The National Office of Philosophy and Social Science has recently announced the list of major projects financed by the National Social Science Fund of China in 2020. The project on “Study of Financial Systematic Risk Identification and Prevention in the Era of Negative Interest Rates” filed by the team headed by Professor Xiaofen Tan of CUFE was approved. The major projects supported by the National Social Science Fund of China are currently projects in the humanities and social sciences in China at the highest level, with the most significant funding, the most intense competition, and the highest authority. They come under the spotlight of all sectors of society.
The project is led by Professor Xiaofen Tan from the School of Finance, with fellow members from the Chinese Academy of Social Sciences, the State Administration of Foreign Exchange, the Institute of International Finance of Bank of China, the School of Finance of Nankai University, the School of Finance, the School of International Economics and Trade and the School of Economics of Central University of Finance and Economics. CUFE jointly applied for national funding with the Chinese Academy of Social Sciences and the State Administration of Foreign Exchange. Concerning the research background of the project, in the wake of the global financial crisis in 2008, major developed economies introduced large-scale unconventional monetary policies, and some even adopted damaging interest rate policies, resulting in ample liquidity around the world and changes in risk appetites in international financial markets. This would lead to cross-border capital flows and rising risks in foreign exchange markets. Emerging economies, including China, might face multiple pressures such as entry of foreign capital, foreign currency asset shrinkage, and exchange rate and capital market turbulence. At the same time, along with the continuous expansion of the two-way liberalization of China’s financial market in both breadth and depth, the country is becoming more and more deeply integrated into the global financial market. From the perspective of international financial network and the global financial cycle, it is of great practical significance and academic value to study how to effectively manage cross-border capital flows in the era of negative interest rates to prevent financial risks crossing national borders and cross infecting due to large fluctuations of capital flows.
The project is aimed at studying the formation, contagion, diffusion, and mitigation of global financial systemic risks in the context of negative interest rates, analyzing the micro mechanism of cross-border capital flows, examining the risks and impacts of the global financial network, cross-border capital flows and linkage between Chinese and foreign financial markets on China’s microeconomic agents, macro policy authorities and domestic financial system, and establishing a prudential management system for cross-border capital flows and systemic financial risk prevention and management mechanism at the micro, macro, and institutional levels.
The project attempts to make a comprehensive study. Based on theoretical models and numerical simulations, it emphasizes the application of financial theories and normative methods, using valid data for support, and the strengthened connection with the actual management departments. Based on long-term academic research, the project, addressing the changes in the global economic and financial markets in the era of negative interest rates, holistically analyzes the causes of external and imported financial risks in China, delves into the possible impacts and hazards, and proposes scientific and reliable research conclusions and feasible policy recommendations to provide scientific basis and decision-making support for forestalling and defusing systemic financial risks and thus better enable finance to serve China’s real economy.
