Summary of China’s Growing Influence on Asian Financial Markets

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Whether it’s rattling financial markets or swaying commodity prices, China is a powerful pacesetter in the Asian regional economy. Trade interconnections form the main routes for the cascading economic effects that occur between China and its neighbors, although growing financial system ties among Asian nations also play a part, according to economists Serkan Arslanalp, Wei Liao, Shi Piao and Dulani Seneviratne. Their study presents ideas on how countries in the region can mitigate the amplified risks of destabilization from ever-increasing linkages. getAbstract recommends their comprehensive report to policy makers, executives and investors concerned about the impacts of China-related shocks.

About the Authors

Serkan Arslanalp, Wei Liao, Shi Piao and Dulani Seneviratne are economists at the International Monetary Fund.

 

Summary

China is undergoing a massive economic transformation as it seeks to reduce its reliance on exports and manufacturing and to emphasize service sectors and domestic consumption. Research suggests that “financial spillovers” – which occur when a disturbance in one market influences asset valuations in other markets – from China to other parts of Asia were increasing before the middle of 2015 but became more extensive afterward. Several factors underlie China’s huge regional influence:

  • “Direct trade linkages” – Changes in the Chinese economy affect...

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