It is well established that commercial banks are financial institutions which are sensitive to interest rates. The sustained cutting of interest rates by the central bank has ushered China's economy into a prolonged low interest-rate environment, presenting commercial banks with multiple challenges such as narrowing interest margins and rising risks, thereby directly threatening financial system stability. Against this backdrop, this paper systematically investigates the impact of a low-interest-rate environment on the systemic risk of commercial banks.
This paper develops a theoretical model to analyze the underlying mechanisms through which low interest rates affect bank systemic risk. Building on this framework, an empirical analysis is conducted by using quarterly panel data from 42 listed banks over the period 2014 to 2023. The results indicate that low interest rates significantly amplify bank systemic risk. Moreover, four mechanisms of this amplifying effect including profit erosion, expanded liquidity risk exposure, heightened risk appetite, and risk contagion effects were proved.
Besides, heterogeneity analysis reveals that the amplifying effect of a low-interest-rate environment on systemic risk is more pronounced for banks with larger interbank liabilities and for those designated as systemically important. To mitigate systemic risks induced by low interest rates, banks can pursue digital transformation or business diversification, while authorities should reduce economic policy uncertainty. Additionally, further analysis suggests that the flattening of the yield curve in a low-interest-rate environment further amplifies bank systemic risk. A plausible explanation is that a flattening yield curve intensifies bank pressure for maturity transformation, thereby exacerbating risk exposures and the possibility of risk contagion.
Based on the above findings, this study proposes the following policy recommendations. Firstly, to enhance the capacity to mitigate risks, banks should prioritize optimizing their asset and liability management. Secondly, banks ought to vigorously promote the digital and diversified transformation of their business models to reduce excessive reliance on net interest income. Thirdly, the key mechanisms for containing financial risk contagion to curb tail-risk spillovers should be improved. Fourthly, greater emphasis should be placed on the enhancement of the “two-pillar” regulatory framework—combining monetary policy with macroprudential policy—to hedge against the amplifying effect of economic policy uncertainty on systemic risk in a low-interest-rate environment.
This paper contributes to the literature in three main aspects. Firstly;, this paper provide a systematic analysis on the effect of low interest rates on bank systemic risk in China, thereby advancing the literature on the implications of prolonged monetary easing for commercial banks. Secondly, it empirically identifies the mechanisms through which low interest rates affect bank systemic risk, shedding light on the determinants of the systemic risk in China's banking sector. Thirdly, from both macro perspective（e.g. economic policy uncertainty）and micro perspectives（including interbank liability size, systemic importance, and business digitalization and diversification）, this paper clarifies the feasible pathways for mitigating the impact of a low-interest-rate environment on bank systemic risk. These findings offer actionable insights for monetary authorities, regulators, and banks themselves on how to effectively safeguard against systemic risk in a low-interest-rate environment.

During the deepening process of globalization, the“anti-globalization”trend has become prevalent in Western countries. The China-US trade friction has also escalated continuously;, exerting a profound impact on the business environment and resource allocation of China's export-oriented enterprises. How to understand the behavioral adjustments of export-oriented enterprises under the impact of external trade frictions, especially their trade-off between financial asset allocation and physical investment, has become an important issue of common concern in both theoretical research and practical fields. Based on the“physical intermediation”theory;, this paper systematically examines the driving effect of trade frictions on the“de-virtualization to real”of export-oriented enterprises and reveals its internal mechanism from two dimensions. This paper takes Chinese A-share non-financial listed companies from 2011 to 2023 as the research sample and conducts an empirical analysis using the difference-in-differences（DID）model. Specifically;, by constructing interaction terms of policy dummy variables and group dummy variables, the net impact of trade frictions on the financialization degree of export-oriented enterprises is identified. At the same time, robustness tests such as propensity score matching, exclusion of concurrent policy interference, and replacement of regression models are used to ensure the reliability of the research conclusions. The findings are as follows. Firstly, trade friction shocks significantly reduce the financialization degree of export-oriented enterprises, indicating that external trade pressure helps drive enterprises to shift from virtual to real economies. Secondly, heterogeneity analysis shows that trade frictions have a more significant inhibitory effect on the financialization of non-state-owned enterprises, high-tech industry enterprises, and enterprises with low customer concentration. Thirdly, mechanism testing indicates that trade frictions reduce the financialization degree of export-oriented enterprises by enhancing the managements' perception of supply chain disruption risks and increasing the enterprises' R&D investment. Fourthly;, economic consequence analysis reveals that trade friction shocks significantly improve the total factor productivity of export-oriented enterprises by reducing their financialization degree, at the same time, trade frictions significantly compress the credit sales ratio of export-oriented enterprises, while the adjustment of suppliers to their credit sales is not significant, leading to an increase in enterprises' net commercial credit. Further analysis also confirms that trade friction shocks significantly promote the physical investment behavior of export-oriented enterprises. Based on the above findings, this paper offers the following implications: Firstly, export-oriented enterprises should optimize resource allocation and actively respond to the impact of trade frictions. In the face of initiated trade friction events, export-oriented enterprises need to optimize their corporate strategies, transform trade frictions into a driving force for building independent intellectual property rights and core competitiveness, and optimize the allocation of financial resources. Secondly, export-oriented enterprises should proactively manage supply chain risks, optimize supply chain finance strategies, enhance supply chain resilience, and reduce reliance on the“reservoir”effect of financial assets.Thirdly;, by guiding export-oriented enterprises to pursue the path of independent innovation and development through policy measures, and by establishing diversified supply channels and strategic reserve systems, export-oriented enterprises can achieve transformation and growth.

