Finance In China Research Articles

Financial structure and earnings manipulation activities in China

AbstractThis study aimed to analyse the monitoring adeptness of the financial system in China, particularly in controlling earnings management activities. First, this study identifies the reasons and motivations of managers for involvement in earnings management activities. Second, this study determines whether China's financial system has developed sufficiently to be capable of establishing a strong monitoring mechanism over firms. The study compares how an equity‐based financial structure develops an efficient monitoring system with that of a bank‐based one. A panel dataset of 2997 listed Chinese firms spanning the years 1998–2015 shows that the agency issue is the main reason that firms engage in earnings management activities. Management of financially constrained firms is found to be more prudent than management of other firms because they avoid masking firm performance. The study concludes that Chinese firms are restrained from indulging in managing earnings practices owing to the overwhelming development of the financial system. Moreover, firms in capital market‐based financial structures are more inclined to avoid earnings management compared with those in bank‐based structures.

Comparative Analysis of Efficiency between Chinese and Foreign Commercial Banks in China

In 2018, China’s financial industry significantly relaxed various market access policies, which greatly promoted the opening of China’s financial market. Foreign banks have been an important part of Chinese financial system and competed with Chinese banks in more and more areas. In the meantime, foreign banks have brought both opportunities and severe tests for China

A Quantitative Analysis of Value-at-Risk based on Two-factor Pricing Model and GARCH Model

Value-at-risk has become the main instrument for the measurement and management of financial risks. With innovative construction of multi-level capital market system and gradual improvement of functions of financial system in China, financial risks demonstrate some new uncertainties. With regard to quantitative analysis and the management of risks in Chinese financial market, adoption of some methods for quantification of value-at-risk is of greatly importance in the fields of both theory and practice. The constant improvement in research of theory and practice concerning financial development gives birth to all kinds of new instruments for measurement and management of financial risks, among which value-at-risk is a common new instrument applied in measurement and management of modern finance. In this paper, an empirical analysis is conducted on quantification of financial value-at-risk based on Two-factor pricing model and GARCH model.

A study of interconnections and contagion among Chinese financial institutions using a [formula omitted] network

With the development of market economy, the interconnections among Chinese companies are becoming closer and the risk exposures are increasing. In this study, a tail risk network based on ΔCoV aR is constructed to access interconnectedness and contagion between Chinese financial institutions and explore the existence of community structures in the network. The results demonstrate that securities are closely linked to other industries and risk contagion within the industry is more serious for banks, insurers, and diversified financial institutions. The systemically important financial institutions are concentrated in the banking and insurance industries. In addition, there is an obvious community structure with industry characteristics in the Chinese financial system. The approach proposed herein can help regulators develop effective policies and investors disperse investment risks.

Nature of property right and the motives for holding cash: Empirical evidence from Chinese listed companies

Earlier studies have reaffirmed the pivotal role played by the private sectors in China's development, so the growth of private enterprises deserves more attention. This paper carries out a series of empirical studies based on the motives for holding cash. It is found that private enterprises were forced to maintain a high level of cash holdings to deal with financing constraints, while SOEs accumulate cash proactively for larger financial flexibility. In such context, credit discrimination remains an urgent problem pending Chinese financial system reform solutions.

Activating Consumer Demand as a Key to Successful Development of the PRC Economy.

—In the 14th five-year plan of the PRC (2021–2025), consumer demand is considered as the basis for future economic development and GDP per capita growth. Stimulating consumption within the PRC is one of the tasks of the government for 2021. This article analyzes the factors affecting the expansion of consumer demand, and also analyzes the economic indicators associated with the selected issue. The article also draws conclusions about the impact of the United States-China trade war and the COVID-19 pandemic on changing consumption patterns in the PRC.

Development Status, Causes of Risks, and Risk Supervision Suggestions on Internet Finance in China

As a useful supplement to China’s financial system, the development of internet finance has promoted the innovation of financial model and injected strong vitality into the financial market. Internet finance provides customers with more convenient and fast financial services, effectively alleviates financial exclusion, and reduces information asymmetry. It is of great significance to promote the marketization of interest rate and the development of inclusive finance in China. However, internet financial risk events occur frequently, posing a serious challenge. Therefore, this research analyzes the causes of internet financial risks, and provides suggestions on internet financial risk supervision, so as to promote a healthy development of the internet financial industry in China.

