  Uncovering the risk transmitting path within economic sectors in China is
crucial for understanding the stability of the Chinese economic system,
especially under the current situation of the China-US trade conflicts. In this
paper, we try to uncover the risk spreading channels by means of volatility
spillovers within the Chinese sectors using stock market data. By applying the
generalized variance decomposition framework based on the VAR model and the
rolling window approach, a set of connectedness matrices is obtained to reveal
the overall and dynamic spillovers within sectors. It is found that 17 sectors
(mechanical equipment, electrical equipment, utilities, and so on) are risk
transmitters and 11 sectors (national defence, bank, non-bank finance, and so
on) are risk takers during the whole period. During the periods with the
extreme risk events (the global financial crisis, the Chinese interbank
liquidity crisis, the Chinese stock market plunge, and the China-US trade war),
we observe that the connectedness measures significantly increase and the
financial sectors play a buffer role in stabilizing the economic system. The
robust tests suggest that our results are not sensitive to the changes of model
parameters. Our results not only uncover the spillover effects within the
Chinese sectors, but also highlight the deep understanding of the risk
contagion patterns in the Chinese stock markets.
