Unit root test results of each variable.

While higher interest rates increase the cost of credit financing for businesses, this study finds that the direct impact of this traditional credit transmission mechanism on corporate bankruptcy risk is limited. Instead, our research reveals that changes in corporate behavior induced by rising debt financing costs are the root cause of bankruptcy risk. In the short term, an increase in interest rates drives businesses to substitute supply chain financing for credit financing in pursuit of profit maximization. This mismatch of short-term debt and long-term investments undermines the sustainability of the supply chain, ultimately reducing financial security—sacrificing safety for profitability. In the long term, higher interest rates exacerbate the overcapacity problem in industries, increasing the unsustainability of the production and sales balance. Using data from China’s construction industry, this study empirically tests these findings and, based on the main conclusions, provides policy suggestions regarding the long- and short-term effects of monetary policy on the sustainable development of China’s construction industry: (1) focus on short-term interest rate risks and be vigilant against commercial credit bubbles; (2) long-term monetary policy should prioritize industrial structure optimization.

Title: Firm-Level Analysis of Bubble Formation in Chinese Real Estate Equities Economic Modelling This study investigates evidence of bubble preponderance in China’s real estate sector and seeks to identify the main determinants of exuberance in the equity prices of listed developers, relative to their dividend-based fundamentals. In contrast to the focus on property prices and rents that characterizes prior research, we emphasize real estate equity prices and firm-specific metrics. This shift in perspective, and the corresponding use of a dividend-based proxy, separates speculative-driven bubbles from those linked to fundamentals and thus enables us to better interpret the nature of exuberance as well as assess the alignment—or misalignment—between prices and fundamentals. Our empirical examination, based on the equity prices of 25 publicly listed developers included in the BICHODVP Chinese benchmark real estate index, detects bubbles in developer equity prices as well as the presence of common bubble dynamics among BICHODVP index components. Additionally, by incorporating firm-specific characteristics and macroeconomic variables, we provide a more granular understanding of how company characteristics—especially corporate valuation multiples and leverage—interact with broader market and policy conditions to generate equity price bubbles in the real estate sector.

Selection of the optimal lag order.

In 2023, the average price of real estate in China was approximately ****** yuan per square meter, representing a decrease from the previous year. Rising prices in the real estate market Since the 1998 housing reform, property prices in China have been rising continuously. Housing in the country is now often unaffordable, especially considering the modest per capita income of Chinese households. Shanghai and Beijing even have some of the most competitive real estate markets in the world. The rapid growth in housing prices has increased wealth among homeowners, while it also led to a culture of speculation among buyers and real estate developers. Housing was treated as investments, with owners expecting the prices to grow further every year. Risk factors The expectation of a steadily growing real estate market has created a property bubble and a potential debt crisis. As Chinese real estate giants, such as China Evergrande and Country Garden, operate by continuously acquiring land plots and initiating new projects, which often require substantial loans and investments, a slowdown in property demands or a decline in home prices can significantly affect the financial situation of these companies, putting China’s banks in a vulnerable position. In addition, due to a lack of regulations and monetary constraints, the long-term maintenance issues of high-rise apartments are also a concern to the sustainable development of China’s cities.

Comparison of the effectiveness of measurement models.

Johansen cointegration test results for each given variable.

In 2024, real estate developers in China completed ****** million square meters of floor space, representing a significant drop of almost ** percent from the previous year. Housing completion figures in China have generally decreased over the last decade, owing to structural challenges in the real estate industry. The ups and downs of the Chinese real estate market Following the marketization of the housing sector in the late *****, China's real estate industry has enjoyed more than two decades of prosperity. The output value of the sector multiplied several times, with home prices rising sharply across the country and some properties in urban centers such as Beijing and Shanghai being among the most expensive in the world. While being a pillar industry in the country’s economy, the real estate sector has also stimulated the development of many related industries, such as construction and financial services. The property bubble and unfinished buildings The former expansion of the housing market had created a considerable bubble in the sector, which finally burst during the COVID-19 pandemic. Many apartments, especially the tower blocks in small or medium-sized cities and towns remained unsold or left unoccupied, leading to financial turmoil for real estate developers. The failure of major market players such as China Evergrande and Country Garden resulted in more than a million unfinished apartments in China.

This paper uses the test proposed by Generalized Supremum Augmented Dickey-Fuller to identify whether there are multiple bubbles in copper price. The empirical results show that base on market fundamentals, there are seven bubbles existed from January 1980 to March 2023. Through analyses, the first two bubbles can be explained by the demand from Japan by the industry concentration and persistent supply constraint. The third to sixth bubbles are mainly negatively impacted by the global financial crisis and growing demand of China. The last bubble is caused by the economic recovery from Covid-19. The logit regression has stated that aluminum price, copper production, all metals index and GDP have a positive impact on copper bubbles, while China’s copper imports and precious metals price negatively explains copper bubbles. The main contributions are the investigation of the copper price bubbles, its determinants and the different technique of GSADF to detect copper price bubbles. Furthermore, it provides helpful information for those investors to make reasonable investment decisions and thus, avoid potential price risk.

Regression results of default risk on interest rate.

Interest rate, enterprise bankruptcy risk, and financing structure.

Robustness testing of different coefficients for non-current liabilities conversion.

Bubble length and price changes during bubble episodes.