Abstract: Using a newly developed network analysis, this paper explores the architecture and determinants of the transmission of financial shocks among China’s financial institutions while controlling for the influence from financial sectors in four major global financial markets during 2008~2015. We find: 1) though banks still dominate China’s financial system, non-bank financial institutions have considerable influence as well; 2) the role that each financial institution plays in the transmission of financial shocks is time-varying rather than static; 3) China’s financial sector exerts considerable influence to global financial markets, especially to the Japanese financial sector; and 4) Macro (such as monetary policy) related factors dominate in determining the influence from others while firm-specific factors dominate in determining the influence to others in the transmission of financial shocks. We believe that sufficient attention should be given to international spill-over effects of intervention policies and the impact of non-bank financial institutions to financial stability.

Full report ：WP No.20174 Transmission of Financial Shocks among Chinese Financial Institutions A Global Perspective.pdf