As China's bond market expands rapidly, the complexity of financial guarantee networks and their implications for credit risk have become critical issues in both academic research and financial practice. Utilizing micro-level data from China's credit bond market spanning 2014 to 2024, this study constructs a multi-layer network incorporating bonds, guarantors, and issuing firms to empirically examine the impact of guarantor network centrality on bond credit spreads. The results reveal a significant U-shaped relationship: moderate centrality reduces spreads by bolstering market confidence, whereas excessive centrality increases them due to heightened systemic risk. Mechanism analyses identify systemic risk and information asymmetry as key mediating channels through which centrality affects credit risk premiums. Heterogeneity tests indicate that this U-shaped pattern is more pronounced among state-owned guarantors, real estate firms, and high-risk clusters within the network. Furthermore, both cross-layer connectivity within the multi-layer structure and regional financial development levels significantly moderate the centrality-spread relationship. These findings offer a structural perspective on credit risk pricing in emerging markets and provide valuable policy insights for credit rating system design, guarantee regulation, and systemic risk prevention. International investors could also leverage these findings to better assess systemic risk in interconnected financial markets across emerging economies.

We construct a new geospatial measure using high-resolution river vector data from National Geomatics Center of China (NGCC) to study how urban riparian exposure shapes local government debt financing costs. Our base-line results show that cities with higher riparian exposures have significantly lower credit spreads, with a one-standard-deviation increase in riparian exposure reducing credit spreads by approximately 12 basis points. By comparing cities crossed by natural rivers with those intersected by artificial canals, we disentangle the dual role of riparian zones as sources of natural capital benefits (e.g., enhanced transportation capacity) versus climate risks (e.g., flood vulnerability). We find that climate change has amplified the impact of natural disasters, such as floods and droughts, particularly in riparian zones, thus weakening the cost-reducing effect of riparian exposure on bond financing. In contrast, improved water infrastructure and flood-control facilities strengthen the cost-reduction effect. Our findings contribute to the literature on natural capital and government financing, offering valuable implications for public finance and risk management.

This paper examines the consequences of Chinese regulators deviating from a long-standing full bailout policy in addressing the distress of a city-level commercial bank. This policy shift led to a persistent widening of credit spreads and a significant decline in funding ratios for negotiable certificates of deposit issued by small banks relative to large ones. Our empirical analysis reveals a novel contagion mechanism driven by reduced confidence in future bailouts (implicit non-guarantee), contributing to the subsequent collapse of other small banks. However, in the longer term, this policy shift improved price efficiency, credit allocation, and discouraged risk-taking among small banks.

We investigate the impact of government environmental credit ratings on bond credit spreads based on a sample of Chinese A-share listed companies from 2014 to 2022. Empirical results demonstrate that a favourable environmental credit rating significantly reduces bond credit spreads, highlighting the incentivising effect of environmental credit ratings. Mechanism testing reveals that a good environmental credit rating diminishes information asymmetry and enhances an enterprise’s resource acquisition capabilities, reducing bond credit spreads. Furthermore, subgroup analyses suggest the reduction effect is more pronounced in enterprises with low debt and tax credit ratings.

We investigate the impact of government environmental credit ratings on bond credit spreads based on a sample of Chinese A-share listed companies from 2014 to 2022. Empirical results demonstrate that a favourable environmental credit rating significantly reduces bond credit spreads, highlighting the incentivising effect of environmental credit ratings. Mechanism testing reveals that a good environmental credit rating diminishes information asymmetry and enhances an enterprise’s resource acquisition capabilities, reducing bond credit spreads. Furthermore, subgroup analyses suggest the reduction effect is more pronounced in enterprises with low debt and tax credit ratings.

Regional financial development has greatly supported the rapid growth of Chinese municipal corporate bonds. This study introduces the concept of regional financial resources and constructs an informative measure of regional financial development by using principal component analysis (PCA), incorporating 13 indicators from three primary financial industries, including bank, security and insurance. Using a sample of municipal corporate bonds (MCBs) issued in China from 2009 to 2019, we find that an increase in regional financial development is associated with significant MCB credit spreads narrowing. This effect can be realized by improving fiscal stability and debt sustainability. Additionally, this narrowing varies among cities and provinces with different fiscal conditions and economic development. The results are also verified through a series of robustness tests. This study proposes possible policy suggestions for improving the Chinese fiscal management and MCBs market.

The macroeconomic risk associated with climate change potentially results in a risk premium on asset prices. Using a sample of 11,468 Chinese quasi-municipal bonds from 2014-2021 in 267 cities, this research investigates the impact of climate risk on the credit spreads of quasi-municipal bonds. We employ principal component analysis (PCA) to construct a climate risk index and find that climate risk significantly increases credit spreads by increasing the local government fiscal gap and debt burden. The effect of climate risk is more remarkable for bonds that have shorter maturity and lower corporate ratings, issued by smaller city investment companies and corporations located in regions with stronger environmental regulation, stronger climate risk perception, and better green financial development. A significant relationship is also observed in the eastern regions but not the western regions. This study broadens the scope of quasi-municipal bond credit spread determinants from traditional financial to climate indicators.

This paper examines the relationship between controlling shareholder equity pledges and their pricing using data on new debt financing instruments issued by Chinese A-share listed companies from 2010-2021. The findings suggest that controlling shareholder equity pledges lead to higher credit spreads on new debt financing instruments issued. Further findings suggest that this significant relationship only exists in groups where listed companies are on the eastern seaboard, where there is a higher risk of the share price collapse, and where management is more competent. It was also found that this relationship was not heterogeneous in the quality of the firm's information environment group and was only significant in the low hollowing out-group, thus ruling the hollowing out hypothesis and the information hypothesis and validating the uniqueness of the control transfer risk hypothesis in this paper.

This paper investigates the consequences of Chinese regulators deviating from a long-standing full bailout policy in addressing a city-level commercial bank’s distress. This event led to a persistent widening of credit spreads and a significant decline in funding ratios for negotiable certificates of deposit issued by small banks relative to large ones. Our empirical analysis pinpoints a novel contagion mechanism marked by diminished confidence in bank bailouts, which accounts for the subsequent collapse of several other small banks. However, the erosion of confidence in government guarantees enhances price efficiency and credit allocation while discouraging risk taking among small banks.

We construct a text-based indicator of US-China tension and examine its economic transmission. Our index closely tracks the share of related discussions in US firms’ earnings conference calls and that it correlates with firm actions in ways that are highly indicative of firm concerns about bilateral tensions. Elevated US-China tension is associated with protracted declines in US corporate investment, especially among firms that are expected to be exposed to the bilateral tensions. We also ffnd adverse effects of US-China tension in the aggregate, even after accounting for a large number of factors traditionally used to explain such effects. Impulse responses from medium-sized VARs show that positive shocks to the US-China tension index lead to protracted output declines, increased credit spreads, and reduced bilateral trade. These effects are milder and less persistent in the Chinese aggregates than those of the US. To examine how USChina tension propagates through the real economy, we isolate a component of our index reflecting the realizations of barriers that disrupt bilateral transactions from the component driven by uncertainty of increased barriers without their materialization. We find data patterns suggesting that the economic transmission of US-China tension primarily operates through uncertainty effects.