This paper examines the effect of financial constraints as a transmission channel of cross-sectoral spillover of systemic risk in China using the impulse response separation technique and Diebold & Yilmaz’s (2014) spillover matrix under the STVAR modeling framework. The results show that financial constraints do have an impact on both financial and real sector risks. Financial constraints provide a transmission channel for risk spillovers among sectors, which has a greater impact on asset prices and bank loans. In addition, financial constraints also affect the overall magnitude of risk spillovers in the economy, as well as the direction of risk spillovers. •Financial constraints affect both finance and real sector risks in China.•Financial constraints provide a transmission channel for risk spillovers among sectors.•Financial constraints also affect the overall magnitude of risk spillovers in the economy, as well as the direction of risk spillovers.