An explicit deposit insurance system was introduced to cover all depository financial institutions in China to decrease the probability of systemic bank crisis on May 1,2015. However, it is still uncertain whether deposit insurance will reduce bank systemic risk: it depends on a country's unique institutional background. Using the panel data of listed banks in China during 2010 q4 to 2017 q2, the paper takes the financial institutions, interconnectedness structure and market capitalization into consideration in the measurement of systemic risk. Based on this measurement, the paper further explores the effect of deposit insurance on bank systemic risk and the possible underlying channels. It is found that explicit deposit insurance significantly increases the systemic risk of non-state-owned banks in China. Following the introduction of China's deposit insurance, non-state-owned banks will engage in shadow banking more actively, resulting in higher bank systemic risk. The paper has certain reference significance on strengthening macro-prudential management of shadow banking, introducing differential deposit insurance rate based on bank systemic risk and improving the assessment of systemically important financial institutions.