Financial Shocks,Deleveraging and Macroeconomic Fluctuations in China

To deleverage is one of the major tasks for the supply-side structural reform in China,and to steadily deleverage in order is the key to fending offand defusing financial risks.This paper uses the economic statistics of China around 2016 to depict the“expansion-contraction”fluctuations with Chinese macroeconomy during the deleveraging.In this realistic context,it constructs a financial business cycle model based on the financial accelerator theory and attempts to use default cost changes to introduce financial shocks and understand China’s macroeconomic fluctuations in the deleveraging context in the perspective of unanticipated and anticipated shocks.Results of the numerical model simulation show that before and after the deleveraging,the fluctuations of credit,leverage ratio,credit spread and other major macroeconomic variables originate not only from the changes with unanticipated default cost.Anticipated changes with default cost can similarly explain the“expansion-contraction”macroeconomic fluctuations in recent years and offer a new perspective into the fluctuations during deleveraging.Accordingly,government,when practicing deleveraging policies,is advised to take into full consideration not only the actual changes with default cost,but also anticipated factors of financial institutions.

Research on the influence of equity pledge on stock price crash risk:based on financial shock of 2015 stock market crisis

The 2015 Chinese stock market crisis triggered liquidation because of equity pledge so that the leverage effect of the small probability event with severe results got intensive attention from investors.It is found that the effects of equity pledge on stock price crash risk reversed significantly before and after the 2015 stock market crisis.In the mechanism analysis,we further find that the equity pledge influenced the stock price crash risk by longer suspension and greater price fluctuation.The shareholding ratio of institutional investors and information environment also had a significant moderating effect on the influence of equity pledge on stock price crash risk.Alternative interpretation tests excluded the tunnel effect and pressure effect by shareholders and incentive effect by management.This study by analysing empirical data provides evidence on the change of investors’risk recognition,which is caused by financial shock,in the Chinese capital market.

Capital Account Liberalization and International Corporate Bond Issuance:Transaction-level Evidence from China

This paper provides transaction-level evidence about the impact of capital account liberalization on firms'bond issuance in the international financial market.Using bond issuance data for firms headquartered in China between 2014 and 2018,we showed that domestic private firms issued more bonds abroad than foreign-invested enterprises afier restrictions were largely relaxed,controlling for possible confounding shocks such as monetary policy,local credit market shocks,US interest rate,carry trade,and global uncertainty shocks measured by the Chicago Board Option Exchange's Volatility Index.We found that domestic firms did not increase the overall volume of bond issuance but just had a higher portion of international bond issuance.We also found that domestic firms with higher tangible asset ratios tended to issue more bonds abroad.Our results suggest that targeted liberalization policy could effectively stimulate firms to issue bonds abroad.Policymakers need to monitor closely firms that issue more bonds abroad and thus have greater exposure to global shocks,incorporate these financial risks into policy design,and safeguard financial stability more effectively.