<p>In this paper, applying dynamic CoVaR models and the Tail-event driven network (TENET) approach, we measure tail-risk interdependence among 11 industries in China over the period between October 2006 to December 2023. The TENET approach extends the bivariate CoVaR model to an ultra-high dimensional analysis framework. Backtesting analysis illustrates the outperformance of TENET approaches in capturing the tail-risk spread during crisis period. Our analysis reveals that the real estate, energy, and telecommunication industries are more susceptible to the tail risk of the financial sector, while the financial, energy, and materials sectors emerge as the largest risk receivers. This interconnectedness intensifies during crises, driven largely by the fatter tails of the financial sector’s return distributions. Our findings highlight the significant role of “derealization to virtuality” measure by the financialization of firms as a primary channel through which financial risks are transmitted to the real economy. The connectedness between the financial and real sectors forms a two-way link, with risks originating from the financial sector flowing between the two sectors. This risk transmission gradually weakens over time, resulting in incoming links exhibiting lower volatility compared to outgoing ones.</p>