develops the theory of liquidity economics by using the literature as a basis to further the analysis of “the significance of the dual attributes of land assets and the triple constraints of bank loans,” “the constraints of base money supply on land mortgage leverage” and “the interference of credit asset securitization on the effect of monetary policy.” For the convenience of discussion, the total amount of land assets in this paper is fixed. Future research can include the effects of land finance (related to land transfer and infrastructure construction) and real estate investment on the total amount of land assets.
This paper has three implications for policy. First, it is helpful to understand how the effect of monetary policy is affected by land asset prices. Specifically, this paper provides an explanation for an important practical phenomenon: in the balance sheet downward range where land assets are relatively low, M2 growth is more synchronized with the change in land asset prices than the growth of the base money supply. Second, it is helpful to understand the source of systemic financial risk, especially to analyze why changes in land asset prices show the characteristics of expected self-realization. Third, the paper discusses some ideas to resolve systemic financial risks. Specifically, it analyzes the ability of traditional monetary policy to eliminate the land asset price bubble and its constraints, as well as the constraints of credit asset securitization (representing land derivative financial assets in a broad sense) on this ability, which is of great significance for understanding China's policy of restricting real estate mortgage leverage since 2020.

At present, China's economic development faces the threefold pressure of demand contraction, supply shock, and expected recession. The liquidity risk, delivery risk, debt default risk, and credit risk caused by ruptures in the capital chain of real estate companies may not only hinder economic growth but also induce systemic financial risks. Therefore, to control financial risks and ensure stable economic growth, it is important to accurately measure real estate companies' financial risk and systemically identify companies in need of supervision or rescue. This is also in line with the goal of “promoting a virtuous circle and healthy development of the real estate industry” set out at the 2021 Central Economic Work Conference.
This paper uses data on listed real estate companies in China's A-share market. First, based on the SIM single-index quantile regression method, a new systemic risk indicator SIM-CoVaR is proposed, and the systemic risk of listed real estate companies is measured. Next, by combining it with the forward-looking TENET model, we construct dynamically evolving real estate market tail risk networks and reveal the time-varying spillover effect of systemic risk in the real estate market through the dynamic network topology. Second, we calculate the systemic risk contribution index and exposure index, and we capture systemically important companies with strong tail risk correlation through the index ranking. Furthermore, through the block model method, we explore the clustering of systemic risk spillover effects and the contagion path between blocks. Finally, we investigate the influence of the overall network structure on systemic risk spillovers in the real estate market.
The empirical results show the following. (1) There is an extensive systemic risk co-movement and spillover effects across real estate companies, and the tail risk network presents heterogeneity. A diversified business structure strengthens the diversified relationship between real estate companies, broadens the channels for dispersing risks, and further reduces the risk spillover level of the overall real estate market. (2) The risk spillover intensity between real estate companies during the 2008 financial crisis was greater than that during the 2015 domestic stock market crash. This difference is affected by the external economy, related policy, and internal linkage, and the real estate industry has become an amplifier of systemic risk spillovers during economic recessions. (3) The systemic risk spillover effect has significant clustering characteristics in the tail risk network. The tail risk network can be divided into four blocks with different functions. In the process of systemic risk transmission, the roles and functions of each block show clear time-varying characteristics. (4) From the perspective of the impact mechanism of spillover effects, the reduction of network aggregation, network efficiency, and network matching can significantly reduce systemic risk spillover. In addition, during periods of economic prosperity and steady development, the real estate sector tends to hide potential risks, and the spillover effects of systemic risks are weakened.
The study makes the following contributions. First, TENET incorporates more companies into the regression through the SIM selection technology and captures the nonlinear risk spillover relationships between real estate companies in a complex higher-dimensional environment, thereby overcoming the limitations of existing models such as high-dimensional interconnection and multivariate variable selection. Second, this paper uses the block model from social network theory to investigate the aggregation, trigger mechanism, and propagation path of risk spillover in the real estate market. Third, this paper discusses the formation mechanism of real estate market risks from the micro-level of companies, which is in line with the actual needs of real estate companies facing a capital dilemma and deeper supply-side regulation in this real estate cycle. The findings provide a useful reference for multi-level real estate market supervision and regulation, and for promoting the healthy development of the real estate industry.

Sino-US trade friction has created a major challenge to China's efforts to ensure high-level opening-up and maintain production and supply chains. Previous studies have discussed the impact of trade frictions on consumption, employment, economic welfare, and industrial output. This paper examines financial market risks in China and the U.S. against the backdrop of recent trade frictions, and in particular the impact of the expected exchange rate change on stock market returns. An empirical spatial auto-regressive (SAR) model is derived from a static general equilibrium model, in which the production network measured by the input-output table is used as the spatial weight matrix, which is then given economic meaning. Based on the SAR model, the direct impact of exchange rate changes on the stock market and the indirect impact through the production network are estimated. We further calculate the direct and indirect impacts on various industries and assess the average impacts on industries subject to tariff sanctions versus those not subject to sanctions.
