Cryptocurrencies and the Chinese Stock Market Amid the Health Crisis: Determinants of Systemic Risk and the Influence of Policy Responses

Maher Abida

This study investigates the interplay between COVID-19 dynamics, government restrictions, cryptocurrencies, and the Chinese stock market from a global perspective. Using the TVP-VAR frequency connectedness approach, we analyze short- and long-run spillovers across markets. We also apply SHapley Additive exPlanations (SHAP) to assess the influence of each factor on Chinese stock market risk. Our findings reveal strong frequency-dependent connectedness, with higher spillovers at short-term frequencies. The results indicate that the reproduction rate, government stringency index (SI), and cryptocurrency prices significantly predict the Chinese stock market index (HIS), while vaccination rates have a minimal effect. We also show that managerial policy indices are linked to market dynamics. Overall, the study highlights the critical role of pandemic severity and policy responses in shaping market risk and spillovers in China.