The Effect Of Climate Change On China’s Financial Development

At present, the global climate change is more and more significant, with someuncertainty and diversity. The main climate characteristic including temperature andprecipitation have changed a lot. The specific manifestation includes the rise of globalaverage temperature, the rise of the sea level, the change of precipitation patterns, acidrain and extreme weather which occurred frequently and so on. In China, because ofthe climate change, the frequently and intensity of extreme weather events, such asdrought, floods, tropical cyclones, dust storms, cold waves and frost damage, areconstantly increasing. The climate change has some impacts on the production,people’s life and health, and the smooth running of national economy. The financialindustry which serves and promotes the development of economy is also facing theimpacts of the climate change.This paper analyzes the impacts of climate change on China’s financial industryfrom the theoretical and empirical point. Through the research, the paper expands thestudy of the impact factors of China’s financial development, and the theory has beenverified empirically. At the same time, this paper put forward a series of measures todeal with the impacts of climate change. So the paper has some theoretical andpractical meanings.The basic view of this paper is as follows. Firstly, climate change has broughtadvantage and disadvantage affects to the assets, liabilities and risk exposures ofChina’s banking, insurance and securities industry. Secondly, through the empiricaltest, we can know that the decrease in temperatures and the increase in precipitationhas a negative impact to China’s banking industry, higher temperatures and lowerprecipitation have a negative impact to China’s insurance industry, highertemperatures and the increase of precipitation have a negative impact to China’ssecurities industry. Thirdly, higher temperatures and lower precipitation have anegative impact to China’s financial industry on the whole. The paper uses the data of China’s climate change and financial markets toestablish the multiple linear regression model to analyze. In order to solve themulti-co linearity problem, this paper uses the model of ridge regression. The papercombines the methods of theoretical analysis and empirical analysis, also thequalitative and quantitative analysis to research the impacts of climate change onChina’s financial development in a comprehensive way.Through research, this paper gives conclusion that the climatic factors such astemperature and precipitation changes have advantage and disadvantage affects on theassets, liabilities and risk exposures of China’s financial industry. The paper putforward a series of suggestions for the financial industry to address the climate changein the end, including strengthen the monitoring of climate change information, issuethe green credit by the banking, prevent and transfer the risk by the insurance as wellas improve the mechanism of market access and information disclosure by thesecurities industry. Taken together, the innovation of this paper is to integrate climatechange into the scope of economic impact, and expand the study of factors affectingthe China’s financial development.