Finance In China Research Articles

BANKING AND BANKING REFORMS IN CHINA IN A MODEL OF COSTLY STATE VERIFICATION

AbstractWe present a macro view of China's financial system where a monopolistic banking sector coexists endogenously with bonds and private loans. In equilibrium smaller firms raise finance from private lending, larger firms through bank loans, and the largest by issuing bonds. The model predicts that expanding credit supply increases bank loans but reduces bond finance and private lending, in absolute terms and relative to total credit. In addition, removing the interest rate ceiling on bank lending—a recent reform in China—induces larger loans and higher lending rates, lowering the share of bank loans in total credit. Empirical evidence is presented to support these predictions.

Interpreter Intervention: Balancing Objectivity and Subjectivity in Business Negotiations

In the era of economic globalization, interactions and collaborations between China and the global economy have significantly intensified. This trend has led to increased foreign investment in China and a growing number of Chinese enterprises expanding their operations internationally. Successful business negotiations are crucial for these endeavors, yet they face challenges such as linguistic barriers, cultural differences, and divergent thought processes. In such high-stakes scenarios, an experienced interpreter serves as a vital communication link between Chinese and international parties. This paper aims to examine the role of dialogue interpretation in business negotiations and to investigate how interpreters can effectively leverage their subjective judgment alongside strategic translation techniques. By doing so, interpreters can facilitate smoother negotiations and contribute to mutually beneficial outcomes. The study will explore specific strategies that enable interpreters to bridge cultural and linguistic gaps, thereby promoting successful and harmonious negotiations.

The Mediating Effect of Information Technology Usage on the Relationship of Internal Audit Processes and Internal Auditor Competence towards Internal Audit Effectiveness: Evidence from the Chinese Financial Sector

The effectiveness of internal auditing is determined by various factors, such as the independence of the internal audit function, auditors’ competence, effective audit planning, efficient audit processes, and support from senior management. The digitalization and informatization of modern enterprises have transformed the way companies are managed and have similarly impacted internal audit practices. Informatization not only alters traditional internal audit processes but also changes auditors’ ways of working and thinking. From the perspective of resource-based theory, the effective allocation and full utilization of human, technological and organizational resources can enhance the effectiveness of internal audit. Therefore, the purpose of this study is to examine the impact of internal audit processes (IAP) and internal auditor competence (IAC) on internal audit effectiveness (IAE), as well as the mediating effect of information technology usage (ITU) on the relationship between IAP and IAC and IAE. To test the proposed hypotheses, a questionnaire survey was conducted within Chinese financial enterprises, yielding a total of 133 valid responses. Statistical data analysis was performed using the partial least squares structural equation modelling (SEM-PLS) method. The results indicate that both IAP and IAC have a significant impact on IAE and ITU. Furthermore, ITU serves as a mediating factor, enhancing the positive contributions of IAP and IAC to IAE.

Profit or Power: Determinants of Chinese Financing to the Developing World

ABSTRACT Since the launch of its ‘going out’ strategy in 1999, China has become the largest bilateral sovereign lender to the developing world. This article argues that, since Xi Jinping came to power in 2012, China has used overseas financing to developing countries to consolidate a strategical wedge between certain borrowing countries and the United States, China’s main geopolitical rival. Using a Heckman two-stage estimation, this article shows how China, albeit providing financing to a wide array of developing nations, lends more and on more favourable terms to countries that are farther away from the United States in terms of foreign policy preferences. Statistical analyses on a sample of 148 developing countries from 2000 to 2017 provide support for the hypotheses.

Opting Out: Botswana’s Limited Negotiating Power on Chinese Finance

Since 2013, a downward trend in lending by China’s state-owned policy banks, which are mandated to help finance overseas projects executed by Chinese companies, has been observed in Africa. This article reveals that in Botswana this development started markedly earlier. The country has not borrowed from Chinese policy banks since 2006. Furthermore, overall Chinese lending to Botswana peaked in 2009 and came to a complete halt thereafter. Botswana has nonetheless continued to benefit from grants as well as debt cancellation from China. This shift from borrowing to an exclusive reliance on aid seems counterintuitive for an upper middle-income country with a relatively strong credit rating like Botswana. However, the paper shows that the downgrading of Botswana’s economic co-operation with China came about as a result of the principle of maximisation of national benefit that Botswana’s policy elites uphold in their interactions with foreign lenders, including China. The paper contributes to the literature on African agency as a key variable shaping Africa–China relations but, crucially, also highlights the limitations thereof. Botswana was able to shift to other lenders when it became dissatisfied with the Chinese loan offering. However, it could not get China to change its offering because of structural incompatibilities between Botswana’s demands and China’s approach to foreign lending. The paper also offers a study of Botswana–China economic relations, which have received limited scholarly attention thus far.

