The Spatial Correlation Effect of Real-Estate Financial Risk in China: A Social Network Analysis

Yunsong Xu, Jiaqi Li and Hanying Qi
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Yunsong Xu: School of Business, Beijing Language and Culture University, Beijing 100083, China
Jiaqi Li: School of Finance, Central University of Finance and Economics, Beijing 100081, China
Hanying Qi: The New Type Key Think Tank of Zhejiang Province’s “Research Institute of Regulation and Public Policy”, Zhejiang University of Finance and Economics, Hangzhou 310018, China

Sustainability, 2022, vol. 14, issue 12, 1-23

Abstract: In this paper, we draw on real-estate finance data from 31 provinces in China over the period between 2006 and 2018 in order to develop a comprehensive index of real-estate finance risk. Our principal innovation lies in our use of the social network analysis method to portray the spatial correlation characteristics of real-estate financial risk dynamically. We find that (1) the spatial correlation effect of real-estate financial risks in China is increasing and exhibits multiple superposition characteristics and spatial spillover effects; (2) current trends in real-estate financial risk suggest that the eastern region has a strong contagion potential, that the middle region is highly vulnerable, and that the level of risk in the northwest is high; (3) the spatial network of real-estate financial risks in China can be divided into four functional blocks, namely a strong net-spillover block, a weak net-spillover block, a broker block, and a main damaged block. There is significant gradient transmission between them. The network structure of real-estate financial risks poses serious challenges to the formulation and implementation of regulatory policies. However, it creates favorable conditions for the construction of cross-regional risk prevention mechanisms as well as a practical basis for preventing systemic risks in the new era. (4) Meanwhile, the formation of a spillover network of real-estate financial risks is driven by the high dependence of local fiscal resources on land finance, not by local GDP growth.

Keywords: real-estate financial risk; spatial correlation effects; social network analysis; systemic risk; financial regulation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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