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Shifting balances of systemic risk in the Chinese banking sector: Determinants and trends

Nivorozhkin, E; Chondrogiannis, I; (2022) Shifting balances of systemic risk in the Chinese banking sector: Determinants and trends. Journal of International Financial Markets, Institutions and Money , 76 , Article 101465. 10.1016/j.intfin.2021.101465.

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

Type: Article
Title: Shifting balances of systemic risk in the Chinese banking sector: Determinants and trends
DOI: 10.1016/j.intfin.2021.101465
Publisher version: https://doi.org/10.1016/j.intfin.2021.101465
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher's terms and conditions.
Keywords: Systemic risk, Chinese banking sector, 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/10138977
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