The main findings are summarized as follows. First, during the trade friction period, the expected exchange rate change has significant negative impact on stock market returns in China and the United States. Indicating that the correlation between the stock market and the foreign exchange market increased during the friction period. Second, expected bilateral exchange rate changes between China and the United States not only directly affect the stock returns of various industries but also affect a certain proportion of the network because of the production links between industries. The proportion of network effects is 50% in the Chinese sample and 37% in the American sample, which reflects the stronger links between Chinese industries. Third, on average, both industries affected by tariff sanctions and those not affected are influenced by exchange rate changes; the latter is more affected through the network.
The fimdings have important policy implications. First, trade frictions have mutually damaging consequences. Therefore, we should strengthen communication and cooperation between countries. Second, the linkage between the foreign exchange market and the stock market is enhanced during the period of trade friction. Therefore, special attention should be paid to high-level risk and cross-market contagion in periods of economic and financial turmoil. Third, the connection between the entity units (such as a production connection) can transmit the impact of financial shock (such as the impact of exchange rates on the stock market). Therefore, we should take into account the factors at the entity level when attempting to prevent and resolve financial risks. Finally, as an economic power, China should accelerate the improvement of the industrial chain, promote economic internal circulation, and enhance its ability to resist external shocks.
This study contributes to the literature in several ways.First, this paper examines the impact of Sino-US trade frictions on the financial market, studies the financial market risk magnified by inter-industry production linkages and gives some new insight from the perspective of industrial linkages. Second, most studies of trade frictions focus on their impact on entity-level activities. From the perspective of the production network, this paper compares and analyzes the changes in the financial markets of China and the United States in a period of trade frictions, focusing on the impact of exchange rate changes on stock market returns. Finally, this paper uses a new method to estimate and decompose the impact of exchange rate changes, and it obtains several new findings. Using the SAR model, with the production network as the spatial weight matrix, this paper quantitatively evaluates the direct impact of exchange rate changes on the stock market and the network impact caused by inter-industry production links.

Since the Reform and Opening-up, China has experienced rapid and extensive urbanization. Large scale labor agglomeration in cities has brought about the renewal of urban housing and amenities, which has not only reshaped cities' function and form but also led to the emergence of new tensions within cities, especially between the demand for high-skilled labor and the presence of low-skilled rural migrants.
Although rising housing costs have weakened wage premiums and reduced the willingness of low-skilled labor to stay in big cities, this does not fully explain heterogeneous labor mobility. It is therefore necessary to investigate urban amenities. The welfare associated with urban life is key to determining labor migration, but welfare does not always increase with wage growth. In particular, rising housing costs and improved amenities also have significant impact. Therefore, it is necessary to evaluate heterogeneous labor's living conditions from the perspective of welfare. However, it is not easy to complete this research task because both housing costs and amenities are endogenous to urban employment, and heterogeneous labor has differentiated preferences for housing and amenities.
In this paper, we first establish a spatial equilibrium model with endogenous housing and amenities and calibrate the model's parameters by constructing the Bartik instruments and using population survey data. Then, we set up three types of counterfactual scenarios for individual changes and joint changes in housing costs and amenities. By applying the counterfactual tests, we provide dynamic descriptions of the flow and allocation of high-skilled labor and low-skilled labor among cities, and we evaluate the resulting welfare effects according to the welfare level and welfare gap. Our study thus shows how to optimize the spatial allocation of heterogeneous labor and improve the quality of human-city integration during the urbanization process in China.
The empirical results yield several conclusions. In terms of micro mechanisms, the agglomeration of heterogeneous labor in cities drives a significant increase in housing costs, but the improvement of urban amenities is mainly due to the expansion of high-skilled labor, and the contribution of low-skilled labor growth is not significant. At the same time, rising housing costs and improved amenities have two completely opposite effects on labor mobility, i.e., dispersion and agglomeration. Rising housing costs induce both high-skilled and low-skilled labor to escape from big cities, and the scale distribution of cities is characterized by flattening. However, improved amenities induce a trend of spatial agglomeration in heterogeneous labor, resulting in the polarization of urban scale towards large cities.
In terms of welfare effects, rising housing costs reduce the potential for welfare improvement due to a wage premium but alleviate a widening welfare gap, as the housing costs of high-skilled labor are higher than those of low-skilled labor. Nonetheless, rising housing costs cannot be regarded as Pareto-optimized for improving welfare inequality. On the contrary, higher amenities promote improved welfare in heterogeneous labor but exacerbate welfare inequality because of low-skilled labor's lower preference for amenities. This conclusion does not imply a need to limit the supply of amenities, but a need to focus on improving low-skilled labor's preference for amenities. In addition, city size has an amplifying effect on these welfare effects.
