15 Dec 2025
The paper titled Standing up for profitability or bowing to political pressure? A study of government economic growth targets and firm performances, by Dr Sheng Zhao, Assistant Professor from the International Business School Suzhou (IBSS) at Xi'an Jiaotong-Liverpool University (XJTLU), and Ruoxuan Liu, a 2024 graduate of IBSS, has been published in China Finance Review International—a CAS Category 1 journal. Focusing on core issues in China’s economic sphere, this study provides important academic insights into the connection between government policies and corporate behaviour.
The core of the paper explores a key question: in what ways do growth targets set by the Chinese government shape the daily operational decisions of enterprises, especially state-owned enterprises (SOEs)?
In China, local governments are required to formulate annual GDP growth targets. These targets are not mere paper figures but are directly linked to the assessment and promotion mechanisms of local officials. The study finds that when GDP targets are set aggressively, SOEs often shoulder most of the resulting political pressure. Many SOEs shift their core focus away from profit maximization, instead choosing to take on higher operational risks, expand their borrowing scale, and increase investment in fixed assets. The results show that while this short-term growth can meet the assessment needs of local officials, it often comes at the cost of sacrificing enterprises’ long-term operational efficiency and their capacity for sustainable development.
Notably, the study reveals that private enterprises are significantly less affected by such pressures. This difference highlights the unique role of SOEs as policy implementers in China’s political and economic system. Further analysis indicates that the aforementioned negative impacts described above are most prominent in the manufacturing industry, among small and medium-sized enterprises (SMEs), and in regions with underdeveloped markets. However, 2015 marked a crucial policy turning point: as China entered the new normal development phase and shifted to a growth model that pursues moderately slower but higher-quality growth, the relevant pressures on SOEs eased significantly, and the adverse correlation between growth targets and corporate performance weakened accordingly.
The study also uncovers a core macro-level pattern: government policies can directly alter firms' behavioural patterns and may even prompt them to take risky measures that are not in line with their long-term interests. The paper clearly explains the delicate balance between political goals and business realities. The academic insights it generates are not only applicable to the Chinese market but also provide valuable points of reference for other economies where the government exerts strong influence.
Sheng Zhao, Assistant Professor in the Department of Economics at Xi’an Jiaotong-Liverpool University, and Deputy Programme Director of the MSc Business Analytics programme at the International Business School Suzhou). He obtained his Ph.D. from the University of Edinburgh in 2019 and subsequently joined XJTLU. His primary research areas include credit andbanking risk management, corporate finance, and regional,urban and energy economics. He has published multiple academic papers in internationally renowned journals, such as: ABS 3-star journals (Journal of International Financial Markets, Institutions and Money; Environmental and Resource Economics; European Journal of Finance; International Review of Financial Analysis; International Journal of Finance and Economics); ABDC-A rated journal (International Review of Economics and Finance; Journal of Cleaner Production); CAS-Zone 1 journal (China Finance Review International). He has previously led a research project funded by the Suzhou Social Science Fund (completed).
Ruoxuan Liu, who graduated from Xi'an Jiaotong-Liverpool University with MSc in Economics and Finance in 2024, is currently pursuing a Ph.D. at Nankai University.
China Finance Review International is a flagship academic journal that broadly covers the Chinese and international financial markets. Founded by Antai College of Economics and Management at Shanghai Jiao Tong University — one of the top universities in Asia — it aims to publish high-quality empirical and theoretical research on important financial and economic issues in the field. Additionally, it is a Category 1 journal in the Chinese Academy of Sciences (CAS) Journal Classification, with an impact factor of 7.6.
15 Dec 2025