12 April 2026, Volume 0 Issue 4

    

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  Can Bilateral Currency Swaps Enhance the Cross-Border Financing Function of the RMB? —Evidence from RMB External Debt

  Huang Sainan, Wang Teng

  Studies of International Finance. 2026, 0(4): 3-16.

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  Based on panel data covering 49 countries and regions from 1990 to 2017, this paper investigates the impact of China's bilateral currency swap agreements on the RMB's cross-border financing function. Utilizing a multi-period difference-in-differences（DID）model and data on RMB-denominated external debt drawn from the international investment position（IIP）currency composition database, this study finds that entering into a bilateral currency swap agreement with China significantly increases the relative share of a partner country's external debt denominated in RMB. This result indicates that such swap arrangements effectively enhance the RMB's role in cross-border financing, and this positive effect strengthens in the years following the agreements' implementation.
  The analysis further identifies and validates three primary channels through which bilateral currency swaps operate. Firstly, the liquidity provision channel: swaps enhance the availability of the RMB, reducing financing costs and exchange rate risks for partner countries, thereby increasing both the capacity and willingness to use the RMB for financing. Secondly, the export revenue channel: swaps facilitate bilateral trade and promote RMB settlement, leading to increased RMB income for exporters in partner countries. This, in turn, creates a stronger incentive for“natural hedging”by raising RMB-denominated debt to match RMB-denominated export revenues. Thirdly, the information transmission channel: swaps foster closer bilateral economic ties and financial cooperation, mitigating information asymmetry between Chinese financial institutions and foreign entities, which strengthens the willingness of lenders to provide RMB financing.
  Heterogeneity analysis reveals that the positive effect of swap agreements on RMB-denominated external debt is significantly stronger in partner countries with higher levels of financial openness and more developed financial systems. This underscores the complementary role of partner countries' institutional environments in realizing the benefits of RMB internationalization policies.
  Furthermore, the study examines the impact on other major international currencies. Results show that while bilateral RMB swaps significantly reduce the share of external debt denominated in Japanese Yen, they do not significantly affect the shares of debt in US dollars, euros, or British pounds. This suggests that, at its current stage, the internationalization of the RMB primarily substitutes for the Yen in cross-border financing, without yet challenging the dominant positions of the dollar or the euro.
  This research provides robust empirical evidence on the effectiveness of bilateral currency swaps as a policy tool for advancing RMB internationalization, specifically in the dimension of cross-border financing. The findings offer important policy implications, including the need to expand and strengthen swap arrangements, promote RMB invoicing in trade, and further liberalize China's capital account to facilitate two-way capital flows and financial market integration.
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  Spatial Spillover Effects of Housing Price Fluctuations on Financial Risks —From the Perspective of Systemically Important Cities

  Xie Yang, Xiao Dongli

  Studies of International Finance. 2026, 0(4): 17-31.

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  Real estate functions as both a financial and a spatially embedded asset. Accordingly, the financial contagion generated by housing price fluctuations is not confined to individual cities but propagates across urban agglomerations through a center-periphery structure. As China's real estate market shifts from broad-based expansion to differentiated adjustment, cross-city divergence in housing prices has widened while financial risks have become more regionally clustered. These developments necessitate a reexamination of real-estate-related financial risks through the lens of the internal spatial structure of urban agglomerations. Against this backdrop, this paper adopts a micro-regional perspective, extends the macroprudential concept of“systemic importance”to the city level, and studies the spatial spillovers of financial risk triggered by housing price changes in central cities.
  The paper develops a new economic geography model with a center-periphery structure that incorporates consumers, real estate developers and banks. This framework clarifies the channels through which housing price fluctuations affect financial risk. It is then combined with numerical simulations and panel data for 294 prefecture-level and above cities in China from 2003 to 2023. Empirically, an improved Spatial Durbin Model is used to identify the spatial spillover pattern of housing-price-induced financial risk, its effective boundary, and its transmission heterogeneity across different urban agglomerations. In addition, multiple indicators of urban agglomeration development, market integration, and factor mobility are incorporated to examine the conditions under which such spillovers are intensified or mitigated.
  Housing price fluctuations have an asymmetric U-shaped effect on financial risk: both market booms and downturns raise risk, with stronger spillovers to peripheral cities especially in downturns. Central cities operate as“systemically important cities”, transmitting shocks through resource siphoning, credit linkages, and factor reallocation; without them, spillovers are limited and mostly short-lived. Urban agglomeration development lowers financial risk and weakens center-to-periphery spillovers, whereas distance only partly blocks contagion, often at the cost of higher overall risk. Functional specialization and transport connectivity reduce spillovers, while market segmentation, financial decentralization, and stronger resource siphoning intensify them. Overall, financial risk spillovers exhibit distance decay but remain heterogeneous, nonlinear, non-monotonic, and strongly conditioned by urban hierarchy and regional integration, with substantial variation across different types and stages of urban agglomeration development.
  This paper contributes by constructing a center-periphery framework for the spatial transmission of real-estate-related financial risk from the perspective of systemically important cities and by integrating theoretical modeling, numerical simulation, and spatial econometric identification. The findings suggest that central cities should be prioritized for real estate risk regulation. Moreover, urban agglomeration integration should be accelerated, and differentiated, city-specific policy toolkits should be adopted according to the development stage, spatial position, and heterogeneity of each urban agglomeration.
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  Research on the Trends of Global Supply Chain Reconstruction under Trade Policy Shocks

