Research On The Relationship Of China's Shadow Banking And Financial Stability:Threshold Effect And Risk Spillover Effect

According to the latest data released by the Financial Stability Board(FSB),the size of shadow banking in China in 2017 was US$7 trillion,an increase of 7.6% over 2016.With the continuous development of the shadow banking that is detached from traditional banks system,the cross-risk brought by it will easily lead to systemic financial risks and threaten financial stability.This paper mainly explores the threshold effect and risk spillover effect of China's shadow banking on financial stability from the perspectives of shadow banking scale and risk.First of all,introduce the definition,characteristics,division,scale estimation and risk of China's shadow banking.The sum of entrusted loans,trust loans,and non-discounted bank acceptance bills is taken as the shadow banking category of financial institutions.The size of private banking shadow banking is measured from the perspective of borrowers,and the total size of shadow banking in China is calculated by adding the two together.The results show that in recent years,the size of China's shadow banking has grown rapidly,reaching 46.38 trillion by the end of 2016.Then,it introduces the financial stability and its evaluation methods,builds a financial stability index system,and uses the principal component analysis method to measure the financial stability index.The results show that in recent years,China's financial stability has tended to rise and financial stability is good.Then suppose that there is a threshold effect between China's shadow banking and financial stability,namely the "inverted U-shaped" relationship.The threshold effect was verified after regression modeling,and the threshold is 46.09 trillion.Then,from the perspective of risk spillover,assume that China's shadow banking has a risk spillover effect on financial stability.According to the theory of financial fragility,commercial banks are selected as the representative of financial stability,and seven shadow banking institutions and seven commercial banks are selected to use GARCH.-CoVaR model calculates the risk spillover value.The result verifies the existence of risk spillover effect.Among them,the risk spillover effect of private banking shadow banking is the largest,followed by securities and trust,which all have a negative effect on financial stability.Shadow banking has the highest risk of spillover.Finally,this paper proposes countermeasures and suggestions in three aspects,focusing on supervising shadow banking and guiding it toward the direction of maintaining financial stability.