Fiscal policy and monetary policy constitute the two central pillars of the macroeconomic policy framework, and serve as key instruments for stabilizing aggregate demand, optimizing economic structure, and preventing systemic risks. At present, the imbalance between strong supply and weak demand persists in China, while the economy is undergoing a critical phase of transformation and structural adjustment amid rising external uncertainties. Under such conditions, a single policy instrument is increasingly insufficient to simultaneously achieve multiple objectives, including stabilizing growth, employment, prices, and risks. In practice, China's fiscal position remains under a“tight balance”constraint;, and the transmission mechanism of monetary policy still faces certain bottlenecks, leaving room for further improvement in the overall effectiveness of macroeconomic policies. Against this backdrop, it is necessary to promote a higher level of coordination between fiscal and monetary policies in both countercyclical and intertemporal regulation, so as to enhance the consistency and effectiveness of macroeconomic management and further improve governance capacity.
Since the 2008 Global Financial Crisis and the COVID-19 pandemic, major advanced economies have experienced a marked strengthening of coordination among fiscal expansion, central bank balance sheet operations, liquidity provision, and government bond market arrangements. The role of fiscal policy in macroeconomic stabilization has consequently increased, and the policy toolkit has been continuously enriched. However, these international experiences are grounded in distinct institutional foundations and policy instruments, and therefore cannot be directly applied to China. Although the existing literature has examined issues such as short-term policy coordination, government debt management, the monetary effects of fiscal policy, and the relative dominance of fiscal versus monetary policy, it still lacks a systematic synthesis of the coordinated operation of fiscal and monetary policies within China's institutional context. Further clarification and theoretical refinement are therefore needed.
This paper systematically reviews the evolution of international fiscal-monetary coordination and, drawing on China's practice, examines the institutional foundations, operational mechanisms, and conceptual orientations of such coordination. Firstly, fiscal-monetary coordination has become a prominent policy trend among advanced economies, characterized by the rising role of fiscal policy, the continuous enrichment of policy toolkits, and the strengthening function of government bonds as a key linkage between the two. In the post-pandemic period, such coordination has further deepened, particularly in supporting priority industries. Secondly, in the Chinese context, fiscal-monetary coordination is underpinned by a clear top-level institutional design, with state-owned financial institutions playing an important role in financial markets. In terms of operational mechanisms, coordination is reflected in the alignment of policy objectives, the joint use of policy instruments, and interconnected transmission channels. This paper identifies three key directions for conceptualizing fiscal-monetary coordination in China: strengthening the functional orientation of fiscal policy, reinforcing the public nature of credit allocation, and re-evaluating the space for government borrowing. It further proposes policy recommendations to enhance the effectiveness of such coordination.

The financial cycle, driven by credit expansion and asset price fluctuations, has become increasingly asynchronous with the traditional business cycle and has exerted a growing influence on the real economy. Against the background of weakening trade globalization, rising protectionism, and the restructuring of global value chains（GVC）, it is important to understand how domestic financial conditions shape countries' participation in international production networks and their relative positions in value-added distribution. Using unbalanced panel data for 71 countries and regions from 1995 to 2021, this paper examines the impact of domestic financial cycles on GVC participation and GVC position. By incorporating financial cycles into the analysis of GVC adjustment, this paper provides a financial perspective for understanding the reconfiguration of global production.
