Volume 14, Issue 1

Business cycles are often regarded as aggregate phenomena. However, against the backdrop of rapid structural transformation in Chinese economy, they are also influenced by cyclical changes in various sectors and the evolution of the economic network structure. From the perspective of production networks, this paper analyzes the causes of business cycles in China. Firstly, a theoretical model is constructed to discuss the impact of structural characteristics and transformation processes of production networks on the relationship between sectoral shocks and economic fluctuations. Subsequently, using Bayesian structural vector autoregressive (SVAR) model with heterogeneous constraints, based on the China Industry Productivity Database (CIP/China KLEMS), the paper empirically identifies the source sectors of China’s business cycles from 1978 to 2018. The research findings are as follows: (1) Business cycles can be attributed to a combination of a few sectoral shocks, which are propagated and amplified through input-output linkages; (2) As China’s production network evolves, sectors that drive business cycles vary across times, transiting from labor-intensive sectors to capital-intensive sectors; (3) Construction and real estate sector is the key node in the production network. On the one hand, shocks to the key node sector are widely propagated to other sectors. On the other hand, shocks to their upstream and downstream sectors, in turn, affect the macroeconomy through the key node. These structural dynamics have shaped China’s business cycles. This paper reveals the structural characteristics of China’s business cycles, providing significant academic and policy value for understanding the relationship between macroeconomic performance and sectoral structure, as well as for maintaining stable economic growth.

This paper examines the impact of growth of the service sector on economic fluctuations and its underlying mechanisms from the perspective of global production networks. We analyze this mechanism by constructing general equilibrium model of production networks and empirically test it by using nearly three decades of global input-output data and simultaneous equations model. The results show that 10% increase in the share of initial inputs and final consumption in the service sector leads to reduction in the sparsity of the production network by 0.42% to 1.34%; 10% reduction in the sparsity of the production network results in decrease in the magnitude of economic fluctuations by 0.79 to 1.56 units. This indicates that the rise in the share of initial inputs and final consumption in the service sector associated with the growth of the service sector tends to reduce the sparsity of production network linkages, thereby helping to smooth economic fluctuations. Counterfactual analysis reveals that if China’s service sector share, industry intermediate input share, service sector productivity fluctuations are replaced with the corresponding data from the United States, China’s overall economic fluctuations would decrease to varying degrees, with the largest contributions coming from changes in the service sector share and industry intermediate input share (69.8% and 73.6%, respectively). This study implies that actively promoting the development of the service sector has profound strategic significance for stabilizing growth, adjusting structures, and reducing fluctuations in the Chinese economy.

The proposal of developing new quality productive forces is based on the reality of the domestic economy and the complex international environment in the new era, to develop advanced productive forces needed for Chinese modernization. This paper systematically analyzes three characteristics of new quality productive forces: green, digital and high-tech, and demonstrates the key driving role of technological innovation in accelerating the formation of new quality productive forces. The results show that technological innovation strongly supports the formation of the modern industrial system through basic, critical and disruptive technological breakthroughs and their application to the industrial system, through the transformation of traditional industries, the promotion of emerging industries, and the derivation of future industries. The study shows that the new quality productive forces can help to enhance the value of the industrial chain in developing countries, contribute to the global economic recovery, and form a new economic growth pole. The authors believe that to accelerate technological innovation needed for the development of new quality productive forces, it is necessary to enhance the ability of independent research and development, accelerate breakthroughs in core technologies, seize the commanding heights of technology, and actively build an open technological innovation system.

This study examines the impact of investor sentiment and attention on trading volume and volatility across markets in China, India, and Singapore, with a specific focus on the moderating role of news sentiment in various ESG contexts. Analysing panel data from 2018 to 2023, this study finds that investor sentiment and attention significantly affect trading volume and volatility in China and Singapore, with more pronounced effects observed in high ESG groups, particularly in response to positive and negative news. Although the effects in India are less significant, news sentiment plays a crucial moderating role. These results suggest that investor behaviour is strongly influenced by ESG factors and news sentiment, in line with the signalling theory, which suggests that firms with strong ESG profiles are perceived as more stable and trustworthy. From a managerial perspective, this study highlights the need for companies to maintain robust ESG profiles to attract investor attention and enhance their market stability.

In September 2013, the Chinese government approved establishing Shanghai Pilot Free Trade Zone (SPFTZ), the first Pilot Free Trade Zone (PFTZ) in the country. SPFTZ mainly implements policy and institutional innovation, aiming to extend reform and opening-up, generate the dividends of reform, serve as a trial for new initiatives, and replicate successful experiences nationwide. To explain the impact of SPFTZ on Yangtze River Delta’s (YRD) Economic Development, this paper chooses annual panel data of 41 cities between 2006 and 2022, verifying economic effect of SPFTZ’s establishment on YRD by constructing a Difference-in-Differences (DID) model. Empirical results indicate that the creation of SPFTZ stimulated YRD’s economic development. Further analysis reveals that SPFTZ fosters regional economic growth by enhancing financial circulation and attracting foreign direct investment (FDI). To strengthen SPFTZ’s development, it is essential to optimize the spatial layout of the zone, grant greater autonomy for reform and innovation, and prioritize financial opening and innovation.

This paper proposes an alternative solution to the problem related to the risk that banks incur in the protection of deposits. This solution lies in the use by banks of contingent convertible leasing contracts to face financial distress situations by solidifying their own funds and thus improving the quality of deposit protection. Convertible contingent leases are instruments that are automatically convertible into shares when the bank reaches a level of financial distress. They allow a limited bailout of the bank in times of generalized crisis when they are not able to issue sufficient levels of new equity.