Research on Problems and Solutions of Quantitative Investment in the Chinese Market

Quantitative investment has gradually become increasingly important in the Chinese finance market in recent decades. It improves the efficiency of investment, reduces the risk of investment, enhances the liquidity of some market assets and provides new opportunities to accumulate wealth for investors. As a new investment method, it raises some problems which lead to the turmoil of the market when it keeps developing and gaining traction. This paper will review the current situation of quantitative investment in the Chinese market from its development history and the sizes of funds. This study shows that there are mainly four problems existing in the application of quantitative investment in China. Listed below are problems. The evident government intervention in the market has a negative impact on the fitting effectiveness of quantitative models. Some kinds of assets and commodities face poor liquidity and for them, quantitative investment strategies can hardly be conducted accurately. The accuracy of quantitative analysis can be unreliable for the financial data is sometimes incomplete and unreliable in the Chinese market. The high-frequency trading affects the stability of the whole market because of lack of market supervision. This paper also puts forward relevant countermeasures and suggestions according to these problems. This study has great significance to the healthy development of quantitative investment in the Chinese market.

China's Foreign Investment Law and TRIMs Agreement: Conflicts, Amendments, and Applications

This article explores the developmental trajectory of China's Foreign Investment Law and its consistency issues with the WTO TRIMs Agreement. Covering four developmental stages from 1979 to 2020, it provides a detailed account of the evolution and amendments of China's legal framework on foreign investment. The article identifies inconsistencies in national treatment, elimination of quantitative restrictions, and transparency principles, analyzing adjustments and revisions made across these stages to align with international trade environments and WTO requirements. Despite significant progress, the article highlights areas for further improvement, such as the implementation of national treatment principles and resolution of transparency issues.

The Impact of Digital RMB Promotion on China's Corporate Financial System and Policy Recommendations

With the deep development of the digital economy era, digital RMB, as an important form of central bank digital currency, plays an increasingly crucial role in China's financial system. It not only has all the functions of traditional currencies, but also shows unique advantages in enhancing payment efficiency, reducing transaction costs, and improving financial regulatory capabilities. This study conducted an in-depth analysis of the impact of the promotion of the digital RMB on China's corporate financial system by visiting and researching a number of enterprises and collecting financial data over a five-year period. The study finds that the promotion of digital RMB has facilitated the convenience of inter-company payments and settlements, enhanced the traceability of financial data, and positively impacted the enhancement of corporate credit availability and financial service innovation. However, there are also challenges such as increased costs for enterprises to adapt to the new system and risks of digital currency custody. Based on this, this paper constructs a multi-level analytical framework to systematically sort out the mechanisms of the impact of digital RMB on the corporate financial system, and puts forward a series of policy recommendations accordingly. These recommendations involve strengthening the construction of corporate digital infrastructure, coordinating the interface between digital RMB and existing financial regulatory policies, and enhancing corporate digital currency knowledge training. This study aims to provide theoretical support and empirical references for policy formulation and financial decision-making by government departments, financial regulators, and enterprises in the digital currency era.

China's Foreign Investment Law and TRIMs Agreement: Conflicts, Amendments, and Applications

This article explores the developmental trajectory of China's Foreign Investment Law and its consistency issues with the WTO TRIMs Agreement. Covering four developmental stages from 1979 to 2020, it provides a detailed account of the evolution and amendments of China's legal framework on foreign investment. The article identifies inconsistencies in national treatment, elimination of quantitative restrictions, and transparency principles, analyzing adjustments and revisions made across these stages to align with international trade environments and WTO requirements. Despite significant progress, the article highlights areas for further improvement, such as the implementation of national treatment principles and resolution of transparency issues.