The empirical results show that an upward financial cycle significantly increases GVC participation and improves GVC position, while a downward financial cycle has the opposite effect. This finding remains robust after addressing potential endogeneity, replacing the core explanatory variable, excluding special samples and extreme values, and controlling for heterogeneous effects associated with global financial cycles and trade protection shocks. The economic magnitude is also meaningful: a typical transition from financial prosperity to contraction leads to a sizeable decline in GVC participation, and in the case of China, such a transition may result in a downward movement of about one rank in GVC position.
Mechanism analysis indicates that financial cycles affect GVC adjustment mainly through four channels: trade finance, aggregate demand, exchange rate movements, and uncertainty. During an upward financial cycle, credit expansion and higher risk appetite improve the availability of trade finance, support intermediate goods imports and export order fulfillment, and help firms maintain cross-border production links. Financial expansion also stimulates aggregate demand, thereby enlarging international trade and intermediate input demand. In addition, financial cycles influence exchange rates, which may have differentiated effects: currency appreciation can weaken export price competitiveness and restrain GVC participation, but it can also reduce the cost of imported advanced inputs and facilitate upgrading. Moreover, financial downturns increase macroeconomic uncertainty, raise risk premiums, and discourage firms from undertaking long-term and irreversible investment in global production networks.
Heterogeneity analysis further shows that advanced economies are less affected by financial cycle fluctuations than emerging market and developing economies, reflecting differences in financial depth, financing structure, and policy capacity. Economies with floating exchange rate regimes are more sensitive to financial cycle shocks, while fixed exchange rate arrangements can partly stabilize exchange rate expectations and reduce cross-border trade risks. Macroprudential policies can also weaken the impact of financial cycles, especially on GVC participation, by smoothing credit fluctuations and stabilizing trade finance. Further mitigation tests show that fixed exchange rate arrangements and macroprudential policies operate through different mechanisms: the former mainly stabilizes exchange rate expectations, whereas the latter smooths credit cycles, stabilizes trade finance, and reduces macroeconomic uncertainty. These findings provide policy implications for coordinating financial stability, globalized production, and trade gains, and suggest that China should combine financial-cycle management with policies aimed at upgrading its GVC position.

The rapid proliferation of regional trade agreements（RTAs）has formed an overlapping global RTA rule network, yet how RTA deepening affects foreign direct investment（FDI）remains underexplored. Existing studies predominantly focus on bilateral agreements or specific provisions, overlooking network structure and its nonlinear, interactive effects on FDI and outward FDI（OFDI）. This paper combines firm-level FDI data covering 216 home and 216 host countries（2003-2022）with the World Bank Deep Trade Agreements database, applying complex network methods to examine how RTA provision depth and countries' network positions jointly influence FDI and OFDI.This paper constructs a weighted network where edge weights are based on the vertical depth of provisions. Countries' network centrality is measured as the sum of weighted connections to all partners, reflecting both the quantity and depth of their RTA engagements.
Consistent with the theoretical expectations, the empirical results reveal pronounced nonlinearities. Specifically, host country network centrality has an inverted-U relationship with FDI, while home country centrality follows a U-shape relationship with OFDI. The turning point for OFDI occurs earlier than that for FDI, indicating that a country can start reaping outward investment benefits at a lower level of network embeddedness.For host countries, the upward segment reflects the positive impacts of industrial linkages, technology spillovers, and institutional improvements. For home countries, the U-shaped relationship is driven by technological upgrading（imitation to innovation）and financial constraints allevation.
Substantial heterogeneity exists across rule types, country groups, and investment modes. Centrality in investment liberalization, investment protection, and trade facilitation enhances FDI, whereas centrality in trade regulation, trade faciliation, investment regulation and investment liberalization promotes OFDI. In developed economies, higher centrality stimulates OFDI, in developing economies it attracts FDI. Host country centrality is more associated with vertical and greenfield FDI, while home country centrality favors horizontal OFDI and cross-border M&As.
