Has shadow banking promoted interest rate liberalization? Empirical evidence from Chinese commercial banks

Weixue Li, Sipei Wang and Changsheng Xu

Applied Economics Letters, 2024, vol. 31, issue 20, 2150-2156

Abstract: By studying the relationship between shadow banking activities of commercial banks in China and the pricing of deposits and loan interest rates, we find that shadow banking promotes the liberalization of commercial bank interest rate pricing. Further research finds commercial banks’ shadow banking businesses improve their liquidity. Compared with state-owned banks, the development of shadow banking promotes the liberalization of the deposit and loan interest rate pricing of non-state-owned banks to a greater extent. Therefore, we believe China should support the development of shadow banking to promote the liberalization of interest rates and monetary policy transformation.

Date: 2024
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DOI: 10.1080/13504851.2023.2211330

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