Identification of China's Systemically Important Financial Industry based on CoES model
Xueting Zhao, Ph.D; Prof. Tiegang Zhang; Wen Yang Ph.D; Lin Zhu Ph.D

Abstract
Introducing the Expected Shortfall (ES) into CoVaR framework, the paper establishes the dynamic CoES model to measure the systemic risk undertaken by the various financial industries in China and identify the systemic importance of China's financial industry. The results show that CoES is able to reflect the time variability of risk in China's financial system and the scale characteristics of the China's financial industry. An observation to the mean level shows that when the China's financial system is under the high-risk pressure, the China's banking industry will shoulder the largest risk, followed by the insurance industry, securities industry, real estate industry and diversified financial industries. Among them, the Chinese insurance industry will undertake higher risk compared to its market scale, and the risk undertaken by Chinese insurance industry is significantly larger than the risk spillover. During the global financial crisis, the risk undertaken by each industry in China was higher than the mean value in the sample, which fell to around the mean value after the crisis. In the ‘money shortage’ period of Chinese banking industry in 2013, the risk undertaken by each financial industry in China changed largely in the short term, especially for the banking industry. During the "stock market crash" and "8.11 exchange reform" in 2015, the risk undertaken by the financial industries in China increased significantly and lasted for a long time.

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