China's Growing Influence on Asian Financial Markets

38 Pages Posted: 9 Dec 2016

See all articles by Serkan Arslanalp

Serkan Arslanalp

International Monetary Fund (IMF)

Haokun Xu

Nanjing University of Finance and Economics

Shi Piao

International Monetary Fund (IMF)

Dulani Seneviratne

International Monetary Fund (IMF)

Date Written: August 2016

Abstract

This paper finds that financial spillovers from China to regional markets are on the rise. The main transmission channel appears to be trade linkages, although direct financial linkages are playing an increasing role. Without an impact on global risk premiums, China's influence on regional markets is not yet to the level of the United States, but comparable to that of Japan. If China-related shocks are coupled with a rise in global risk premiums, as in August 2015 and January 2016, spillovers to the region could be significantly larger. Over the medium term, China's financial spillovers could rise further with tighter financial linkages with the region, including through the ongoing internationalization of the renminbi and China's capital account liberalization.

Keywords: Financial markets, China, Asia, Regional shocks, Spillovers, Risk premium, Trade integration, Regional integration, China, Spillovers, Equity markets, Foreign Exchange Markets

JEL Classification: F15, F41, G11, G15

Suggested Citation

Arslanalp, Serkan and Xu, Haokun and Piao, Shi and Seneviratne, Dulani, China's Growing Influence on Asian Financial Markets (August 2016). IMF Working Paper No. 16/173, Available at SSRN: https://ssrn.com/abstract=2882611

Serkan Arslanalp (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Haokun Xu

Nanjing University of Finance and Economics ( email )

Nanjing
China

Shi Piao

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dulani Seneviratne

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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