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Not Just Another Shadow Bank: Chinese Authoritarian Capitalism and the ‘Developmental’ Promise of Digital Financial Innovation

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  • Julian Gruin
  • Peter Knaack

Abstract

China's financial system is rapidly evolving. Both the emergence of shadow banking since 2009 and the growth of fintech since 2013 as forms of ‘non-bank credit intermediation’ have catalysed market-oriented institutional change beyond the banking system, with potentially far-reaching economic and political implications. In this article we assess these developments in the broader trajectory of China's financial reform and economic development. Through an analysis of two key sectors of non-bank credit intermediation – wealth management products and online lending platforms – we find that the growth of both shadow banking and fintech can be located in the same trajectory of reform and development that has animated Chinese financial policy since the early 1990s. The toleration of WMPs and promotion of internet lending constitutes the latest stage of the Chinese Communist Party's efforts to construct a more efficient and sustainable market economy whilst simultaneously preserving political supremacy and custodianship of macro-social development. The difference in policy response is commensurate with the degree to which each financial sector meets the Party's twin objectives of economic development and political control. Counterintuitively from a Western liberal perspective, the very forces behind deep and broad financial liberalisation are also consolidating the Chinese Communist Party's overall legitimacy and ruling capacity.

Suggested Citation

  • Julian Gruin & Peter Knaack, 2020. "Not Just Another Shadow Bank: Chinese Authoritarian Capitalism and the ‘Developmental’ Promise of Digital Financial Innovation," New Political Economy, Taylor & Francis Journals, vol. 25(3), pages 370-387, April.
    • Handle: RePEc:taf:cnpexx:v:25:y:2020:i:3:p:370-387
    DOI: 10.1080/13563467.2018.1562437
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    Cited by:

    1. Gordon Kuo Siong Tan, 2021. "Democratizing finance with Robinhood: Financial infrastructure, interface design and platform capitalism," Environment and Planning A, , vol. 53(8), pages 1862-1878, November.
    2. Vasja Roblek & Maja Meško & Mirjana Pejić Bach & Oshane Thorpe & Polona Šprajc, 2020. "The Interaction between Internet, Sustainable Development, and Emergence of Society 5.0," Data, MDPI, vol. 5(3), pages 1-27, September.
    3. You-Kyung Lee, 2021. "Impacts of Digital Technostress and Digital Technology Self-Efficacy on Fintech Usage Intention of Chinese Gen Z Consumers," Sustainability, MDPI, vol. 13(9), pages 1-15, April.
    4. Qi Jun & Hasan Dinçer & Serhat Yüksel, 2021. "Stochastic hybrid decision‐making based on interval type 2 fuzzy sets for measuring the innovation capacities of financial institutions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 573-593, January.
    5. Angela Tritto & Yujia He & Victoria Amanda Junaedi, 2020. "Governing the gold rush into emerging markets: a case study of Indonesia’s regulatory responses to the expansion of Chinese-backed online P2P lending," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-24, December.
    6. P. K. Priyan & Wakara Ibrahimu Nyabakora & Geofrey Rwezimula, 2023. "A bibliometric review of the knowledge base on financial inclusion," SN Business & Economics, Springer, vol. 3(2), pages 1-21, February.
    7. Eric Knight & Dariusz Wójcik, 2020. "FinTech, economy and space: Introduction to the special issue," Environment and Planning A, , vol. 52(8), pages 1490-1497, November.
    8. Jinlong Lin & Xiaoxiao Chen & Guiquan Yan, 2023. "How Smart City Construction Affects Digital Inclusive Finance in China: From the Perspective of the Relationship between Government and Large Private Capital," Sustainability, MDPI, vol. 15(11), pages 1-17, June.

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