The pressure upon local governments to redeem their debt could affect government fiscal ability. It could consequently affect their fiscal policies on corporations, which might distort corporate innovation. Based on the data of Chinese Shanghai and Shenzhen A-share listed companies and the local government implicit short-term debt financed by local government financing vehicles (LGFVs) in 31 provinces, this paper shows that local government debt (LGD) negatively affects corporate R&D investment in China, thereby suggesting a strong crowding-out effect. The crowding-out effect is more pronounced when the firm is a non-state-owned enterprise (NSOE), the firm’s size is small, the firm’s age is young, or the firm is in the lower market competition. This paper provide evidence by interacting the terms that local government actions, such as consumption of fiscal resources, strengthening tax collection efforts, or consumption of credit resources, might partially account for the crowding-out effect. This study illustrates the innovation costs of local government debt.

Preliminary explorations have been conducted on the SO2 emission trading system (ETS) in China, but existing studies have paid little attention to the system's emission reduction effect and the effect mechanism. Based on panel data of Chinese cities, this paper empirically examines the influence and mechanism of the SO2 ETS on urban SO2 emission. In addition, considering the role of government in local environmental governance, this paper also examines synergies between government environmental regulations and the SO2 ETS. The SO2 ETS significantly suppresses urban SO2 emission, but under more extreme levels of urban SO2 pollution, this emission reduction effect gradually weakens until it is no longer significant. The implementation of more stringent environmental regulations by local governments strengthens the emission reduction effect. The analysis of intermediary effects shows that the SO2 ETS promotes the reduction of urban SO2 emission by stimulating green technological innovation, promoting industrial structure adjustment, and channeling investment towards green assets, with the latter intermediary effect being stronger than the former two. This paper affirms the important role of ETSs in the development of the green economy and provides an empirical basis for countries to introduce market mechanisms to solve environmental challenges and leverage the role of government environmental regulation.

State‐owned industrial enterprises' (SOIEs') non‐R&D innovation activities have been ignored by scholars. Using panel data on the regions of China, this paper examines the impact of non‐R&D innovation by SOIEs on regional total factor productivity (TFP) with panel Co‐integration and a panel vector error correction (VEC) model. The results show that SOIEs' non‐R&D innovation is important for economic growth, and different types of non‐R&D innovations have heterogeneous effects on regional TFP. Foreign technology acquisition (FTA) has more positive long‐term and short‐term impacts on regional TFP than do R&D expenditures. Technology assimilation (TA) improves regional TFP, but the effect of R&D expenditures on innovation is higher than that of TA in the eastern region. Domestic technology purchases (DTPs) have no significant impact on regional TFP in the central and western regions and even have a negative effect in the eastern region. Technology transformation (TT) has a stronger long‐term positive effect on regional TFP than R&D expenditures, but R&D innovation has a stronger short‐term positive effect than TT. We examine the impact of SOIEs' non‐R&D innovation on regional economic efficiency and, to a degree, identify the source of its effect on innovation. This study emphasizes the critical function of technology diffusion in fostering economic efficiency.