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China's financial linkages with Asia and the global financial crisis

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  • Glick, Reuven
  • Hutchison, Michael

Abstract

This paper presents empirical evidence on asset market linkages between China and Asia and how these linkages have shifted during and after the global financial crisis of 2008–2009. We find only weak cross-country linkages in longer-term interest rates, but much stronger linkages in equity markets. This finding is consistent with the greater development and liberalization of equity markets relative to bond markets in China, as well as increasing business and trade linkages in the region. We also find that the strength of the correlation of equity prices changes between China and other Asia countries increased markedly during the crisis and has remained high in recent years. We attribute this development to greater “attentiveness” of international investors to China's role as a source and destination of equity finance during the crisis rather than to any greater financial deepening and liberalization, as China did not implement any major policy measures during this period. By contrast, the transmission of U.S. equity returns to Asian countries decreased after the crisis.

Suggested Citation

  • Glick, Reuven & Hutchison, Michael, 2013. "China's financial linkages with Asia and the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 186-206.
  • Handle: RePEc:eee:jimfin:v:39:y:2013:i:c:p:186-206
    DOI: 10.1016/j.jimonfin.2013.06.025
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    Cited by:

    1. Carlos León & Geun-Young Kim & Constanza Martínez & Daeyup Lee, 2017. "Equity markets’ clustering and the global financial crisis," Quantitative Finance, Taylor & Francis Journals, vol. 17(12), pages 1905-1922, December.
    2. Gheorghe H. Popescu & Elvira Nica, 2014. "The Roots of China’s Economic Slowdown," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(1), pages 14-17, March.
    3. He, Hongbo & Chen, Shou & Yao, Shujie & Ou, Jinghua, 2014. "Financial liberalisation and international market interdependence: Evidence from China’s stock market in the post-WTO accession period," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 434-444.
    4. Rudkin, Simon & Wong, Sen Min, 2015. "South East Asian Financial Linkages and the Changing Role of China: Insights from a Global VAR," MPRA Paper 65001, University Library of Munich, Germany.
    5. Chen, Jian & Jiang, Fuwei & Liu, Yangshu & Tu, Jun, 2017. "International volatility risk and Chinese stock return predictability," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 183-203.
    6. repec:eee:reveco:v:51:y:2017:i:c:p:193-213 is not listed on IDEAS
    7. Ho, Sin-Yu & Njindan Iyke, Bernard, 2017. "Consumption and Exchange Rate Uncertainty: Evidence from Selected Asian Countries," MPRA Paper 80096, University Library of Munich, Germany.
    8. Ijaz Ur Rehman & Nurul Shahnaz Mahdzan & Rozaimah Zainudin, 2016. "Is the relationship between macroeconomy and stock market liquidity mutually reinforcing? Evidence from an emerging market," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 9(3), pages 294-316.
    9. Chen, Jian & Jiang, Fuwei & Li, Hongyi & Xu, Weidong, 2016. "Chinese stock market volatility and the role of U.S. economic variables," Pacific-Basin Finance Journal, Elsevier, vol. 39(C), pages 70-83.
    10. repec:spr:decisn:v:44:y:2017:i:1:d:10.1007_s40622-016-0144-2 is not listed on IDEAS
    11. repec:eee:ememar:v:31:y:2017:i:c:p:16-31 is not listed on IDEAS
    12. repec:eee:intfin:v:50:y:2017:i:c:p:182-203 is not listed on IDEAS
    13. He, Hongbo & Chen, Shou & Yao, Shujie & Ou, Jinghua, 2015. "Stock market interdependence between China and the world: A multi-factor R-squared approach," Finance Research Letters, Elsevier, vol. 13(C), pages 125-129.

    More about this item

    Keywords

    Asset market linkages; Cross-country financial links; Equity finance; Bonds; Asia; China;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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