We examine the information content of the call-put implied volatility spread (IVS) of Shanghai Stock Exchange 50 ETF options. Empirically, the IVS significantly and negatively predicts future SSE50 ETF returns at both weekly and monthly horizons. This predictability is robust both in-sample and out-of-sample, which stands in contrast to prior evidence from the U.S. options market. We explore several potential explanations and show that the IVS is closely linked to the option-cash basis. Its predictability is consistent with the model of Hazelkorn, Moskowitz, and Vasudevan (2023), where the option-cash basis reflects liquidity demand common to both options and underlying equity markets.

China has become the world’s leading innovator in renewable energy technologies, accounting for 85% of global new patents in 2023 (up from 15% in 2009). This paper examines how China’s hybrid system—state-owned electricity enterprises dominating downstream and private firms manufacturing upstream equipment—has facilitated this transformation. National renewable energy targets, enforced through career incentives for SOE managers, create strong and predictable downstream demand that stimulates upstream innovation. Using global supplier–customer pair-level data, we show that revenue growth among Chinese downstream customers is significantly associated with their suppliers’ subsequent patenting. This effect is absent for non‑Chinese customers but stronger among those politically aligned with the central government. Exploiting the 2022 clearance of feed‑in tariff subsidy arrears to electricity firms as a demand shock provides causal evidence. Direct subsidies to suppliers have no significant effect, whereas subsidies to fast‑growing downstream customers do. Finally, this arrangement also leads to overinvestment and excess capacity among suppliers.

This paper investigates how government fiscal constraints transmit to the private sector through procurement. We exploit three rounds of VAT rate cuts in China (2017–2019) as exogenous shocks to local government revenues. Combining city-level fiscal pressure measures with 9,189 procurement contracts from A-share listed firms, we construct a firm-year exposure index weighted by procurement volumes across cities. We find that exposure to fiscally stressed government buyers significantly depresses firm valuation: a one-standard-deviation increase reduces Tobin's Q and price-to-sales ratios by 5.3% and 4.3%, respectively. This effect concentrates among private firms, those lacking industrial policy support, and firms with lower rent-seeking expenditures—precisely those with weaker bargaining power against government counterparties. Beyond valuation, such exposure leads to a subsequent deterioration in firm fundamentals, characterized by tightened liquidity constraints, reduced investment and financing, and worse information disclosure over a three-year horizon. Land finance partially buffers these effects. Our findings highlight an unintended micro-level consequence of macro fiscal policy: expansionary tax cuts designed to stimulate the private sector may inadvertently harm firms by weakening the government's capacity to fulfill procurement payments.

This paper studies how air pollution shapes offline cashless spending in China. Using monthly transactions from 118,698 merchants in 332 cities from 2019 to 2023, we find that higher pollution raises cashless spending. Instrumental variable and regression discontinuity designs confirm a causal effect. The increase comes mainly from more frequent but smaller purchases and greater participation by new customers. Spending also rebalances from postponable durables toward high-frequency, proximity-based categories, while durables respond little. These results uncover a behavioral channel whereby poor air quality shifts the margins and the composition of offline cashless commerce.

This paper investigates how foreign institutional investors, specifically Qualified Foreign Institutional Investors (QFIIs), influence the investment strategies of Chinese mutual fund management companies (FMCs) in which they hold shares. By analysing panel data from 1,766 mutual funds managed by 44 foreign-invested FMCs in China between 2005 and 2021, we explore whether QFII-invested FMCs (Q-FMCs) learn more from their domestic counterparts (D-FMCs) than other foreign-invested FMCs (NQ-FMCs). Our findings show that Q-FMC-managed mutual funds exhibit portfolio allocations more closely aligned with local DFMCs than those managed by NQ-FMCs. This imitation is particularly pronounced when selecting new stocks, enhancing portfolio performance, but not when rebalancing existing positions. Additionally, Q-FMCs trade more actively than NQ-FMCs. Robustness checks confirm these results across various ownership structures, fund characteristics, market conditions, and regulatory changes. These findings highlight the dual role of QFIIs as both investors and learners in China’s evolving financial landscape, offering insights into how foreign capital integrates into emerging mutual fund markets, informing regulatory policy aimed at fostering cross-border financial development.

