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Shadow Banking, Chinese Style

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  • Shalendra D. Sharma

Abstract

Shadow banks are broadly defined as entities which conduct credit intermediation outside the formal banking system. Poorly regulated, engaging in opaque forms of intermediation, deeply interconnected with the official banking system, and operating with implicit government guarantees, they pose a major source of systemic risk. Yet shadow banks provide an important service by channeling credit to excluded investors, and can complement the formal banking sector. What explains the rapid proliferation of shadow banks in China? How large are they and what forms do they take? What types of risks do they pose to the financial system? And how best can China utilise the services of shadow banks while at the same time ensuring that they do not create systemic risks for the financial system?

Suggested Citation

  • Shalendra D. Sharma, 2014. "Shadow Banking, Chinese Style," Economic Affairs, Wiley Blackwell, vol. 34(3), pages 340-352, October.
  • Handle: RePEc:bla:ecaffa:v:34:y:2014:i:3:p:340-352
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    File URL: http://hdl.handle.net/10.1111/ecaf.12086
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    References listed on IDEAS

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    1. Gary Gorton, 2009. "The Subprime Panic," European Financial Management, European Financial Management Association, vol. 15(1), pages 10-46.
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    6. Gary Gorton & Andrew Metrick, 2010. "Regulating the Shadow Banking System," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(2 (Fall)), pages 261-312.
    7. Yuanyan S Zhang & Steven A Barnett, 2014. "Fiscal Vulnerabilities and Risks from Local Government Finance in China," IMF Working Papers 14/4, International Monetary Fund.
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