Financial regulation and innovation dynamics: The China banking wealth management case

Hui An, Hanyu Rao, Ruihui Xu and Huaxi Zhang

Pacific-Basin Finance Journal, 2025, vol. 92, issue C

Abstract: This study presents an in-depth analysis of China's Wealth Management Products, a prime example demonstrating the intricate game between financial regulation and innovation. Adopting a novel theoretical framework, this research dissects both static and evolutionary aspects through an empirical lens, utilizing data spanning from 2004 to 2019. The findings reveal that the stability of strategic approaches is significantly shaped by the interplay of innovation and regulatory outcomes. Instances of positive innovation payoff result in a balanced state, characterized by simultaneous bank innovation and effective regulation. Conversely, a negative innovation payoff tends to initiate recurring cycles of innovation and subsequent regulation. A key observation from the empirical analysis highlights the relatively passive stance of Chinese regulators in this dynamic.

Keywords: Financial regulation; Financial innovation; Static game theory; Evolutionary game analysis (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001180

DOI: 10.1016/j.pacfin.2025.102781

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