The Reserch On The Measure, Contagion And Prevention Of Systemic Financial Risk In China

Entering the21st century, the Global systemic financial risk continue brewing and fermentation, then upgrade into systemic financial crisis and spread across the world because of the outbreak of the subprime mortgage crisis, which has become the worst financial crisis since1930s. Think about this financial crisis, although there are some conflicts and argument, the fundamental census of deeply understanding and guard and resolve systemic financial risk to beware of breaking out new crisis.Financial crisis is outbreak of systemic financial risk accumulation, which is not necessarily participated by exogenous shock with strong elusiveness and complexity. Therefore, it is difficult to perfect forecast the breaking time of financial crisis and it is better late than never to response and remedy after the crisis.Meanwhile, we are sure that it is a long process of risk accumulation before systemic financial risk breaking out into crisis----gradual accumulation and fast release are the obvious character of systemic financial crisis. Although it is very hidden, practice workers and academic circles agree that we can recognize and catch the accumulation and take effective methods to restrict it and release the risk of excessive accumulation by intensive study and monitoring. In this context, in order to precaution and defuse systemic financial risk, the theme of intensively studying systemic financial risk has become a common concern.Moreover, during financial industry improvement, the disadvantages and unbalance of financial system is exposing. Disintermediation is deepening, the proportion of banking is too large, leverage ratio of financial department is higher, maturity mismatch and liquidity risk coexist, shadow banking regulation and supervision is out of place and default risk of local government finance platform is rising. All the above elements make vulnerability of financial system rising.At the same time, we should realize that with upgrading of financial liberation and virtualization, the character of finance separating from real economy appears, a lot of money floats outside real economy, some banking institutions driven by short-term interest, borrow interbank money, use bank finance and trust investment as a means to make money with money, which make finance from with abundant liquidity to out of money and real enterprise, especially smaller companies, lack of money seriously. Excessive virtualization in Chinese finance has immeasurable negative impact on macro economy to make it involved in a huge crisis and lead to systemic risk accumulation. At last, since reform and opening-up in finance, Chinese financial system, especially banking system, have the excessive responsibility to keep our economy increasing continuously and steadily, which cannot make financial resources distributed according to market rules and lead to unbalance of financial system.Under the above background, this paper bases on the vulnerability of financial system to discuss the incentive, contagion, monitoring and guard against systemic financial risk in China from multi-dimensions under the new situation and gives scientific and reasonable measurement and explanation. The paper launches the research by combing quantitative research method and qualitative analytic method. Firstly, research on systemic financial risk specialty. The paper research on systemic financial risk from causes of overall risk, risk level of department, contagion of industry and region and risk importance of individual institution.Secondly, research on the guard against systemic financial risk. The paper analyzes how to monitor the accumulation of systemic financial risk from early warning system and macro-prudential policy and how to effectively contain destructive power of systemic financial risk.First of all, the research on the formation and accumulation of systemic financial risk shows that financial fragility is the inner reason which causes the formation of systemic financial risk, financial imbalances is the external cause of the accumulating of the systemic financial risk in our country. The combination that evolved together leads to the steady accumulation of systemic financial risk.From the point of view of fact, the main causes of systemic financial risk accumulation are higher investment portion, economy period fluctuation, excessive volatility in asset price, higher local government debt, rapid expansion of shadow banking system, accumulation of real estate bubble and the rapid rise of leverage ratio.This paper introduces CCA method to measure the risk level of the overall financial sector. The conclusion shows the default probability of financial department in China is nearly0for most of the time. From March2008, default probability of financial department has soared but it is little possibility of breaking out systemic risks in China’s financial department. However, the paper emphasizes the probability of default which is rising without obvious omen. Moreover, from the balance sheet of risk adjustment, the owner’s equity of financial department has decreased which shows American financial crisis has materially influenced china"s financial department. Overall, the systemic financial risk in our country is accumulating.Next, the paper theoretically analyzes the relationship between the correlation and systemic risk.Then the analysis of risk contagion in financial industry shows that the contagion between financial industries rised significantly after the crisis.By comparison, the contagion is the strongest in banking, then securities industry, the weakest in insurance and other industries.The paper also shows that the contagion of all industries is predominant and the interaction of multi-industries is not obvious on the plateau and the contagion of multi-industries is elevating obviously in financial crisis. In the crisis, the impact of banking on other industries is rising to now and security is the most affected, which shows when crisis happens, the overflow effect of banking negative externality is clear, while security is affected most which shows that when the crisis happens, banking negative externalities spillover effect is obvious.The contagion specialty of provincial systemic financial risk shows systemic financial risk has obvious regional asymmetric contagion specialty, that is, the main infected regions are developed provinces in the east, on the other hand, they are less infected by other provinces. Besides, some provinces have strong contagion in certain regions.The infected regions are the province which have single economic development model. That is because these provinces have single economic development model and higher interdependency to other provinces, which are easier influenced by other regions.Next, the paper analyzs the prevention of systemic financial risk problem from the points of view of early warning mechanism. This paper constructs the pressure index in our country which reflects systemic financial risk accumulation and analyzes its trend.Then this paper introduces the dynamic model of average (DMA) method to prove its good ability to predict financial pressure index of our country. Further,this paper analyzes the application of financial risk early warning mechanism under the condition of the complex adaptive system.At last, the paper analyzs the prevention of systemic financial risk problem from the points of view of macro prudence policy. The paper analyzs the goals, tools and institutional arrangement of the macro-prudential policy of our country based on the structure of the macro-prudential policy framework. At the same, the paper identifies the systemic importance of financial institutions of listed banks which uses the risk "share" approach.The result shows that the systemic importance of financial institutions ties up with their scale, the big four SOCB to systemic risk is biggest, national joint-stock commercial bank is second, city commercial banks smallest. In addition, the systemic importance index of bank institutions shows periodic characters. Finally, besides the scale, fungibility, complexity and relativity of stock-listed commercial bank closely tie up with its systemic importance.Finally, the validity check of macro prudence policy instrument shows, RRR is the most effective in all the prudential regulation policy instrument. In fact, China has established conversion period regulatory mechanism whose core is differentiated reserve fund dynamic regulation. Other policy instrument has some problems which needs combining with more other policy instrument. In addition, the individual variation of Chinese banking industry require more specific policy instrument.Above all, financial fragility is the inner reason which causes the formation of systemic financial risk, financial imbalances is the external cause of the accumulating of the systemic financial risk in our country. The combination that evolved together leads to the steady accumulation of systemic financial risk.The features of systemic financial risk in our country can be summarized that at the present, there won’t be happen any large-scale financial crisis in China, however, the steady accumulation of systemic financial risk is the fact that does not dispute.The contagion of systemic financial risk between the financial industry in China is in enhancement, bank financial institutions negative externality is obvious. There have significant asymmetric contagion effects of systemic financial risk between the regions of china, especially pay attention to the risk prevention of region of single economic structure. Through the systemic financial risk prevention research in China, this paper argues that the introduction of advanced prediction technology can improve the systemic financial risk early warning level in our country. Our country needs to further perfect the macro-prudential policy system, strengthen the supervision of systemically important financial institutions, improve the effect of macro-prudential policy tools and play a good role of macro-prudential policy tools which can reagulate the countercyclical.