Research on the Role of Platform Economy in Credit for Small and Micro Enterprises - A Case Study of Alibaba

In the financial market, the financing needs of the micro-economy are concentrated at the long tail, and its development has always been a focus of social attention. In recent years, China has made significant efforts to address the financing challenges faced by small and micro enterprises. Despite these efforts, the financial support allocated to these enterprises remains disproportionate to their economic contributions. Unlike large and medium-sized enterprises, small and micro enterprises (SMEs) still struggle to obtain adequate financial resources, highlighting the incomplete coverage of the current Chinese financial system. As a result, these enterprises continue to encounter difficulties in securing necessary funding. Fintech can help these enterprises choose financing platforms and methods that match their development, enrich their financing channels, improve the loan issuance efficiency of financial institutions, precisely support their development, and ensure that the interests of stakeholders are realized. The report from the 20th National Congress emphasized the importance of establishing a supportive environment for the advancement of technology-driven SMEs. It also advocated for fostering the growth of specialized and innovative companies. This initiative sends a clear signal encouraging SMEs to innovate independently, which will undoubtedly have an important and far-reaching positive impact. However, SMEs are financially fragile, with prominent contradictions between their financing needs and the financial supply side. The integration of finance and technology has changed the operational mechanism of the financial industry. Fintech companies, through the application of emerging technologies, have expanded their business scope to long-tail small and micro clients, bringing new platforms for financing to these enterprises. This paper studies the case of Alibaba’s “Digital Hybrid Trade Show” initiative to further explore how fintech can be more effectively applied to the financing of SMEs, thereby aiding their stable and healthy development.

Direct Investment of Foreign Capital in China and its Future Development

Since the reform and opening up, foreign direct investment in China has developed rapidly. In the past decade, more and more regions in China have been implementing policies to introduce foreign investment. Foreign investment in China is mainly in the form of direct investment, which has had multiple impacts on China's economic development. It can be said that it is a double-edged sword, bringing both opportunities and huge challenges to China. We should adopt the correct way to utilize FDI and maximize its positive role. This article provides a simple and concise analysis of the basic situation of foreign investment research in China.

ESG Performance of Chinese Commercial Banks

As a core component of China’s financial system, the banking industry is crucial for economic development. As a leading institution in the Chinese financial sector, commercial banks can actively promote the ESG development of Chinese enterprises by leveraging their ESG performance. This study selected the top three commercial banks in China’s ESG rating rankings, including the Industrial and Commercial Bank of China, China Construction Bank, and Postal Savings Bank of China, to conduct a detailed analysis of their published ESG reports and social responsibility reports. The purpose is to extract the practical experience of these banks in ESG governance and provide a reference for other banks in the same industry.

Research on the Process of RMB Internationalization under the Belt and Road Initiative

The internationalization of the RMB is of great significance to the further development of China's economy, the reform of China's financial system, and the improvement of the status of the RMB in the international monetary system. The "One Belt, One Road" is a global development initiative proposed by Chinese President Xi Jinping in 2013. The countries along the route are China important strategic direction of opening up to the outside world. Through the "One Belt, One Road" initiative, strengthening trade exchanges and financial cooperation between China and neighboring regions will help China's economic prosperity and development, and this will aslo support efforts to improve the RMB's standing within the global monetary system.The internationalization of the RMB is an important manifestation of the financial integration of Chinese capital under the "One Belt, One Road"initiative and an important support for promoting the construction of the "One Belt, One Road" initiative. Strengthening the research on the process of RMB internationalization under the "One Belt, One Road"initiative has important practical and strategic significance. This article mainly combines the influencing factors of RMB internationalization, summarizes the results of RMB internationalization under the "One Belt, One Road" initiative, and provides prospects for RMB internationalization.

Chinese Financing and Domestic Politics in Sri Lanka—Parallel Evolution across Mid-20th vs 21st Century Episodes of Bilateral Interactions

Abstract: This article studies the parallel evolution of Sri Lanka’s domestic politics and China’s foreign financing in Sri Lanka’s post-independence era through four lenses, namely, political opposition, political gains, economic structure, and institutions. We focus on the bilateral relationship prior to Sri Lanka’s economic liberalization and the aftermath of the middle-income transition and add three major findings to the literature. Firstly, Chinese economic engagements continue to have substantial political opposition in Sri Lanka. But the nature of such opposition evolved from ideology-based to sovereignty-based anti-China sentiments, which heavily correlate with elections. Economic relations with China have continued to evolve as political gains, which helped maintain government popularity in the short-to-medium term and exceeded the costs inflicted by political opposition. Secondly, the nature of the bilateral economic relationship has become more complex, moving from being purely government-to-government to involving multiple actors: Chinese policy banks, state-owned enterprises (SOEs), and the private sector. Thirdly, despite differences, Sri Lanka’s governments have utilized economic relations with China for short-term political gains and to avoid structural reforms, especially in the run-up to Sri Lanka’s sovereign default and unprecedented economic crisis in 2022. We conclude that China’s approach to ongoing debt restructuring will affect domestic politics around China’s engagements and affect how the bilateral economic relationship evolves.

