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China's Shadow Banking: Bank's Shadow and Traditional Shadow Banking

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  • Guofeng Sun

Abstract

Banks' shadow, or money creation by banks beyond traditional loans, plays an important role in China's money-creation process, posing a number of challenges to monetary policy operations and financial risk management. This paper analyzes the money-creation mechanisms of China's shadow banking sector in detail, provides accurate measurements, investigates its effects on financial risk, and surveys recent regulation. To strengthen supervision, China's regulators should closely track the evolution of various shadow banking channels, both on- and off-balance sheet. Specific macroprudential regulation tools, such as asset reserves and risk reserves, should be applied separately to banks' shadow and traditional shadow banking.

Suggested Citation

  • Guofeng Sun, 2019. "China's Shadow Banking: Bank's Shadow and Traditional Shadow Banking," BIS Working Papers 822, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:822
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    References listed on IDEAS

    as
    1. Mr. Stijn Claessens & Mr. Lev Ratnovski, 2014. "What is Shadow Banking?," IMF Working Papers 2014/025, International Monetary Fund.
    2. Torsten Ehlers & Steven Kong & Feng Zhu, 2018. "Mapping shadow banking in China: structure and dynamics," BIS Working Papers 701, Bank for International Settlements.
    3. Kaiji Chen & Jue Ren & Tao Zha, 2018. "The Nexus of Monetary Policy and Shadow Banking in China," American Economic Review, American Economic Association, vol. 108(12), pages 3891-3936, December.
    4. Jinghan Cai & Alicia Garcia-Herrero & Le Xia, 2015. "China’s shadow banking sector: Arbitrage, window-dressing and wealth management products," Working Papers 1530, BBVA Bank, Economic Research Department.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    banks' shadow; traditional shadow banking; credit money creation; bank accounting; regulation;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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