Research On The Risk Spillover Effects From China's Shadow Banking System To The Local Government Debt

With the slowdown of China's economic growth and the arrival of the transition period,the risk of China's shadow banking and local government debt has become a "highlight of contradictions" that has received much attention from China's economy in recent years.Because of the shrinking control of credit policy and the impact of budget constraints,in the face of a long-term fiscal gap,the standardized financing approach is difficult to meet the growing financing needs of local governments,and then turned to innovative financing methods,a large number of funds through a variety of ways of shadow banking.The flow of business to local governments further promoted the common expansion and development of China's shadow banking business and local government debt.However,due to shadow banking's risk characteristics such as maturity mismatch and inherent vulnerability,and the regulatory system also has many deficiencies,this has accumulated a lot of risks for the over-expansion of shadow banking business.Because the shadow banking business is closely connected with local governments,the risk exposure is extremely opaque and can easily become the trigger for triggering local government debt,leading to systemic risks.To this end,the article will systematically elaborate the shadow banking system in China and the risks associated with local government debt.Based on an in-depth analysis of the risk transmission mechanism of China's shadow banking business to local government debt,the paper uses the GARCH-CoVaR extension model to quantitatively measure various shadows in China.Institutional risk spillover effects of banking institutions on local government debt.The results show that:overall,although the scale of China's shadow banking business has expanded rapidly,the risk spillover effect on local government debt has not exceeded the controllable range;the risk levels exposed by different businesses have not been the same,and the shadow banking of securities is not the same.The risk spillover effect on China's local government debt is the largest,followed by trust institutions,private lending institutions,and finally local government financing platform institutions.In order to prevent the risk spillover effect of shadow banking on local government debt in our country from continuing to expand,the article proposes corresponding policy recommendations for the shadow banking system and the risk contagion chain of local government debt.