MANAGEMENT OF XINJIANG’S OIL ENERGY AND NUCLEAR ENERGY SOURCES IN THE PEOPLE'S REPUBLIC OF CHINA (PRC) IN POST-COLD WAR

China's dependence on energy so far has been on coal. However, like other non-renewable fossil energy, the supply of coal itself is getting depleted. In addition, the PRC's dependence on coal so far has brought losses to the PRC itself, namely the high levels of carbon dioxide emissions contained in the PRC's air. This situation makes the PRC government feel the need to develop other energy sources. Considering the PRC is a country that is blessed with various energy reserves which are quite abundant, it is not too difficult for the PRC government to explore and develop these energy reserves. However, it turns out that it is not so easy to raise this issue because in some ways this energy issue has touched other sensitive aspects. For this reason, the PRC government implements an energy policy consisting of a short-term plan, a medium-term plan, and a long-term plan. The agency responsible for this is the State Planning Commission (SPC). Bringing together the supporting factors and inhibiting factors, the visible trend is that the PRC government will continue to strive to maintain its energy policy, but by making improvements that are felt to be very necessary in order to be effective. This is inseparable from the existence of the PRC's economy as well as its environment which means the existence of the country itself in the future.

The Risk Spillover Effects of the Real Estate Industry on the Financial Industry: A GARCH-Time-Varying-Copula-CoVaR Approach on China

This paper analyzes the multiple transmission mechanisms of the real estate industry’s risk spillovers to the financial industry. A GARCH-time-varying-copula-CoVaR model is used to measure the spillover effects and dynamic evolution trends of risk in the Chinese real estate industry. The results show that (1) in recent years, the risk spillovers from the real estate industry to the whole financial industry in China has been relatively high, and the possibility of systemic risks has increased. (2) The channel of the risk spillovers of the real estate industry into the financial industry has shifted from being concentrated within a traditional single banking industry to the accumulation and superposition of risk across the banking, securities, trust industries. (3) Current regulations have not fundamentally mitigated the risk spillovers. As such, this paper proposes three suggestions on financial policies and regulations: firstly, the government should reasonably regulate cooperation between the real estate industry and the financial industry, curb excessive speculation and abnormal fluctuations in real estate prices. Secondly, the government should maintain the continuity of regulatory policies, formulate differentiated policies according to the essential attributes of given industries, and eliminate risk contagion among the real estate industry and financial industries. Thirdly, the government should improve the macro prudential management framework.

Leverage and systemic risk pro-cyclicality in the Chinese financial system

In this paper, we investigate the relationship between balance sheet size and leverage (i.e., leverage pro-cyclicality) and the pro-cyclicality of systemic risk using three systemic risk measures such as ΔCoVaR (Adrian and Brunnermeier (2016)), MES (Acharya et al. (2017)), SRISK (Brownlees and Engle (2016)). We conduct an extensive panel data analysis using a sample of 264 Chinese listed financial institutions (43 commercial banks, 74 finance services and 147 real estate finance services) over 2005:4–2019:4. We also study the impact of different phases of the financial turmoil by considering three subperiods, the “Global Financial Crisis” (2007:1–2009:4), the “Monetary Policy Restriction” (2010:1–2014:4), and the “2015 Chinese Stock Crash” (2015:1–2019:4). We find that leverage pro-cyclicality mainly affects CBs, in particular during the global financial crisis and the monetary policy restriction. We also find that larger financial institutions increase systemic risk, in particular commercial banks, which from 2016 started increasing shadow banking activities, and the real estate financial services with their activity closer to commercial banking.

An Offer You Can Refuse: A Host Country's Strategic Allocation of Development Financing

Abstract Hydropower projects are one of the leading energy sectors being developed in Africa. In the past two decades, this demand has been increasingly met by Chinese financing and Chinese contractors, creating an impression that host countries have no choice but to accept Chinese advances against their preferences. This essay demonstrates through the case study of the Mount Coffee hydropower project in Liberia that host countries strategically allocate financing from different sources to different projects, based on domestic development needs, administrative capacity, flexibility of financiers, and institutional memory between the host and the financiers. This essay also shows that concerns over Chinese contractors' environmental- and social-impact records reflect a combination of host enforcement, financier self-sorting, and Chinese contractors' own perceptions of their comparative advantage. More broadly, this case study provides empirical observations of host countries' agency and strategic calculus in the financier-host relation, as well as the limits of China's role in Africa's hydropower sector.

