The Chinese government considers that the financial risk is currently manageable, benefiting from benign macroeconomic outlook, sufficient bank capital and loan loss provisions of commercial banks, and ample policy instruments to deal with potential fallout. Using various approaches proposed in existing literature, this report monitors the systemic risk of China’s financial system at both macro and micro levels. Our results show that: (i) the systemic risk of China’s financial system has mitigated since 1Q17; (ii) the systemic risk contributions from large commercial banks, security firms and other non-bank financial institutions are stabilizing, but the contributions from some joint-stock commercial banks are worth close monitoring; (iii) financial regulation and measures to avoid systemic risk fallout should be coordinated and consistent. We recommend that the authority should consolidate the regulation regime on systemically important financial institutions (SIFIs).

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    Systemic Risk of China’s Financial System 1Q17