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Systemic Risk in the Chinese Banking Sector

Chondrogiannis, I; Nivorozhkin, E; (2020) Systemic Risk in the Chinese Banking Sector. (UCL CCSEE Working paper series 2021/1). UCL School of Slavonic and East European Studies (SSEES): London, UK. Green open access

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Abstract

We examine the evolution and factors of systemic risk in the Chinese banking sector over the last decade from the perspective of international investors. We apply the SRISK measure of systemic risk to a representative sample of listed Chinese institutions that captures 50-60% of total banking assets and utilize the Granger-causality network-based approach to demonstrate interlinkages among Chinese banks beyond the largest financial institutions. Firstly, we show a dramatic increase in systemic risk after 2011 and the increased contribution of small- and medium-sized banks. Then, we identify causality relationships from housing prices, economic policy uncertainty and shadow banking towards systemic risk and causality from shadow banking to housing prices. According to our results, international concerns about the stability of the Chinese banking system are well justified and a systemic event with international impact could be caused by distress in a Chinese financial institution outside of the group of the largest banks.

Type: Working / discussion paper
Title: Systemic Risk in the Chinese Banking Sector
Open access status: An open access version is available from UCL Discovery
DOI: 10.14324/000.wp.10116941
Publisher version: https://www.ucl.ac.uk/ssees/
Language: English
Keywords: systemic risk, banking, Interconnectedness, Economic policy uncertainty, shadow banking
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES
URI: https://discovery.ucl.ac.uk/id/eprint/10116941
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