The paper also idewtifies synergy and dilution effects in bilateral rule networks. Similarity in network centrality promotes bilateral FDI.However;, a new bilateral RTA dilutes this positive impact. This dilution is stronger when both countries are already deeply embedded in external RTA networks, with high-centrality countries experiencing a more drastic drop in marginal benefits. This finding reveals the hidden costs of network overlap.Further analysis shows the sum of centralities has a U-shape with bilateral FDI and the difference an inverted-U, confirming that synergy and dilution depend on relative network positions.
By moving beyond single-agreement analysis and incorporating the network structure with the functional heterogeneity across provisions, this study contributes to the literature on deep trade agreements and international investment. The findings offer policy implications for China's high‑standard Free Trade Zone network expansion during the 15th Five‑Year Plan period, adopt gradient embedding by prioritizing RCEP and Belt and Road key nodes while narrowing gaps with CPTPP and DEPA through domestic pilots, differentiate provisions by partner, and balancing synergy with dilution by deepening ties with similar centrality partners like Australia and New Zealand, avoiding dense regions like ASEAN, and expanding to peripheral economies in South America, Africa, and Central Asia.

In recent years, resolving local government debt risks has become a central issue in China's macroeconomic governance. Debt swaps replace high-risk local government debt with lower-risk government bonds, contributing to fiscal stability. However, while beneficial for fiscal management, debt swaps also generate spillover effects on the financial sector, particularly on city commercial banks（CCBs）, which are more vulnerable to liquidity risk. This paper develops a theoretical model based on the bank loan-deposit profit framework to explore how debt swaps affect the liquidity risk of CCBs. The study uses data from 87 CCBs from 2015 to 2018 and municipal-level debt swap bond issuance data to empirically examine this relationship.
The research finds that debt swaps significantly increase liquidity risk for CCBs. While debt swaps improve asset quality by converting high-risk loans into low-risk government bonds, they also lower asset returns, prompting banks to seek higher yields by allocating capital to riskier, higher-return assets. The study identifies two main effects: the asset transformation effect, which improves asset quality by reducing non-performing loans（NPLs）, and the risk-taking effect, where lower returns from government bonds push banks to take on higher risk. Further analysis reveals a nonlinear relationship between debt swaps and liquidity risk. Banks with higher initial liquidity levels tend to engage more in profit-seeking behavior, leading to higher liquidity risk post-debt swap. In contrast, banks with lower liquidity levels exhibit stronger risk aversion and are less likely to exacerbate liquidity risk. This suggests that the impact of debt swaps on liquidity risk varies based on the banks' initial liquidity conditions. Additionally, the study finds that debt swaps encourage the growth of shadow banking activities. As CCBs face reduced returns from government bonds, they turn to off-balance-sheet channels to allocate high-risk assets. Although the governance of shadow banking in China has achieved initial results, the potential financial risks caused by debt swap still need to be taken seriously in the context of a new round of large-scale debt issuance.
The study's findings provide empirical evidence on how fiscal risk resolution through debt swaps can translate into financial risks for banks. The article offers policy recommendations to mitigate these risks: Firstly, policymakers should carefully monitor the risk spillover effects of debt swaps on CCBs to prevent systemic financial instability, fully leverage the positive effects of debt-for-asset swaps on mitigating bank liquidity risks and appropriately enhance the collateral eligibility of local government bonds. Secondly, debt swap policies should follow market principles, with bond pricing determined by the market and proper management of long-term and directed placement bonds. In the long run, the sustainability of debt should be achieved through fundamental institutional reforms such as the central-local fiscal and tax system, local performance evaluation mechanisms for officials, and the delineation of government-market boundaries. Thirdly, regulators should strengthen risk preference management for CCBs, particularly those with higher capital adequacy and lower NPL ratios, to prevent excessive risk-taking in the pursuit of profits. These measures aim to prevent secondary financial risks and improve coordination between fiscal and financial policies.

Against the backdrop of accelerating the establishment of a new development paradigm and the expansion of high-standard opening-up, Chinese firms are deeply engaging in international markets through overseas operations, cross-border equity and debt financing. However, the increasingly complex and volatile external environment has introduced uncertainties into firms' cross-border operations. Given that resource allocation affects firms' ability to cope with such uncertainties, optimizing foreign cash management has become a critical decision for internationally active firms, functioning both as a financial strategy that drives performance and as accounting information disclosed in annual reports that guides investor expectations. At present, the two-way opening-up of the financial sector has created an institutional interface for cross-border liquidity pools, enabling firms to transcend geographical constraints by establishing offshore funding platforms or overseas treasury centers. Nevertheless, under the compounded pressures of divergent foreign exchange controls, heterogeneous tax regimes across jurisdictions, and intensifying turbulence in international financial markets, cross-border cash allocation exposes firms to risks like exchange rate fluctuations, credit defaults, liquidity shortfalls, and regulatory compliance challenges. Several firms have faced inquiries from stock exchanges regarding matters such as the verifiability of foreign cash, adherence to safety and compliance requirements, and associated audit risks.
