A Research on Pro-Cyclicality of Finance System of China

Abstract

Empirical studies show that there is a clear pro-cyclicality in China's financial system, which consists of commercial banks, securities firms, insurance companies and investment funds. The pro-cyclicality promotes the vulnerability of financial system and amplifies the volatility of macroeconomic cycles in China. China should accelerate the construction of a complete macro-prudential supervision framework which covers commercial banks, securities firms, insurance companies and investment funds in order to enhance the stability of financial system and promote healthy economic development.