China's financial network with international spillovers: A first look

Using a modified spillover index approach from the perspective of financial shocks transmission, this study is the first to explore China's financial institution (FI) network after the global financial crisis, allowing for interactions with the financial sectors of four major global economies. We document that: (1) although banks still dominate China's financial sector, nonbank FIs also bear considerable influence; (2) the market-oriented large commercial banks generally play a more pronounced role than the four state-owned megabanks in transmitting financial shocks; (3) China's financial sector exerts noticeable influence on the global financial sector, particularly that of Japan; and (4) monetary policy measures dominate in determining the overall influence from other FIs to a particular FI while firm-specific factors dominate in determining the influence of a particular FI on other FIs. These findings have important policy implications.