Credit risk assessment of shadow banking: Evidence from China

Hongjie Pan, Zhaojie Wang, Shusheng Ding and Guangsheng Yu

Research in International Business and Finance, 2025, vol. 77, issue PB

Abstract: This study develops a novel dynamic model to assess credit risk in China's shadow banking sector from 2014 to 2023. By analyzing data from eight sectors, we explore credit risk evolution and sectoral variations. Our findings reveal that credit risk is closely linked to the macroeconomic environment, policy regulations, and market fluctuations, making it highly susceptible to external shocks. Credit risk is rising in real estate, internet finance, and private lending, while declining in insurance, banking, and security. Among sectors, real estate, banking, security, and insurance demonstrate the highest risk, whereas trust, private lending, and internet finance present emerging concerns. Volatility is pronounced in leasing, insurance, and trust, whereas banking and real estate display relative stability. Additionally, most sectors—except insurance, private lending, and leasing—exhibit strong risk adjustment capabilities. These findings underscore the need for a stable market environment, targeted regulatory measures, and enhanced internal governance to mitigate credit risk and strengthen financial oversight.

Keywords: Shadow banking; Credit risk; Exogenous shock; Risk evolution; Policy regulation (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001849

DOI: 10.1016/j.ribaf.2025.102928

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