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Systemic Risk in the Chinese Financial System: Measuring and Ranking

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  • Abdelkader Derbali

Abstract

In this article, we try to analyze the systemic risk of the Chinese financial institutions following the subprime crisis of 2007. We use a sample of seventy Chinese financial institutions during the period from January 2, 2008 to June 30, 2015. We employ the SRISK as a measure of systemic risk. This measure is used to determine financial institutions activity default and its potential to become systemic in whole financial system. The SRISK measure indicates not only individual financial institutions vulnerability but also the default dependency structure between financial institutions and the Chinese financial market returns. Also, these measures can be moderately useful for identifying systematically important financial institutions. Besides, the empirical findings indicate that the systemic risk of the Chinese financial institutions is very important. The contribution of each financial institution to the risk of the whole financial system in China is very significant. We show that the dynamic conditional correlation between financial institutions and market return is the main factor of the systemic risk in China. The results of systemic risk decomposition show that the institution which has the higher level of debt contributes positively and extremely to systemic risk.

Suggested Citation

  • Abdelkader Derbali, 2017. "Systemic Risk in the Chinese Financial System: Measuring and Ranking," Chinese Economy, Taylor & Francis Journals, vol. 50(1), pages 34-58, January.
    • Handle: RePEc:mes:chinec:v:50:y:2017:i:1:p:34-58
    DOI: 10.1080/10971475.2016.1211904
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    Cited by:

    1. Alexey Vasilenko, 2018. "Systemic Risk and Financial Fragility in the Chinese Economy: A Dynamic Factor Model Approach," Bank of Russia Working Paper Series wps30, Bank of Russia.
    2. Wang, Gang-Jin & Xie, Chi & Zhao, Longfeng & Jiang, Zhi-Qiang, 2018. "Volatility connectedness in the Chinese banking system: Do state-owned commercial banks contribute more?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 57(C), pages 205-230.
    3. Omid Farkhondeh Rouz & Hossein Sohrabi Vafa & Arash Sioofy Khoojine & Sajjad Pashay Amiri, 2024. "Interconnectedness of systemic risk in the Chinese economy: the Granger causality and CISS indicator approach," Risk Management, Palgrave Macmillan, vol. 26(2), pages 1-24, May.
    4. Pham, Thach N. & Powell, Robert & Bannigidadmath, Deepa, 2021. "Systemically important banks in Asian emerging markets: Evidence from four systemic risk measures," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    5. Abdelkader DERBALI & Ali LAMOUCHI, 2020. "RETRACTED ARTICLE: The triple (T3) dimension of systemic risk: identifying systemically important banks in Eurozone Abstract: Editor’s Note - This paper has been retracted from our journal due to bogu," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11, pages 87-122, June.

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