Dynamic Effects Of The Banking System Financial Stress On The China Real Estate Market

As the series of financial reform policies promulgated by government in recent years, pace of China’s financial reform has accelerated markedly, risks and uncertainties of financial institutions increased. The banking system occupy a very important position in China’s financial market, to measure banking financial stress help the relevant regulatory authorities make a forward-looking estimate on the commercial banking and the shadow banking, issues analysis has practical significance. Due to the real estate market plays an important role in China’s real economy, further explored its transmission mechanism and dynamic effects of the banking financial stress on the real estate market. This topic provides a theoretical basis to guard real economy against financial risks.Firstly, based on the related research in domestic and abroad, this dissertation have a theoretical analysis on the interaction mechanism between the banking financial stress and the real estate market. According to China’s actual situation, this research choose Credit growth, TED, Rate of loan interest change, Rate of Inter-bank Bond Repo Change, Loan-to-Deposit Ratio to constructed commercial banking Financial Stress Index; Apply Trust Loans Growth Rate, Entrusted Loans Growth Rate and Undiscounted Bank Acceptances Growth Rate, to estimate the financial stress of shadow banking; Select Real Estate Equilibrium Price, Resident’s Disposable Income, Sales and Completed Area Ratio, Sales and Development Investment Ratio, Funds Proportion of Financial Institutions to estimate China’s real estate market price bubble; The main conclusions: with the enhancement of banking supervision and loans auditing and improvement of asset quality, China commercial banking and shadow banking financial stress have a downward trend in 2015; Real estate price bubble is still in a high level, with the relevant policies, the extent of the price bubble has a gradual mitigation after 2014.Secondly, this dissertation based on VAR models, using impulse response and variance decomposition to estimate the transmission effect between the banking system and real estate market. Results showed that: in the sample period, commercial banking financial stress has a significant negative and long duration effect on real estate market. In comparison, shadow banking financial stress has weaker impact on real estate market. The real estate price bubble has a positive stimulus to banking financial stress short-term. Finally, based on the empirical results, this dissertation proposes relevant policy advice. Related department should not only focus on commercial banking systemic risks, but also strengthen supervision of shadow banking system and real estate, to maintain financial market and real economy sustaining and stable.