To address the benefit-risk trade-off in foreign cash holdings among firms with international business, this paper hand-collects detailed cash data from the annual reports of A-share listed firms, and develops a theoretical framework to examine how cross-border cash allocation affects firm resilience from the perspectives of financial performance fluctuations and investor reactions. The findings indicate that foreign cash holdings have a positive but threshold-driven effect on firm resilience. While holding an appropriate amount of foreign cash helps sustain corporate earnings and mitigate stock price volatility, excessive foreign cash holdings can undermine resilience, making it a double-edged sword. Furthermore, moderate foreign cash reserves help firms buffer against exchange rate and liquidity risks while laying the groundwork for flexible asset allocation and improved resource deployment efficiency. Cross-border risk buffering and asset allocation capabilities serve as mediating mechanisms through which foreign cash holdings exert a positive effect on the resilience of firms with international business. The heterogeneity analysis reveals that the positive relationship between foreign cash and firm resilience is particularly evident in subsamples with superior cash management abilities and higher growth rates of real overseas operations.
Overall, coordinating domestic and overseas liquidity helps secure the supply and utilization of resources for firms with international business, thereby bolstering their resilience to external uncertainties. By extending the literature on the economic consequences of foreign cash holdings and identifying the determinants of firm resilience in non-crisis contexts, this study provides theoretical guidance for multinational corporations seeking to optimize global capital management, and offers insights for regulators in enforcing foreign exchange oversight and disclosure standards.

In the face of increasingly fierce international competition, Chinese enterprises urgently need to obtain external resources and knowledge through open innovation. However, open innovation imposes higher requirements on sustained financial support, information transparency, and collaborative governance. In practice, firms still face constraints such as difficulties for external stakeholders to identify firm quality, insufficient cooperative trust, and unstable resource acquisition.
This paper examines the effect of bank-firm common investors on corporate open innovation from a neutral third-party perspective. Bank-firm common ownership refer to institutional investors that simultaneously hold shares in both banks and non-financial firms. Since the returns of bank-firm common ownership depend on both firm growth and bank asset quality, they have incentives to improve the overall value of their investment portfolios by strengthening monitoring, certification, and information transmission.
Using a sample of Chinese A-share non-financial listed firms from 2010 to 2023, this paper constructs a bank-firm common investor measure based on common institutional shareholdings in firms and their lending banks. Corporate open innovation is measured by the ratio of jointly applied invention patents to total invention patent applications, which captures firms' preference for collaborative and external knowledge-based innovation. The empirical results show that bank-firm common investors significantly promote corporate open innovation. This conclusion remains robust after replacing the core explanatory variable and dependent variable, applying the Heckman two-stage model, conducting propensity score matching, using instrumental variable estimation, and employing the one-period-ahead dependent variable.
Mechanism tests further indicate that bank-firm common investors promote open innovation through three channels. Firstly, they enhance firms' ability to identify and integrate external knowledge by improving the external information environment and increasing firms' access to technologically relevant knowledge pools. Secondly, they improve financing conditions by increasing long-term loan support and reducing firms' tendency toward financialization, thereby ensuring more stable resource allocation for collaborative R&D activities. Thirdly;, they strengthen governance by improving corporate governance quality and reducing default risk, which helps lower agency problems, enhance cooperation credibility, and reduce trust costs in cross-organizational innovation.
Further heterogeneity tests show that the positive effect is stronger in regions with higher marketization levels, and when the commonly held banks are small and medium-sized banks rather than the“Big Five”state-owned banks;, suggesting that flexible information-processing mechanisms are important for supporting open innovation.
This study enriches the literature on the determinants of open innovation and the economic consequences of bank-firm common ownership. It also provides policy implications for strengthening information disclosure, improving investor protection, promoting long-term institutional investment, and building a coordinated financial system that jointly supports corporate open innovation.