Abstract
The prognosis of upcoming crises and the course of actually understanding them is increasingly becoming a major subject of discussions in pursuit of reliable indicators. The trade war between the United States and China, along with the COVID-19 pandemic are two events that took place in the Chinese economy with the aforementioned characteristics of the Black swan phenomenon, to which this latest professional analysis is devoted. The objective of this research is to examine the response of the Shanghai Stock Exchange Composite (SSEC) index, in addition to its relation with macroeconomic variables contributing towards a possible Black Swan Event. We employ an econometric methodology comprising of a unit root test, descriptive statistics, linear regression and correlation analysis for the period 2007-2019. Our results illustarte that the bubble from 2015, which is classified as a Black Swan event by many researchers, has a negative influence on the SSEC index. We can further deduce that there were some psychological effects on the Chinese stock market that lead to both, positive and negative trends of SSEC indices. The main findings confirmed that the Consumer Price Index, Exchange Rate, Interest Rate, Unemployment, GDP and Trade Balance were significantly elaborative macroeconomic variables, that had a substantial impact on the SSEC index.
Highlights
Over the past twenty years, China's economy experienced a complex transformation process, which, as stated by experts, has lead to an average 9.54% Gross Domestic Product (GDP) growth
The growth and development of its financial industry and that of FinTech innovations has given rise to numerous financial risks in China (Lerong, 2018). It is by virtue of these major variations in the international positioning of the Chinese economy, that experts emphasise on studying the effects of the crisis on its situation
The results of this study reveal that a Black Swan event of 2015 had an adverse effect on the SSE Composite index and this unforeseen event affected the macroeconomic conditions in the economy of China
Summary
Over the past twenty years, China's economy experienced a complex transformation process, which, as stated by experts, has lead to an average 9.54% GDP growth. This has turned out to be a crucial prerequisite for the country's inclusion in global supply chains. The growth and development of its financial industry and that of FinTech innovations has given rise to numerous financial risks in China (Lerong, 2018) It is by virtue of these major variations in the international positioning of the Chinese economy, that experts emphasise on studying the effects of the crisis on its situation. Monetary relief helped to support the activity to some extent, but a revived financial tightening, towards the end of 2016, initiated a slowdown in production once again
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