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When Shadow Banking Can Be Productive: Financing Small and Medium Enterprises in China

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  • Kellee S. Tsai

Abstract

Small and medium enterprises (SMEs) represent the backbone of China’s economy, yet they face challenges in accessing bank credit. SMEs thus rely on a wide range of alternative sources, including informal finance, online peer-to-peer (P2P) platforms, registered non-banking financial institutions (NBFIs), and underground financiers. This article distinguishes among different types of ‘shadow banking’ to clarify popular misconceptions about the nature of risks associated with informal financial intermediation in China. Given their familiarity with local business conditions and needs, regulated and well-managed NBFIs could provide an enduring foundation for commercialised financial intermediation serving SMEs.

Suggested Citation

  • Kellee S. Tsai, 2017. "When Shadow Banking Can Be Productive: Financing Small and Medium Enterprises in China," Journal of Development Studies, Taylor & Francis Journals, vol. 53(12), pages 2005-2028, December.
    • Handle: RePEc:taf:jdevst:v:53:y:2017:i:12:p:2005-2028
    DOI: 10.1080/00220388.2016.1228877
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    1. Nicholas R. Lardy, 2014. "Markets over Mao: The Rise of Private Business in China," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6932, January.
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    Cited by:

    1. Chen Yang & Weitao Shen, 2022. "Non-Financial Enterprises’ Shadow Banking Business and Total Factor Productivity of Enterprises," Sustainability, MDPI, vol. 14(13), pages 1-19, July.
    2. Mingtang Liu, 2024. "Amplified State Capitalism in China: Overproduction, Industrial Policy and Statist Controversies," Development and Change, International Institute of Social Studies, vol. 55(2), pages 191-218, March.
    3. Daniela Gabor, 2018. "Goodbye (Chinese) Shadow Banking, Hello Market†based Finance," Development and Change, International Institute of Social Studies, vol. 49(2), pages 394-419, March.
    4. Ruo-Yu Zhu & Ke-Hu Tan & Xiao-Hui Xin, 2023. "Can the Opening of High-Speed Railway Restrain Corporate Financialization?," Sustainability, MDPI, vol. 15(6), pages 1-23, March.
    5. Phuong Mai Le, Vo & Matthews, Kent & Meenagh, David & Minford, Patrick & Xiao, Zhiguo, 2022. "Regulatory arbitrage, shadow banking and monetary policy in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    6. Yan Li & Md. Main Uddin & Ye An, 2020. "Has financial development benefited the performance of publicly traded cultural and creative firms? Evidence from China," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 44(3), pages 351-395, September.

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