Our study makes three contributions to the literature. First, because we note that local governments rely on fiscal revenue to provide amenities, we treat the supply of amenities as a cost dimension. Combined with the non-exclusive nature of amenities consumption, this extension provides a more comprehensive perspective for understanding the social phenomenon of heterogeneous labor, especially low-skilled labor, flocking to larger cities in China with higher housing costs. Second, we examine heterogeneous labor's differences in preferences for housing and amenities, and we assess their welfare levels and welfare gaps. As an important supplement to the wage-focused perspective, this expansion provides an objective basis for analyzing the living conditions of heterogeneous labor. Third, improving the quality of human-city integration is essential for promoting people-oriented urbanization. In this regard, China's 14^th Five-Year Plan emphasized improving the housing market system and housing security system, and it encouraged local governments to provide more public services and amenities. This paper enriches the research on human-city integration from the perspective of housing and amenities and provides policy implications for improving the spatial allocation and welfare of heterogeneous labor.

China put forward the Belt & Road Initiative in 2013, which not only established a new approach to cooperation with the international community but also created new opportunities for China to open up and promote economic transformation. To realize the Belt & Road Initiative, it is important to improve domestic factor allocation efficiency and to accelerate “dual circulation” development. The research question is whether the Belt & Road Initiative can improve factor allocation efficiency. Previous studies have evaluated the impact of the Belt & Road Initiative from different angles, such as opening up, China's international reputation, financial constraints, and R&D, among others. However, there has been a lack of empirical analysis from the perspective of factor allocation efficiency.
Referring to the framework of Hsieh and Klenow(2009), this paper relies on data from listed industrial enterprises in China from 2010 to 2018 and uses the difference-in-differences method to study the impact of the Belt & Road Initiative on factor allocation efficiency. The estimation results show that the Belt & Road Initiative significantly improved the labor allocation efficiency of enterprises in key provinces but had no significant impact on capital allocation efficiency. The results of the extended analyses show that the Belt & Road Initiative improved labor allocation efficiency mainly by increasing the openness of key provinces, and especially by promoting their FDI and OFDI. The results of further studies confirm the adage that “labor goes high and capital flows low”: in the key provinces, enterprises with higher labor productivity have more labor factors and their labor allocation efficiency is improved. However, as the market's ability to allocate resources has not been fully realized, enterprises with higher capital productivity do not have more capital factors, and capital allocation efficiency thus has no significant improvement effect.
Improving factor allocation efficiency is vital for resolving the deep-seated problems of the Chinese economy, and the Belt & Road Initiative represents a major opportunity to do so. Based on the results of this study, we propose four policy suggestions. The first is to reinforce the positive role of the Belt & Road Initiative on the Chinese economy. While engaging in production capacity cooperation with partner countries along the Belt & Road, it is also necessary to improve domestic resource allocation efficiency and establish a new development pattern. Second, relevant regions should participate in the Belt & Road Initiative according to their own comparative advantages and should resort to globalization to resolve the difficulties and challenges of economic development. Third, relevant regions and industries should remove institutional barriers and allow the market to dictate resource allocation. It is necessary to let the market and globalization jointly promote efficient resource allocation. Fourth, the government should accelerate capital market reform, eliminate ownership and scale discrimination, facilitate enterprises' financing channels, and fulfill the potential of the Belt & Road Initiative for improving resource allocation efficiency.

The economic connections between enterprises result in tightly linked networks. Therefore, a corporation's dishonesty risk is not independent, but has a contagion effect in the surrounding corporate network. A credit guarantee network is an important medium for credit risk contagion. Extensive credit guarantee networks have been established among domestic enterprises. When an enterprise experiences dishonesty risk, the risk spreads along the guarantee network to the surrounding enterprises, which is a complex network dynamics process. However, traditional economic tools cannot effectively analyze this process; risk monitoring and prevention can be more effective through the application of big data and artificial intelligence.
Traditional bond credit research, whether it uses a structured or parsimonious model, holds that the credit spread of a corporation depends on its own business conditions, ignoring contagion effects among corporate networks. There have been few studies of the impact of dishonesty contagion on bond credit risk, and the following questions remain unanswered: Are bonds that have not incurred dishonesty risk affected by dishonesty risk contagion from other entities？ If a dishonesty risk contagion effect exists, does it have the same impact on enterprises with different ownership structures？
The guarantee network is a credit lending network among enterprises, and it also represents the contagion path of the dishonesty risk. Dishonesty risk, as a broad credit risk, has a contagion effect in the guarantee network, affecting the pricing of credit bonds. Three types of dishonesty risk contagion effects are identified in this research: a direct effect, a local effect, and a global diffusion effect.
