Characteristics of financial capital flow circulation and the risk transmission effect in China
基于2011-2020年中国资金流量表，构建金融流量乘数模型，从负债视角测度部门间资本流动的直接与间接传导效应，发现金融部门是主要资金进出部门，居民部门负债和投资占比上升加大风险传导。
Financial capital is an important force driving China's economic modernisation. Examining the characteristics of financial capital flow circulation across sectors and risk transmission laws is crucial in guiding financial market operations and deepening financial system reforms. This study establishes a 2011–2020 China matrix that includes capital fund flow statements for non-financial corporations, financial institutions, the general government, households, and foreign sources and examines changes in capital flow circulation by developing a financial flow multiplier system model to measure the direct and indirect transmission effects of capital flows between sectors from the perspective of liabilities. Results show that China's overall scale of financial capital flows has increased, but fluctuations have emerged in the last decade. The sectors' financing structure has changed significantly, with financial institutions remaining the primary capital inflow and outflow sectors of the financial market; however, the proportion of liability and investment in the household sector has increased, resulting in increased risk transmission. Moreover, the sectoral fund surpluses and shortages are highly volatile and uncertain, with non-financial enterprises serving as the primary drivers of real-economy investment. The capital flow from financial services to the real economy shows a fluctuating growth trend, primarily flowing to non-financial corporations; however, the proportion exhibits a downwards trend. Finally, we find that the flow transmission relationship between different sectors and financial transactions in the financial market is complex, with both direct and indirect risk transmission effects between sectors. Changes of financial institutions' liabilities significantly affect the liabilities and investments of other sectors. • We systematically synthesize the literature on Flow of Funds Statement. • Based on the China's Flow of Funds Statement, we analyse the characteristics of capital flow circulation between departments. • We use the multiplier model to measure the risk transmission effects of the intersectoral capital flow cycle. • We find that the flow transmission relationship between different sectors and financial transactions is complex.