Local supervision of Chinese shadow banking

JiHong Zhang () and Li Xu ()
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JiHong Zhang: Shanghai University of Political Science and Law
Li Xu: East China Normal University

Journal of Banking Regulation, 2023, vol. 24, issue 3, No 6, 337-356

Abstract: Abstract In recent years, China’s shadow banking has developed in full swing, showing a trend of expanding scale. The vigorous development of shadow banking reflects the transformation of China’s financial industry from a single traditional bank to a new financial industry that provides customers with comprehensive financial services such as financing, financial management, risk management, payment and settlement. In this transformation, the systematic risk of shadow banking does not lie in the shadow banking system itself, nor is it the inherent defect of shadow banking. The root of the risk lies in the regulatory loopholes of the existing banking regulatory system. Therefore, from the perspective of local supervision under the decentralization of central government, this paper relies on the specific shadow banking business of bank-trust cooperation, adheres to macro-prudential supervision to prevent systemic risks, improves the information statistics and information sharing mechanism, supervision and management coordination mechanism of shadow banking, and establishes a risk rating mechanism for shadow banking to improve the transparency of shadow banking operation. The construction of shadow banking supporting mechanism under the decentralization of central government shall be improved, and the local financial supervision system of shadow banking shall be established and improved in line with China’s reality to balance “financial innovation” and “effective supervision” and to achieve the unity of safety, efficiency and fairness.

Keywords: Decentralization of central government; Shadow banking; Financial risks; Local supervision (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41261-022-00200-9

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