Chinese banking industry faces high systemic contagion risk, new policy intervention needed.
Systemic risk contagion is a big concern in Chinese banking. A study looked at how interconnected Chinese banks are and found high correlation among them. This means if one bank fails, others are at risk too. The study used data from 2006 to 2018 and found that the banking system in China is exposed to significant domestic contagion risks. This suggests that new policies are needed to address hidden stress in the banking system.