Harnessing technology for financial stability: firm risk mitigation in China’s economy

Understanding systemic risk and firm-level mitigation strategies is crucial in today’s interconnected economy. We use data from the Hushen 300 Index firms for the 2018–2023 period to study their risk mitigation capacities within risk propagation networks. We identify a significant positive relationship between firms’ simulated roles in risk transmission channels and their contributions to systemic risk, highlighting their critical impact in propagating risk throughout the network. Furthermore, the COVID-19 pandemic amplified systemic risk while intensifying this relationship. We highlight the pivotal role of non-financial enterprises in financial stability, offering insights for managing systemic threats which is often overlooked in favour of financial institutions.