From shadow banking to digital financial inclusion: China’s rise and the politics of epistemic contestation within the Financial Stability Board

Global financial standard-setting has been the exclusive domain of advanced economies for decades. Following the 2008–09 crisis, China and other emerging markets and developing economies obtained formal membership in the forums of global financial regulatory governance. Has their incorporation changed global regulatory politics? We analyze the epistemic contestation, bargaining, and persuasion surrounding the latest item on the financial regulatory reform agenda of the G20 and the Financial Stability Board: non-bank credit intermediation. Our study identifies three groups of norm entrepreneurs with different epistemic backgrounds that advance partially overlapping and competing interpretative frames of how to define, understand, and regulate this amorphous financial (non-)sector. Regulators from Western advanced economies took the lead in defining non-bank finance as stability-threatening shadow banking, successfully asserting epistemic authority against alternative frames advanced by China and other developing countries that include developmental prerogatives. Confronted with this impasse, Chinese authorities have sought to re-frame non-bank finance at the G20 under the label of digital financial inclusion. Our findings challenge and refine salient theories of global regulatory politics and underscore the importance of epistemic concerns for debates over the consequences of the entry of new actors from the ‘Global South’ into the core institutions of global financial governance.