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Shadow Banking in China: Institutional Risks

Author

Listed:
  • Jianjun Li
  • Sara Hsu

Abstract

The authors examine China’s shadow banking institutions for financial risks. They use a bank stress test to analyze solvency risk for the systemically important financial institutions and the banking system as a whole. They find that there is some risk of bankruptcy and potentially a risk of liquidity shortages, for which they lack sufficient data to run a stress test. They conclude with policy recommendations.

Suggested Citation

  • Jianjun Li & Sara Hsu, 2013. "Shadow Banking in China: Institutional Risks," Working Papers wp334, Political Economy Research Institute, University of Massachusetts at Amherst.
    • Handle: RePEc:uma:periwp:wp334
    as

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    References listed on IDEAS

    as
    1. Brehm Stefan, 2008. "Risk Management in China's State Banks - International Best Practice and the Political Economy of Regulation," Business and Politics, De Gruyter, vol. 10(1), pages 1-31, May.
    2. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    3. Li, Jianjun & Hsu, Sara (ed.), 2009. "Informal Finance in China: American and Chinese Perspectives," OUP Catalogue, Oxford University Press, number 9780195380644.
    4. Yung-Ho Chiu & Yu-Chuan Chen & Yu Han Hung, 2009. "Basel II and bank bankruptcy analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 16(18), pages 1843-1847.
    5. Rodrigo Cifuentes & Hyun Song Shin & Gianluigi Ferrucci, 2005. "Liquidity Risk and Contagion," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 556-566, 04/05.
    6. Purnanandam, Amiyatosh, 2008. "Financial distress and corporate risk management: Theory and evidence," Journal of Financial Economics, Elsevier, vol. 87(3), pages 706-739, March.
    7. World Bank & International Monetary Fund, 2011. "China : Financial Sector Assessment," World Bank Publications - Reports 15913, The World Bank Group.
    8. Mr. Martin Cihak, 2007. "Introduction to Applied Stress Testing," IMF Working Papers 2007/059, International Monetary Fund.
    9. Boris Podobnik & Davor Horvatic & Alexander M. Petersen & Branko Urov{s}evi'c & H. Eugene Stanley, 2010. "Bankruptcy risk model and empirical tests," Papers 1011.2670, arXiv.org.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Shadow banking; China; Stress Tests; banks; Risk; Solvency; Liquidity;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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