  Li Kunwang, Zhan Kuan

  Studies of International Finance. 2026, 0(4): 32-46.

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  In recent years, changes in trade policies between China and the United States have driven the reconstruction and adjustment of global supply chain. This paper reveals the typical facts of global supply chain reconstruction based on the modified Lilien Index（MLI）and the share of import and export trade, by constructing a general equilibrium model to quantitatively analyze the impact of the trade policy shocks of China and the United States from the Trump 1.0 to Trump 2.0 era on global supply chain reconstruction.
  This paper draws the following conclusions, firstly, from 2017 to 2023, China gradually reduced its reliance on developed economies such as the United States and the European Union, and strengthened its trade ties with ASEAN countries. Simultaneously, the United States increased its import trade shares from the European Union and ASEAN while reducing imports from China. Secondly, simulations of changes in Sino-US tariff policies and scenarios of supply chain disruptions in high-tech manufacturing industries revealed that these shocks led to a decline in China's total imports and exports, an increase in the US total imports, and a decline in the US exports, resulting in a significant contraction of bilateral trade. Both countries showed a trend of“supply chain localization”, with the localization tendency of the United States being more pronounced. Thirdly, the tariff policies during the Trump 2.0 period significantly affected the total trade and bilateral trade patterns of major economies around the world, exacerbating the“localization”reconfiguration trend of Chinese and the US supply chains. However, the two countries exhibit significant differences in the adjustment paths and strategic priorities of their respective supply chains.
  This research holds significant theoretical and practical value. Firstly, it reveals the reallocation of supply and demand relationships among major global economies at the national level, confirming the typical characteristics of the global supply chain reconfiguration. Secondly, this paper constructs a general equilibrium model and quantitatively analyzes the global impacts arising from changes in Sino-US tariffs and export control policies. Thirdly, it explores and answers a issue in the academic community, namely, under the continuous impact of trade policies, whether the supply chain reconfiguration paths of China and the United States exhibit an“indigenization”（the return of the supply chain to the domestic market）or a“diversification”（a dispersed layout across multiple countries）evolution trend, thereby providing a more explanatory perspective for understanding the reconfiguration of the global industrial and supply chain.
  Based on the above research conclusions, this article holds that in the context of intensified competition among major countries and the accelerated reconfiguration of global supply chains, China should accelerate the promotion of industrial upgrading, solve the“strangling”predicament in mid-to-high technology industries, expand domestic import demand in China to effectively hedge against the risks of global supply chain reconfiguration, continue to strengthen communication and cooperation between the country and regions, and effectively ensure the stability and smoothness of the global industrial chain and supply chain, which has a positive effect on preventing and resolving the risks of supply chain reconfiguration and enhancing the resilience of China's industrial chain and supply chain.
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  Financial Development Distance and Corporate Cross-Border Mergers and Acquisitions —Theoretical Construction and Empirical Test Based on the Logic of Financial Development Arbitrage

  Han Yonghui, Zhang Chenwei

  Studies of International Finance. 2026, 0(4): 47-61.

