The Stock Market Linkage Between China and Major Asian Economies Based on the Markov-Switching Copula

Based on the stock market data of China and major Asian economies from 2000 to 2022, a Markov State Transition Copula model was constructed to explore the linkage between China and major Asian stock markets. As for the linkage effect, the linkage between the China and Singapore stock markets is the strongest, while the linkage with the Vietnam stock market is the weakest. In addition, analysis shows that the stock market linkage between China and Asian countries has not shown a significantly strengthening trend with the opening of China’s capital market. From 2001 to 2005, China’s capital market was in the initial opening stage, and the stock market linkage between China and Asia was low; in 2006, The outbreak of the financial crisis from 2006 to 2013 further deepened the connection between China’s capital market and the international market. However, in the phase from 2014 to 2020 after the “Belt and Road” initiative was proposed and implemented, the linkage between China and major Asian stock markets suddenly dropped to a low level. During the COVID-19 period from 2020 to 2022, the linkage has increased again and exceeded the status of the second stage. This paper analyses and further explains the reasons for this phenomenon and provides corresponding countermeasures and suggestions.