Geolocated dataset of Chinese overseas development finance

China is now the world’s largest source of bilateral development finance and will likely continue to play a prominent role in sovereign lending through its multi-billion-dollar Belt and Road Initiative. This paper introduces major methodological enhancements in tracking this finance: the use of an original application programming interface (API) to gathers news in multiple languages; double-verification of every record to ensure every finance commitment has been formalized; and visual geo-location to trace the precise footprint of every project. The resulting dataset enables economic, environmental, and social analyses with high-precision spatial accuracy, as well as spatiotemporal monitoring by project stakeholders and enhanced planning by project managers. It covers the years 2008–2019 to enable analysis before and after the announcement of the Belt and Road Initiative. It includes 862 finance commitments, 669 of which have geographic location, to 94 countries across the world.

Research on production efficiency evaluation of Trust Company based on DEA -- Take 21 trust companies as an example

trust is one of the important pillar of China's financial system, but since 2017, our country business entrusted to the total assets fell gradually, the profit growth declining, as trust companies in our country is facing the transformation and strengthen the effective management of product critical moment, so trust company production efficiency research is of great significance to our country. Based on this, this paper selects the data of 21 domestic sample trust companies with a certain size. From the perspective of efficiency, DEA and M-index method are combined to measure and analyze the total factor productivity of Chinese trust companies from 2015 to 2020.

Account-level analytic hierarchical mixing modeling for credit risk of Chinese Government financing vehicle portfolios

Account-level analytic hierarchical mixing modeling for credit risk of Chinese Government financing vehicle portfolios

Wege aus der Covid-19-Krise: Chinesische Banken und die Hoffnung auf globales Wirtschaftswachstum

Abstract In crisis times a stable financial system is the basis to stimulate economic growth. In the bank-centered Chinese financial system mainly banks provide additional capital to the economy. According to the International Monetary Fund, the Chinese banking system represents one of the key weak spots of global financial stability. Do Chinese banks mitigate the negative consequences of the Covid-19 crisis or do they increase the risks? Based on the strengths and weaknesses of the Chinese banking system, I discuss the relevance of China for global economic growth. In summary, Chinese banks secure China’s short-term growth and lead the global economy back on the growth track. In the long run, the stability of the financial system depends on China’s ability to shape a sustainable financial system based on even more extensive reforms.

Export component of the PRC economy

Export component of the PRC economy

Влияние качества институциональной среды на развитие реального и финансового секторов экономики Китая

The article examines the impact of the quality of the institutional environment on the development of the real and financial sectors of the economy. To assess the formation of the institutional environment, a set of qualitative and quantitative indicators was used. As indicators for assessing the development of the financial sector, it is proposed to use indicators of financial depth. Based on the use of correlation analysis tools, correlations between indicators of financial depth and indicators for assessing the formation of the institutional environment were identified. Based on the identified most significant correlations, taking into account institutional factors, diagnostic models were constructed, the use of which allowed us to build three forecast scenarios for changes in the financial depth of the Chinese financial system for the period up to 2030: optimistic, optimistic and basic. Arguments are presented that prove the weakness of the institutional environment of the Chinese economy, not only in comparison with the most developed economies, but also in emerging markets due to the preservation of certain characteristics of the transition economy, which hinders the development of the financial sector and market mechanisms. It is revealed that in the short term, further expansion of state participation in the Chinese financial market in a weak institutional environment may have a positive effect, but in the long term, an increase in state presence may become an obstacle to institutional development. Testing of the proposed tools of correlation analysis on the materials of the United States showed that indicators of the financial depth of the financial systems of developed countries with a high level of development of institutions have much weaker correlations with indicators of the formation of the institutional environment than in countries with emerging markets characterized by low quality of institutions.