The flow-performance relation in China’s mutual fund market differs from that in developed markets (e.g., the U.S.). We find that investors actively allocate capital to poorly performing funds, generating a negative relation at the bottom of return distribution. These flows are driven mainly by increased purchases rather than reduced redemptions. We then examine the mechanisms behind this anomaly. First, investors act on rational expectations of performance reversals, with this pattern being more pronounced among funds with higher activeness. Second, product differentiation attracts heterogeneous investors when performance is weak. Third, marketing and fund family effects serve as simple signals that amplify inflows. Overall, our study provides new empirical evidence on fund investor behavior and its economic consequences in an emerging market context.

We introduce a real-time dispersion measure based on cross-sectional stock returns explicitly designed to capture retail-driven speculative episodes. Elevated return dispersion effectively identifies periods characterized by intensified retail investor trading behaviors, driven by salience, diagnostic expectations, and extrapolative beliefs. During these high-dispersion states, momentum strategies collapse, and short-term reversals become dominant. Conditioning momentum strategies on our dispersion measure resolves the longstanding puzzle of missing momentum in retail-intensive markets such as China, substantially enhancing profitability. A dynamic rotation strategy between momentum and short-term reversal portfolios guided by dispersion states achieves annualized Sharpe ratios nearly double those of static approaches. Extending our analysis internationally, we employ Google search trends as proxies for retail investor attention, confirming that dispersion robustly predicts momentum and reversal returns globally. Our findings underscore the behavioral channel through which retail-driven speculation conditions momentum dynamics, providing clear implications for dynamic portfolio management strategies.

This study theoretically and empirically examines the impact of intangible capital on firm markups. The current research follows Altomonte et al. (2021) and first establishes a theoretical framework of intangible capital affecting firm markups. Accordingly, this study finds that an increase in intangible capital results in an increase in firm markups via the “production efficiency” channel but a decrease in firm markups via the “market-based pricing” channel. We use the data of Chinese manufacturing firms to further empirically study the influence of intangible capital on firm markups and its influencing mechanism. After a series of robustness and endogeneity tests, this research finds that intangible capital is conducive to increasing firm markups. Results of the empirical analysis also reveal that the positive impact of an increase in intangible capital on the markups of Chinese manufacturing firms via the “production efficiency” channel are higher than the negative impact of an increase in intangible capital via the “market-based pricing” channel. Moreover, the impact on the markups of different types of firms are not the same, with significant heterogeneity characteristics. This study provides micro evidence from a large developing country on how intangible capital affects the change in firm markups, thereby providing a new perspective on the economic effects of intangible capital.

This paper examines how China allocates its newly accumulated foreign assets by analyzing the long-run relationship between net national savings, foreign exchange reserves, and outward direct investment (ODI). Using quarterly data from 2005 to 2023, a cointegrated vector autoregression framework shows that ODI—particularly through state-owned enterprises— has emerged as an important channel for recycling national savings abroad. Although short-run reserve fluctuations persist, sustained reserve accumulation has become less central to China’s external asset management. This study contributes to the literature by highlighting the institutional role of state ownership in shaping cross-border investment patterns and by identifying ODI as a strategic mechanism for channeling national savings internationally. The findings shed new light on China’s evolving approach to external asset allocation and its broader economic and geopolitical implications.

This study examines the economic consequences of China’s Three-Red-Lines policy, introduced in 2021 to cap real estate developers' leverage by imposing strict thresholds on debt ratios and liquidity. Developers breaching these thresholds experienced sharp declines in financing, land acquisitions, and financial performance. Privately owned developers(POE) are hit harder than state-owned firms (SOE), with larger drops in sales and higher default risk. Using granular project-level data, we show that the policy reduces developer sales primarily by curtailing new-project supply: breached developers launch fewer projects. On the demand side, homebuyers reallocate purchases from privately owned developers to SOEs, further widening the POE-SOE gap. The policy also reduced local governments’ land-transfer revenues and increased reliance on local government financing vehicles (LGFVs) for land purchases. These LGFV-acquired parcels exhibit very low subsequent development rates, which may increase local governments’off-balance-sheet debt risks.