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  The asymmetry in financial development across countries may lead to differentiated cross-border capital flows globally, significantly impacting cross-border mergers and acquisitions（M&A）. To examine the direction and magnitude of this influence, from the perspective of financial development arbitrage, this paper constructs a country-level panel dataset matching the financial development distance between China and host countries from 2004 to 2021 with Chinese outward M&A activities, examining the impact of financial development distance on Chinese cross-border M&A. The study finds that, firstly, there is a negative correlation between the financial development distance between China and host countries and the amount of Chinese cross-border M&A. When the financial development of the host country is superior to that of the home country, the well-developed financial system of the host country gives the home country's enterprises the opportunity to achieve financial development arbitrage. In other words, at this time, the home country's enterprises are willing to escape the domestic financial system through cross-border mergers and acquisitions. Secondly, heterogeneity tests reveal that the impact of financial development distance is more pronounced for non-OECD countries and countries with lower government intervention. On the one hand, the institutional asymmetry between developed countries and China has led to an outsider disadvantage, causing Chinese enterprises to face a legitimacy deficit that hinders cross-border mergers and acquisitions. On the other hand, the ways in which financial development distance affects cross-border mergers and acquisitions of enterprises inevitably involve fair and transparent market transaction behaviors, and the interference of the host government will have a negative impact on fair and transparent market transaction behaviors. Thirdly, mechanism tests show that financial development distance negatively affects the amount of Chinese cross-border M&A by exerting 'financing compensation effects' and 'information compensation effects'. When the financial market of the host country develops better than that of the home country, the enterprises of the home country have the motivation for financial development arbitrage. They enter the host country's market through cross-border mergers and acquisitions and take advantage of the host country's well-developed credit system and transparent information disclosure system to avoid some deficiencies in the development of the home country's financial market. Fourthly, extended tests find that establishing people-to-people diplomatic relations facilitates the smooth realization of financial development arbitrage, promoting the overseas layout of Chinese multinational enterprises. Diplomacy helps to strengthen bilateral political mutual trust. Compared with state diplomacy, people-to-people diplomacy is more conducive to curbing the unfairness and opacity of the trading market caused by the implementation of protectionism by the host country. A good bilateral relationship has lowered the entry barriers for investors from the home country, enhanced the legitimacy of cross-border investment by home country enterprises, facilitated the effective realization of financial development arbitrage, and thereby promoted the overseas layout of Chinese enterprises.
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  Liquidity Crisis Rescue and Preference for Currency Swaps Decision—From the Perspective of an International Lender of Last Resort

  Li Jing, Li Boyu, Li He

  Studies of International Finance. 2026, 0(4): 62-78.

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  International currency crises often manifest as liquidity crises, resulting from global financial instability. The current uncertainties stemming from geopolitical and geo-economic conflicts have made international capital flows more volatile, with peripheral economies universally facing difficulties in accessing liquidity. When countries confronting liquidity crises have insufficient foreign exchange reserves,particularly facing large-scale hot money shocks,they typically compensate for liquidity shortages through IMF quotas, regional financial frameworks, and swap lines to maintain monetary and financial stability.
  The international lender of last resort is a crucial component in improving current global financial conditions, maintaining financial market stability, and strengthening the financial safety net. While swap lines prevent crisis contagion through liquidity assistance, recipients may engage in high-risk economic activities, leading to moral hazard. When establishing swap lines decisions, donor countries always balance the intensity of bilateral ties, moral hazard, signaling effects, and the recipient country's own foreign exchange reserves. When making swap lines decisions, donor countries tend to favor recipients with stronger comprehensive ties and existing foreign exchange reserves, balancing moral hazard and signaling effects.
  Empirical research on donor countries' swap lines preferences reveals that such swap lines serve as a key mechanism for donors to fulfill their role as international lenders of last resort, providing liquidity crisis relief and reducing foreign exchange market risk exposure. In their decision-making, donor countries balance economic concerns and political preferences, with signaling effects and moral hazard being key considerations influencing swap willingness.
  Against the backdrop of bilateral financial opening, China's participation in global economic governance is significantly manifested through its support for building global and regional financial safety nets. The swap lines provided by the People's Bank of China facilitate trade and investment, embodying Chinese principles of balanced interests in advancing the Belt and Road Initiative, and demonstrating greater inclusiveness. The renminbi swap lines network is effectively forming a regional financial safety net.
  In practice, the construction of the global financial network is structured into three tiers: international organizations, regional financial stability arrangements, and bilateral swap lines.The rescue package from IMF is usually insufficient and untimely. Regional rescue mechanisms can, to some extent, overcome the limitations of IMF conditionality. Bilateral currency swaps are more timely and effective but always faces selective preferences and limited coverage.
  In the new international political and economic context, the lender-of-last-resort mechanism should be treated as a vital public good. Strengthening its development, expanding bilateral swap coverage, and knitting together the global financial safety net. As China's coordinated advancement of the renminbi internationalization continues, it can leverage the role of the central bank's renminbi swap network in facilitating trade and investment while providing liquidity support, thereby becoming a significant force in improving global financial governance.
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  Compilation of the Global Flow of Financial Funds Tables and Analysis of Its Data Characteristics

  Zhou Ling

  Studies of International Finance. 2026, 0(4): 79-93.

