China Financial Stability Evaluation

This paper evaluates the stability of financial systems in china and aims at the construction of the index system and model on early warning of financial risks. First,it chooses23qualitative and quantitative indexes reflecting early warning of financial risk from three aspects of macroeconomy and financial systems and financial market. Then it applies factor analysis to compute the factor scores after extracting4common factors from those23indexes.The results show that the stabality conditions of china reaches2peak points respectively in2003and2007during the period of2001-2010,and the weakest stability appears in2007and that the financial stability is on the fluctuation during these10years.Finally,this paper builds up a logit model using the4common factors which comes from factor analysis. The model is in the final form of ln(p/(1-p))=-3.5-8.9f1-3.1f2+1.4f3-4.1f4,and its results are as follows:(1)when the value of f1,f2f4rises,the occurrence incidence of financial instability,will fall；(2)when the value of f3rises,the occurrence incidence will also rise.