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Evolution of the Chinese guarantee network under financial crisis and stimulus program

Author

Listed:
  • Yingli Wang

    (Chinese Academy of Sciences
    The University of Chinese Academy of Sciences)

  • Qingpeng Zhang

    (City University of Hong Kong, Kowloon)

  • Xiaoguang Yang

    (Chinese Academy of Sciences
    The University of Chinese Academy of Sciences)

Abstract

Our knowledge about the evolution of guarantee network in downturn period is limited due to the lack of comprehensive data of the whole credit system. Here we analyze the dynamic Chinese guarantee network constructed from a comprehensive bank loan dataset that accounts for nearly 80% total loans in China, during 01/2007-03/2012. The results show that, first, during the 2007-2008 global financial crisis, the guarantee network became smaller, less connected and more stable because of many bankruptcies; second, the stimulus program encouraged mutual guarantee behaviors, resulting in highly reciprocal and fragile network structure; third, the following monetary policy adjustment enhanced the resilience of the guarantee network by reducing mutual guarantees. Interestingly, our work reveals that the financial crisis made the network more resilient, and conversely, the government bailout degenerated network resilience. These counterintuitive findings can provide new insight into the resilience of real-world credit system under external shocks or rescues.

Suggested Citation

  • Yingli Wang & Qingpeng Zhang & Xiaoguang Yang, 2020. "Evolution of the Chinese guarantee network under financial crisis and stimulus program," Nature Communications, Nature, vol. 11(1), pages 1-11, December.
    • Handle: RePEc:nat:natcom:v:11:y:2020:i:1:d:10.1038_s41467-020-16535-8
    DOI: 10.1038/s41467-020-16535-8
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    Cited by:

    1. Shan, Yuan George & Wang, Yirui & Wu, Wuqing & Zhen, Weihao, 2023. "Does the Achilles heel of guarantee networks drive financial distress?," International Review of Financial Analysis, Elsevier, vol. 87(C).
    2. Zhibin Niu & Junqi Wu & Dawei Cheng & Jiawan Zhang, 2021. "Regshock: Interactive Visual Analytics of Systemic Risk in Financial Networks," Papers 2104.11863, arXiv.org.
    3. Xinyu Wang & Liang Zhao & Ning Zhang & Liu Feng & Haibo Lin, 2022. "Stability of China's Stock Market: Measure and Forecast by Ricci Curvature on Network," Papers 2204.06692, arXiv.org.

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