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  With the deepening of global economic integration, cross-border financial flows have emerged as a pivotal component of international economic relations. Traditional financial statistics mainly focus on the static investment stock and fail to provide a dynamic perspective of cross-border investment flows. Consequently, developing a scientific, systematic, and dynamic accounting framework for cross-border financial capital flows has become a core issue in global accounting.
  This paper built a framework for cross-border financial flows accounting in alignment with the System of National Accounts（SNA）standards, designed the fundamental“economy × economy”global flow of financial funds tables, and clarified the corresponding compilation principles. Based on the authentic bilateral financial flow data,“economy × instrument”investment flow data, and“economy × economy”investment position data released by economies and international organizations, this paper applied an accounting logic that flows are approximated by the changes in positions between the end and the beginning of the period to fill the missing data. Furthermore, this study actually compiled the global flow of financial funds tables for 2014-2023, encompassing major global economies. On this basis, using the method of network analysis, this article tracked the scale, direction, and structure of cross-border financial flows, summarized the patterns of financial flows in Mainland China, and measured its status in the global financial market.
  This paper identified several key findings. Firstly, the“economy × economy”global flow of financial funds tables accurately measured inter-economy financial flows, effectively capturing the global and regional dynamics of direct, portfolio, and other investments. By adhering to the accounting logic, this study achieved a dual improvement in data coverage and internal consistency, providing a credible data foundation for subsequent analyses of global financial flow patterns. Secondly, the global financial flow network exhibited structural fragmentation. Over the past decade, despite significant shifts in the landscape of the global financial market, the composition of core participants remained relatively continuous and stable. The United States and the United Kingdom consistently occupied the core positions in the global financial resource allocation system, dominating the paths and rhythms of international financial flows. Finally, Mainland China has emerged as an active participant, nonetheless it has not fully established the functions of a global capital hub. Whether in terms of aggregate financial investment or specific sub-items, and whether regarding financial diffusion efficiency or network influence, a significant gap remains between Mainland China and the traditional financial powers. Only in select years did Mainland China's financial index rankings reach the global top three; for most of the observed period, its overall and sub-item transmission efficiency and influence indices maintained a mid-to-high level, with rankings typically fluctuating between 10th and 20th globally.
  This article gave three suggestions: gradually increase the financial diffusion efficiency and network influence of Mainland China and promote this as a long-term strategic task; steadily advance the high-level opening-up of financial markets and enhance the attractiveness of the Mainland China market for global financial capital accordingly; address the relative weaknesses in cross-border financial flows and comprehensively intensify the competitiveness of Mainland China within the global financial system.
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  Nonlinear Impact of Interbank Assets on Banking Systemic Risk: Theoretical Mechanism and Empirical Test

  Huang Min, Jiang Hai

  Studies of International Finance. 2026, 0(4): 94-107.

