Macro Risk Measurement And Contagion Analysis Of China's Financial Sector

In 2017,President Xi Jinping proposed that "financial security is an important part of national security",and the report of the 19 th National Congress of the Communist Party of China first proposed that preventing and resolving major financial risks was one of the three major tackles.A series of systemic risk prevention measures,such as deleveraging in China's financial sector,have been implemented successively and achieved preliminary results.Financial risk is a research hotspot,however,less researches have involved financial sector risks including banking,insurance and securities.In this context,this paper focuses on the financial sector macro risks quantification and contagion analysis,and drawing conclusions to propose solutions.First of all,this paper summarizes the main risks of China's financial sector,including the risk of rapid rise in financial sector debt leverage,the risk of bank credit structure and the liquidity risk caused by the mismatch of maturity.Secondly,based on the recent research progress in the field of macro balance sheets,in order to further explores the debt risk of China's financial sector,this paper attempts to compile the financial sectors balance sheets based on CCA model,which includes banking sector balance sheet(2005-2016),insurance sector balance sheet(2005-2016)and securities sector balance sheet(2005-2016).Furthermore,the paper takes use of the CCA model based on the above data to measure the risk levels of the above-mentioned financial sectors,including implicit asset volatility,default distance and default probability.In the financial sector,there is close business dealings between banking,insurance and securities companies,and risks are transmitted within the financial sectors.In order to further clarify the risk contagion mechanism,this paper has constructed a risks transmission network based on banks,insurance,securities and central bank,and uses the maximum entropy method to estimate the bilateral positions between the various subsectors.In the analysis of financial contagion,this paper constructs the network model of the damage of bank net assets affected by market fluctuation based on the data of 2008 and 2015.The paper draws the main conclusions as follows: First,since 2008,M2 growth rate has been more than GDP growth in the same period.Bank credit expansion that was mainly invested in real estate was the main reason for the rapid increase in M2.There are two reasons for the increase of liquidity risk in the banking sector,one is the increase of the proportion of non-deposit currencies in the source of funds,and the other is the increase in the proportion of medium to long-term loans;Secondly,the leverages of the financial sector and three subsectors are high,but the overall trend of debt leverage remains stable,particularly during the 2008 financial crisis and the 2015 "stock disaster";Thirdly,default distance is mainly affected by asset volatility and debt leverage,and is particularly sensitive to market volatility when the debt leverage is high.The increase of market fluctuation will aggravate the financial macro risk.Maintaining market stability is the top priority of preventing and controlling financial risks.The main innovation of this paper on the following two aspects: First,we are the first to integrate the insurance sector and securities sector into the financial sector macro-financial risk analysis,and the other is to combine risk measurement and risk contagion analysis based on balance sheets,with more comprehensive analysis of the financial sector macro risk.The inadequacies of this paper are as follows: First,the CCA model has analysed the macro-level risks of the financial sector while ignoring the risks of a single financial institution;Secondly,balance sheet data is hysteretic,and some items have different statistical standards at different times,so there would be deviation in data calculation.