ABSTRACT
This chapter examines financial market integration of China with the South Asian countries over the period 2004–2016 covering three segments of the financial markets: equity, bond and currency. Copula functions are employed to ascertain the dependence structure between the financial markets of China and the sample countries, and analysis is supplemented using Diebold and Yilmaz (2012) spillover index methodology to ascertain the level of transmission of shocks across markets. Four interesting findings emerge from our analysis: (i) there exists low level of financial market integration between China and the South Asian region, (ii) financial market integration of China is the highest with India amongst the South Asian countries, (iii) bond market integration of China and South Asian countries is relatively strong in comparison with equity and currency market integration and (iv) China plays significant role in strengthening bond market integration amongst the countries. This chapter contributes to the recent debate on China’s role in SAARC