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  The 2025 Central Economic Work Conference of China called for“actively yet prudently defusing risks in key areas”, reiterating that preventing systemic financial risks remains the core task for the banking system. In recent years, despite the effective containment of interbank asset expansion under the guiding principle of“risk prevention and enhanced supervision”, the nature of the associated risks has undergone a profound structural shift. Existing literature has predominantly identified a linear or monotonic relationship between interbank assets and banking systemic risk, but failed to uncover the structured pattern of risk accumulation inherent in these activities. This paper seeks to address this gap by investigating the potential nonlinear and threshold-dependent effects of interbank assets on banking systemic risk.
  This paper analyzes the nonlinear impact of interbank asset on banking systemic risk theoretically and empirically using quarterly data on 39 Chinese listed banks from 2009 to 2022. Results show that: Firstly, interbank asset has a nonlinear impact on banking systemic risk. Banking systemic risk increases significantly only when the scale of interbank asset exceeds a certain threshold. Secondly, heterogeneity test results show that the nonlinear impact of interbank business on systemic risk varies with the nature of ownership. Thirdly, mechanism test results a moderate level of interbank assets helps mitigate banks' risk-taking, whereas excessive holdings of interbank assets weaken banks' profitability. Fourthly, the relationship between interbank asset business and banking systemic risk would be affected by liquidity. With a high loan-to-deposit ratio and tight credit constraints, interbank assets can cushion against earnings pressure, but their excessive expansion increases banks' risk-taking behaviors and thereby enhances their systemic risk.
  The contributions of this paper are as follows. Firstly, this paper constructs a theoretical model to analyze the nonlinear impact of interbank asset on banking systemic risk and examining the moderating effect of liquidity, which fills the gap in theoretical research. Secondly, this paper provides a detailed examination of influential channels of interbank asset on banking systemic risk from the perspectives of risk-taking and profitability, enriching the literature on the relationship between interbank asset and systemic risk. Thirdly, this paper explores how the impact of interbank asset on systemic risk varies among different types of banks, providing empirical evidence to implement differentiated supervision. Fourthly, this paper investigates the moderating effect of liquidity on the relationship between interbank assets and systemic risk, which helps build a more effective interbank supervision framework.
  This paper offers the following policy recommendations. Firstly, regulators should adopt a tiered supervision framework for interbank assets, with targeted rules for joint-stock, state-owned, and local banks. Secondly, regulators should require clearer disclosure of how interbank assets affect bank risk and profitability. Thirdly, regulators should strengthen liquidity monitoring and mandate stress tests to evaluate systemic risks under stressed conditions.
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  Does Bank Digital Transformation Empower the Manufacturing Industry?—Evidence Based on Enterprise Total Factor Productivity

  Li Jianjun, Zhou Chaojin

  Studies of International Finance. 2026, 0(4): 108-120.

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  China's economy has entered a stage of high-quality development. As the core pillar of the real economy, In this context, has become an important support for serving the real economy and advancing the high-quality development of manufacturing. However, existing literature still lacks sufficient targeted empirical research on how bank digital transformation empowers manufacturing firms at the micro level, as well as in-depth investigations into its internal mechanisms and heterogeneous impacts.
  Using a sample of China's A-share listed manufacturing firms from 2012 to 2023, this paper constructs a firm-level bank digital transformation indicator as the core explanatory variable by weighting the Peking University Commercial Bank Digital Transformation Index with listed firms' loan data. The dependent variable is manufacturing firms' TFP, estimated by the Levinsohn-Petrin（LP）method. This paper systematically examines the enabling effect of bank digital transformation on manufacturing TFP, and empirically tests the causal relationship, transmission mechanisms, heterogeneous characteristics, and moderating effects between them, while further exploring the relevant nonlinear influences.
  The empirical results show that bank digital transformation significantly improves the TFP of manufacturing enterprises, which remains robust after a series of robustness checks and endogeneity treatments. Mechanism tests identify two core channels. Firstly, banks alleviate bank-enterprise information asymmetry through big data and artificial intelligence technologies. Secondly, technological spillovers and standardized interactions from banks drive firms' digital transformation, thereby boosting manufacturing firms' TFP. Heterogeneity analysis indicates that the promotional effect is more pronounced in high-tech manufacturing firms and those located in regions with poor business environments. Quantile regression further reveals that bank digital transformation exerts a stronger TFP improvement effect on low-productivity manufacturing firms. In addition, the shareholding ratios of chairmen and CEOs positively moderate the relationship, further strengthening the enabling effect of bank digital transformation.
  This paper makes three marginal contributions. Firstly, focusing on manufacturing as the core of the real economy, it addresses the lack of industry specificity in existing studies. Through precise matching of bank-firm relationships, it provides empirical evidence for finance to empower manufacturing firms to improve quality and efficiency, supplements theories of financial support for the high-quality development of the real economy, Secondly, at the mechanism level, focusing on the pain points of manufacturing firms, it systematically clarifies the internal mechanisms through which bank digital transformation affects manufacturing firms' TFP via the two channels of alleviating information asymmetry and promoting firm digital transformation, Thirdly, using panel quantile regression and moderating effect models, it systematically explores the heterogeneous characteristics of manufacturing firms' TFP at different quantiles and the nonlinear impacts of moderating variables on the relationship, providing empirical support for precise empowerment of manufacturing firms by bank digital transformation and the formulation of targeted support policies.