IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v251y2025ics0165176525001661.html
   My bibliography  Save this article

Fear of war: Geopolitical risks and the potential impact on local government bonds, stock market and FDI in China

Author

Listed:
  • Wang, Daoping
  • Li, Kangle
  • Shen, Xinyan

Abstract

This study investigates the impact of Taiwan Strait-related geopolitical risk on local government bonds, stock market and FDI in the Chinese mainland. Using data from 10,983 bonds, we find that increased geopolitical risks are associated with higher credit spreads. Provinces with higher FDI and greater foreign trade dependence, short-term bonds, and secondary market trading are more strongly affected. A case study demonstrates that geopolitical risk has an immediate and persistent impact on spreads, peaking within one month and gradually declining afterward. Moreover, heightened geopolitical risk negatively affects provincial FDI inflows and the stock returns of state-owned enterprises.

Suggested Citation

  • Wang, Daoping & Li, Kangle & Shen, Xinyan, 2025. "Fear of war: Geopolitical risks and the potential impact on local government bonds, stock market and FDI in China," Economics Letters, Elsevier, vol. 251(C).
    • Handle: RePEc:eee:ecolet:v:251:y:2025:i:c:s0165176525001661
    DOI: 10.1016/j.econlet.2025.112329
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176525001661
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2025.112329?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Geopolitical risk; Local government bonds; Stock market; FDI;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:251:y:2025:i:c:s0165176525001661. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.