The Research on the Impact of Shadow Banking on Small and Medium-sized Enterprises in China

Because of the serious financial repression in China's financial system, the traditional commercial bank's credit is very large. It is difficult to reach small and medium-sized enterprises and industries restricted by credit policies. In order to solve this existing problem, those Independent of traditional commercial banks, not subject to or less supervision by the central bank, and capable of providing credit Institutions have emerged, traditionally known as shadow banks. Shadow banks have been quantitative easing money It played an important role in the implementation of the policy. This paper will explain China's shadow banking system from the introduction of shadow banking, the development of shadow banking in China and some of its impacts, as well as the introduction and analysis of special cases of shadow banking and the impact of shadow banking on small and medium-sized enterprises. This paper draws the following conclusions through research: With the growing development of shadow banking in China, China's shadow banking system is becoming increasingly complex, and small and medium-sized enterprises have gained more development opportunities due to the characteristics of high risk and high returns brought by shadow banking.

Study on the Reform of the Open Policy of Utilizing Foreign Investment in China's Leasing and Business Service Industry

Study on the Reform of the Open Policy of Utilizing Foreign Investment in China's Leasing and Business Service Industry

Conceptualising State-Centric Mediation: An Analysis of China's Foreign Investment Complaints Mechanism – ERRATUM

Conceptualising State-Centric Mediation: An Analysis of China's Foreign Investment Complaints Mechanism – ERRATUM

Risk Assessment of Banks and Financial Institutions under COVID-19 Crisis

Systemic risk refers to risks that have a broad and severe impact on the entire financial system or economic system. There are similarities in the definition of systemic risk in China and abroad, which usually refer to threats to the entire financial system or economic system, which can trigger a chain reaction and lead to a systemic collapse. In terms of characteristics and measurements, there may be some differences in views and methods at home and abroad. While foreign countries usually pay more attention to the interconnectedness of financial institutions, market liquidity, macroeconomic factors, etc., China may pay more attention to factors such as the stability of financial markets and the role of state-owned enterprises and governments in the economy. The shortcomings of systemic risk abroad may lie in the fact that the unique circumstances of some characteristic countries or regions are sometimes overlooked, because these factors are not universally applicable on a global scale. Due to its unique environment of large economic size, complex financial system, government intervention, and the influence of state-owned enterprises, the study of systemic risk is particularly important for China. This particular situation may require unique methods and metrics to measure and address risks to ensure the stability and sustainability of China's financial system. It is precisely in view of the lack of foreign research on China's specific context that it is of great significance to study the systemic risk of China's banking industry under China's financial system.

The cross-sector risk contagion among Chinese financial institutions: Evidence from the extreme volatility spillover perspective

This paper investigates the cross-sector risk contagion among Chinese financial institutions using the quantile connectedness approach, and analyzes the impact of macroeconomic factors on risk spillover effects at different quantiles. The empirical results show that the volatility spillovers in the tail quantiles are higher than those in the median quantile, suggesting that financial risk propagate more intensely during extreme events relative to normal conditions. Furthermore, we demonstrate that macroeconomic factors have a significant impact on volatility spillovers among financial institutions. Our findings provide valuable insights for regulators to effectively manage and mitigate the risk contagion within the Chinese financial system.

Evaluating financial fragility: a case study of Chinese banking and finance systems

Global financial systems are inherently fragile due to their complexities. Thus, it is of great interest to devise various methods to assess the dynamics of financial fragility. As such, this study builds a financial fragility evaluation index system. The study finds three major fluctuations in the trend of financial fragility due to the great recession in 2008, the huge financial volatility in 2015, and the COVID-19 pandemic in 2019. It also tests the index system on the Chinese finance market from 2007 to 2022. Observations of capital adequacy, non-performing loans, and liquidity ratios, in addition to the average return on total assets, are used to assess banking fragility. The results attained show that amongst the tested banks, the Bank of Ningbo has the lowest vulnerability score, mainly due to its higher average return on total assets, capital adequacy ratios, and lower non-performing loan ratio. On the other end of the spectrum, China Minsheng Bank has the highest vulnerability score due to its lower capital adequacy and higher non-performing loan ratios. These findings provide valuable insights into the banking sector in China for policy formulation.