The Impact Of The Real Estate Market On The Banking Systemic Risk In China

The financial crisis which happened in the USA, triggered by the subprime in the August 2007, not only hit the American financial system, but also caused a lot of damages in the world financial system of other countries. Although our country suffered damage in this financial crisis is small, relative ly to the developed countries, but that does not mean there is a possibility of the bank systemic risk is small, on the contrary, C hina’s financial system is fragile. The reforms oriented in the real estate market, which lead to rapid rise in house prices since 1998, and there have been a bubble tendencies. While our country enacted a number of measures in order to ensure the healthy operation of the real estate market. But on the whole, China’s real estate market is still running high, which is not conducive to prevent bank systemic risk in C hina. This article is to explore the impact of C hina’s real estate market on the bank systemic risk in this context.Based on the theoretical analysis, firstly, we use principal component analysis method to construct four secondary indicators and 18 third indicators of systemic risk of banking system, using data from 1995 to 2013, a total of 19 years, to measure of the bank systemic risk of the country. Then, we use the granger causality test, VAR model, the impulse response analysis and variance decompositio n method, from the loans and housing prices of the real estate, to analysis the influence of the real estate market on the banks of systemic risk.The empirical results show that: firstly, the house prices is not the cause of the loans of the real estate, but the loans of the real estate is the reason of the house prices, which indicates that excessive financial support to promote C hina’s real estate market is the main reason for the rapid rise in house prices. Secondly, the loans of the real estate and the housing prices are the reasons of the bank systemic risk. And there is a long-term positive effect on the relationship, indicating that the rising and expanding of the loans of the real estate and the house prices will reduce the bank systemic risk. Because the expansion of the loans of the real estate will increase the bank’s earnings, and the rise in house prices will increase the value of the real estate as collateral. And the impact of house prices on bank systemic risk is greater than the impact of the loans of the real estate on the bank systemic risk.