A Study On Factors That Influence China’s Sovereign Credit Risk

Throughout the international market,both developing and developed countries h-ave suffered the debt crisis;back to China,the economic situation is not optimistic,a-nd the debt problem is facing structural problems.In this context,China’s sovereign c-redit risk are getting more and more attention.From the view of the credit risk price,this paper chose China’s sovereign CDS spreads as the proxy variable to explore the determinants of China’s sovereign credit risk,including international and domestic va-riables.At the same time,this paper also uses VAR model and Granger causality test to explore the mutual influence of China’s sovereign credit risk and Europe’s soverei-gn credit risk in full sample and sub-sample respectively.The study result finds that China’s stock market,foreign debt level,China’s corporate credit premiums and inter-national market risk are important factors that influence China’s sovereign credit risk.In addition,the Europe’s sovereign credit risk has an international transmission to Ch-ina’s sovereign credit risk,but due to the European debt crisis,the impact of Europe’s sovereign credit risk on China’s sovereign credit risk is slightly different at various st-ages.Specifically,before the outbreak of the debt crisis in Europe,based on the "risk spillover effect" the Europe’s sovereign credit risk showed a strong positive impact on China’s sovereign credit risk.In the European debt crisis,the "risk spillover effect"and "flight to safety effect" exist and offset each other,leading to the impact to be re-latively weakened.After the substantive default of Greece,with the gradual recovery of the European economy,the influence of the debt crisis on investors’ risk appetite a-nd the risk sensitivity of investors have been gradually weakened,and the risk transm-ission from Europe to China has been declined,too.