The Transmission Path And Impact Analysis Of Qiaoxing Debt Default Risk

On December 20,2016,Ant Financial's Zhaocaibao announced that the investors held the “Huizhou Qiao Xing Telecom Industry Co.,Ltd.Private Equity in 2014” and“Huizhou Qiao Xing Telecom Industry Co.,Ltd.'s Private Equity in 2014” In the first to the seventh phases of the Qiaoxing Bonds,the issuer was unable to repay the funds and was unable to cash in overdue amounts.The principal and interest amounted to 1.146 billion yuan.After the outbreak of Qiaoxing Bonds' default,due to the large number of investors involved,and related financial institutions debate over the responsibility of compensation and the authenticity of the guarantee,attention of the media and public were quickly caught.Then under the pressure of public and regulatory authorities,the Zheshang Property Insurance Co.,Ltd.paid off against Qiaoxing's bonds and suffered huge losses.The difference between the Qiaoxing bonds' default event and the general bond default is that it is a typical case which the economic risk was transmitted to the financial sector and the financial risk was transmitted between different financial institutions.It involves banks,insurance companies and regional equity transactions.Centers and other types of financial institutions are instructive and referential for improving the risk management of financial institutions in China and strengthening financial risk supervision.Therefore,this paper focuses on the analysis of Qiaoxing bonds' default risk transmission path and its effect on relevant financial institutions,mainly on the compensation and insurance side of Zheshang Property Insurance Co..This paper draws lessons from the research on the U.S.subprime mortgage crisis risk transmission path,analyzes the Qiaoxing bonds' risk transmission path,and reveals how risks are transmitted from companies to financial institutions and investors.A total of three indicators,including Zheshang Property Insurance Co.,Ltd.premium income,solvency and profitability,were selected.Based on the changes in the three indicators before and after the default event,the impact of the default event on Zheshang Property Insurance Co,Ltd..was analyzed.The SARIMA model was usedto fit the monthly premium income of Zheshang Property Insurance Co.,Ltd.,to simulate the situation of premium income when there was no default event,and to compare the actual value to analyze the impact of default event.The analysis shows that during the Qiaoxing bonds' default event,the participating institutions and investors jointly conducted and amplified the risk,so that the company's credit risk is superimposed to financial institutions and investors.Once the guarantee and the underwriting agency are unable to fulfill their liability,it may cause systemic risks.The Qiaoxing bonds' default event also caused a negative impact on the relevant financial institutions,which caused theZheshang Property Insurance Co.,Ltd.premium income,solvency,and profitability to fall significantly.Based on the above analysis,this paper concludes with recommendations for relevant financial institutions and regulatory authorities.Relevant financial institutions should strengthen their awareness of legal compliance and risk management and control,and should not rely too much on the credit of their peers but to strengthen the analysis and follow-up on the underlying assets.The regulatory authorities should standardize the cooperation model between the regional equity market and the Internet platform and strengthen the supervision of cross-border financial risks,and beware of systemic risks.