Systemic Risks, Macroeconomic Shocks, and Financial Security in China

The Healthy development of China’s economic and financial markets is crucial. This paper discusses in depth the macroeconomic factors and financial security environment that affect the systemic risk in China, and focuses on the regional research and analysis. The study discusses the relationship between macroeconomic factors and financial market performance and simulates the fragility and security conditions of the financial market through the detailed empirical facts. The loan scale, the transaction volume in financial markets, and the price performance of real estate are taken as the most important influential macroeconomic shocks to the systemic risk in China. The composite index for financial security is calculated by fully considering systemic risk based on factor analysis and finds significant regional differences in China. Through the method of stress testing, the study measures the different effects of macroeconomic shocks under different economic environments, time periods, and regions. The results of the stress testing suggest that the credit scale has the greatest impact on China's systemic risk, followed by the real estate market and the financial asset price. Besides, the most sensitive to the deterioration of the macroeconomic environment is the western region, followed by the middle region, the northeastern region, and the eastern region.