IDEAS home Printed from https://ideas.repec.org/a/anr/refeco/v10y2018p287-308.html
   My bibliography  Save this article

Shadow Banking in China

Author

Listed:
  • Kinda Hachem

    (Darden School of Business, University of Virginia, Charlottesville, Virginia 22906, USA)

Abstract

Shadow banking and the Chinese economy are two subjects that have independently garnered much attention. A new but actively growing literature is now emerging at their intersection. I review this literature and argue that shadow banking in China is not fundamentally different from the textbook definition of shadow banking, namely credit intermediation with maturity mismatch that is structured to avoid regulation. I emphasize maturity mismatch because that is what creates run risk and makes any shadow banking system inherently fragile. I explain how the rise of shadow banking in China can be traced back to stricter liquidity regulation, how shadow banking has changed the financial landscape in China, and what the current state of the industry is. Interactions between shadow banking and the rest of the economy have some characteristics that reflect China's unique politico-economic structure, but this is because the rest of the economy has these characteristics, not because there is something fundamentally different about the forces behind shadow banking in China.

Suggested Citation

  • Kinda Hachem, 2018. "Shadow Banking in China," Annual Review of Financial Economics, Annual Reviews, vol. 10(1), pages 287-308, November.
    • Handle: RePEc:anr:refeco:v:10:y:2018:p:287-308
    DOI: 10.1146/annurev-financial-110217-023025
    as

    Download full text from publisher

    File URL: https://doi.org/10.1146/annurev-financial-110217-023025
    Download Restriction: Full text downloads are only available to subscribers. Visit the abstract page for more information.
    File URL: https://libkey.io/10.1146/annurev-financial-110217-023025?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eduardo Dávila & Ansgar Walther, 2021. "Corrective Regulation with Imperfect Instruments," NBER Working Papers 29160, National Bureau of Economic Research, Inc.
    2. Ren, Meixu & Ke, Konglin & Yu, Xin & Zhao, Jinxuan, 2023. "Local governments' economic growth target pressure and bank loan loss provision: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 1-14.
    3. Franklin Allen & Xian Gu, 2021. "Shadow banking in China compared to other countries," Manchester School, University of Manchester, vol. 89(5), pages 407-419, September.
    4. Du, Julan & Li, Chang & Wang, Yongqin, 2023. "Shadow banking of non-financial firms: Arbitrage between formal and informal credit markets in China," Journal of Financial Intermediation, Elsevier, vol. 55(C).
    5. Nivorozhkin, Eugene & Chondrogiannis, Ilias, 2022. "Shifting balances of systemic risk in the Chinese banking sector: Determinants and trends," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    6. repec:zbw:bofitp:2018_001 is not listed on IDEAS
    7. Carletti, Elena & Claessens, Stijn & Fatás, Antonio & Vives, Xavier (ed.), 2020. "Barcelona Report 2 - The Bank Business Model in the Post-Covid-19 World," Vox eBooks, Centre for Economic Policy Research, number p329.
    8. Ridoy Deb Nath & Mohammad Ashraful Ferdous Chowdhury, 2021. "Shadow banking: a bibliometric and content analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-29, December.
    9. Christou Anna & Eriotis Nikolaos & Lomis Ioannis & Papadakis Spyros & Thalassinos Eleftherios, 2021. "The Greek VAT Gap: The Influence of Individual Economic Sectors," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 851-882.
    10. Song, Zheng (Michael) & Xiong, Wei, 2018. "Risks in China’s financial system," BOFIT Discussion Papers 1/2018, Bank of Finland, Institute for Economies in Transition.

    More about this item

    Keywords

    shadow banking; maturity transformation; regulation; regulatory arbitrage; interbank markets; credit supply;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:anr:refeco:v:10:y:2018:p:287-308. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: http://www.annualreviews.org (email available below). General contact details of provider: http://www.annualreviews.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.