 The varying shadow of China's banking systemJournal of Comparative Economics, 2021, vol. 49, issue 1, 135-146 Abstract: The rapid rise of shadow banking activities in China since 2009 has attracted a great deal of attention in both academia and policy circles. Most existing studies and commentary on China's shadow banking have treated it as a recent phenomenon that appeared after the Global Financial Crisis and China's response to it. In this paper, I argue that shadow banking is not a new phenomenon; it has always been a part of China's financial system since the 1980s, and arose from the need to get around various lending restrictions imposed by the central government on banks. I also emphasize that there are two types of shadow banking activities, those initiated by banks and those initiated by local governments or state-owned enterprises. I provide evidence suggesting that the shadow banking activities initiated by banks prior to 1996 helped directing credits to the more productive non-state sector and were efficiency enhancing. In recent years, however, I find that the shadow banking loans have a positive effect on real estate investments only, and their effects on investments by private firms outside the real estate sector have been negative. Keywords: banking system; credit allocation; investment allocation; shadow banking; China (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:49:y:2021:i:1:p:135-146 DOI: 10.1016/j.jce.2020.07.006 Access Statistics for this article Journal of Comparative Economics is currently edited by D. Berkowitz and G. Roland More articles in Journal of Comparative Economics from Elsevier |
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