CHINA’S INVESTMENT CLIMATE AND IT’S CONTRIBUTION TO THE GLOBAL SUSTAINABLE DEVELOPMENT ACHIEVEMENT

The article analyzes the factors affecting China’s investment attractiveness, the features of creating a favorable investment climate in China, and investigates new trends of FDI in China. The article highlights the main directions of attracting foreign direct investment in the Chinese economy. The paper aims to systematize the theoretical aspects of the state’s investment attractiveness and analyze the investment attractiveness of the Chinese economy at the present stage of development. The purpose of the article is to determine the PRC’s contribution to global sustainable development, taking into account the fact that the PRC is strengthening its position in the world arena due to the inflow of foreign investments. The article initially examines the role of foreign direct investment in the development of the state’s economy. Each country has a specific approach to attracting foreign investment, which is predetermined by the level of socio-economic development, the degree of external openness, and the established objectives. Therefore, the first stage of the research was an analysis of investment inflows and outflows. Changes that took place due to the implementation of the “open door” policy were considered. Then the advantages and disadvantages of China’s policies aimed at stimulating foreign investment were analyzed in detail. We studied the state and dynamics of investment processes in the PRC, examined the specifics of the regional and sectoral structure of foreign investment in China, evaluated the economic essence and classification of foreign investment, forms and methods of state regulation of foreign investment, as well as some aspects of the legal regulation of investment activity in China. We have systematized the main advantages and risks of the PRC investment climate. It was found that, despite the significant investment attractiveness of China, there are many investment risks. Still, the Chinese government continues reforms aimed at improving the investment climate of the state. A review of China’s position in the ratings of investment attractiveness, such as the Ease of doing the business score, the Global Competitiveness Index, and the Global Sustainable Competitiveness Index was carried out. It was made an intermediate conclusion that foreign capital is increasingly rushing to developing countries, especially to the dynamically developing economies of the BRIC countries, the undisputed leader in attracting foreign investment among which is China. The work results give every reason to predict the growth of foreign investment in the PRC’s economy since the country is characterized by stable and positively dynamic development. It is also assumed that the inflow of investments into the PRC’s economy is reciprocal since China is smoothly turning from a recipient of investments into an investor ready to contribute to global sustainable development.

The Role of Sustainable Finance in the Achievement of Sustainable Development Goals in Nigeria: A Focus on Chinese Foreign Direct Investment

Due to globalization, the great diversity that prevails requires more innovative concepts of businesses, Foreign Direct Investments (FDI), and ventures that consider economic and environmental aspects of sustainable development that facilitate the growth of communities, towns, cities, and countries at large. As such, for a country like Nigeria to attain sustainability and significantly achieve the 17nr. Sustainable development goals (SDGs): Complete diversification of the economy is needed through adequate infrastructure, planned and executed without harming the environment. In China, African countries like Nigeria found a partner whose FDI is directed towards infrastructural projects that is adequately financed between China (Financier) and Nigeria (Host). These affirm that Nigeria needs Chinese financing for its projects to achieve its SDGs while China needs resources from Nigeria for its manufacturing. However, despite these mutualisms, sustainable funding agreements for developments, it is impacted by factors that hinder or promote such arrangements. Hence, this study examined the role of Chinese FDI in infrastructures across various sectors that enable achieving SDGs in Nigeria. Desk research concept was adopted as the sole research method by reviewing secondary sources of data from existing and publicly available data, which enable identification of projects by sectors that Chinese finances are playing a development role in Nigeria. The results show that Chinese FDI in development projects in countries like Nigeria enable Chinese companies to function properly on one hand, while Nigeria benefits from projects that drive growth and sustainable development that rhymes with its SDGs.

‘Bad Banks’ with Chinese Characteristics: an Ongoing Transformation

ABSTRACT This article analyzes the experience of four asset management companies (AMCs) or ʽbad banks’ established in China in 1999 to address a systemic build-up of non-performing loans (NPLs). It describes the modalities of NPL transfers across several rounds of government interventions. It explains the AMCs evolving asset structure, funding and operations, with particular focus on a significant change in their business model. Overall, AMCs have helped stabilize the Chinese financial sector, albeit at a substantial fiscal cost. While they became permanent features of the financial system, the expansion of non-core activities has reduced their ability to perform their original function and generated additional systemic risk. Recent developments point to a renewed role, although a deeper reform of the NPL market will also be needed.