Asymmetric Risk Spillover Networks and Risk Contagion Driver in Chinese Financial Markets: The Perspective of Economic Policy Uncertainty

The global financial market shocks have intensified due to the COVID-19 epidemic and other impacts, and the impacts of economic policy uncertainty on the financial system cannot be ignored. In this paper, we construct asymmetric risk spillover networks of Chinese financial markets based on five sectors: bank, securities, insurance, diversified finance, and real estate. We investigate the complexity of the risk spillover effect of Chinese financial markets and the impact of economic policy uncertainty on the level of network contagion of financial risk. The study yields three findings. First, the cross-sectoral risk spillover effects of Chinese financial markets are asymmetric in intensity. The bank sector is systemically important in the risk spillover network. Second, the level of risk stress in the real estate sector has increased in recent years, and it plays an important role in the path of financial risk contagion. Third, Economic policy uncertainty has a significant positive impact on the level of network contagion of financial risk of Chinese financial markets.