Based on 433000 pieces of guarantee data from non-financial enterprises, this paper constructs a corporate credit guarantee network month by month, including 5,578 bond issuers. It also uses data of defaulters disclosed by the Supreme People’s Court and bond default data to identify the dishonest behaviors of enterprises.
The empirical results show that the three types of contagion effects have low correlations with each other, and thus they illustrate the effects from different perspectives. Contagion effects will cause the credit spreads of bond issuers to increase significantly. For direct and local contagion effects, the contagion effect of the guarantor has a greater impact on the bond credit spread than that of the guarantee, as the credit qualification of the guarantee is worse than that of the guarantor, and it is more susceptible to direct risk contagion. From the perspective of enterprise ownership, state-owned enterprise bonds are more sensitive to the global diffusion effect, and private enterprise bonds are more responsive to direct contagion effects and local contagion effects. In addition, the dishonesty risk contagion effect will reduce enterprises' refinancing ability. The local contagion effect of the dishonesty risk may cause the issuers' borrowing and financing amounts to decrease in the following year, and the global diffusion effect will lower the bond financing amount in the following year.
This paper makes three major contributions to the literature. (1) In terms of research perspective, it reveals the impact of dishonesty contagion on bond credit spreads and supplements the research on credit bond pricing. (2) In terms of research objects, previous research on network risk contagion mainly focused on local contagion effects rather than global diffusion effects. This paper distinguishes three types of contagion effects (direct contagion, local contagion, and global diffusion) and comprehensively reveals the transmission mechanism from the local to the whole, supplementing the research on network risk diffusion. (3) In terms of research methods, most research on network risk contagion examines the correlation of credit risk and network structure to test the network contagion characteristics of risk, ignoring the network heterogeneity of risk diffusion. When constructing risk contagion variables, this paper takes into account heterogeneous factors such as network structure characteristics, the location of both enterprises, and the risk sources in the network, supplementing the research on network risk.

In recent years, China's capital markets have undergone extensive marketization reform. In particular, the reform of the mergers and acquisitions (M&A) market has received considerable attention from academics and practitioners. The material asset restructuring of listed companies in China's M&A market is a complicated and cumbersome process. The critical document guiding listed companies' material asset restructurings is “Measures for Administration of Material Asset Restructurings of Listed Companies” (hereafter referred to as “Restructuring Measures”).
In this paper, we examine the effectiveness of the China Securities Regulatory Commission(CSRC) approval for the material asset restructurings of listed companies. The impact of this approval system of material asset restructurings remains controversial. Chinese restructuring market still has many problems, and it therefore needs supervision and guidance from the CSRC. First, the irrational investment of some listed companies increases the risk of restructuring and financial loss. Second, some majority shareholders may use M&A restructuring to infringe on the interests of small and medium shareholders. Third, Chinese investors have insufficient access to non-financial information reflecting the intrinsic value of enterprises, which makes it easy for listed companies to raise their stock prices through restructurings.However, the approval policy also has potential adverse effects. The policy increases the uncertainty of M&A transactions and reduces the efficiency of transactions. It is difficult to judge the fairness of asset pricing in regulatory practice.
Direct comparisons of differences and whether they are subject to approval policy events may cause endogeneity problems. Transaction proposals that need to be submitted to the CSRC for approval are typically more significant, have higher underlying revenues, or are more likely to impact firms. Direct comparisons of the economic consequences of the two can have endogenous effects because of differences in characteristics. An amendment to the Restructuring Measures in 2014 provides a suitable control group for material asset restructurings. Prior to this amendment, all material asset restructurings had to be submitted to the CSRC for approval. In contrast, after this amendment, material asset restructurings using cash payments no longer had to be submitted to the CSRC for approval. Restructurings involving other payment methods still required CSRC approval. This event facilitates the identification of the causal relationship between the approval policy and the performance of material asset restructurings.
Using the 2014 amendment of the Restructuring Measures as a quasi-natural experiment, we use Chinese A-share listed companies that engaged in M&A activities from 2007 to 2018 to evaluate the approval policy's role. The data are obtained from the CSMAR database. We find that the performance of material asset restructurings that no longer require approval is significantly lower after the relaxation of approval requirements compared with the control group. This finding is more significant for firms with higher agency costs and lower growth. In contrast, the relaxation of approval requirements helps higher-growth firms increase their value through restructuring. Material asset restructurings that no longer require approval after the relaxation are more likely to be cross-provincial and cross-country, but their performance is significantly lower.
As far as we know, this paper is the first empirical study to demonstrate the effect of approval policies on material asset restructurings. Previous studies on the regulation of China's M&A market have either been qualitative or focused on other regulatory policies such as comment letters. This paper overcomes the endogeneity problem to a certain extent by using a difference-in-difference empirical design. This paper demonstrates the necessity of the marketization of China's M&A market and provides policy suggestions for category review to help balance the market and regulations.