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In Search of a Place in the Sun: The Shadow Banking System with Chinese Characteristics

Published online by Cambridge University Press:  04 November 2014

Li Guo
Affiliation:
Professor Dr Li Guo is a Law School Professor at Peking University (LLM, Harvard)
Daile Xia
Affiliation:
Ms Daile Xia is a PhD in Law candidate at PKU and an LLM candidate at Columbia Law School
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Abstract

The shadow banking system is the one that conducts credit, maturity and liquidity transformation outside regular banking mechanisms. Chinese practices largely fit into this concept. However, unlike their foreign peers, Chinese shadow banking institutions have been intertwined into a complex whole and have achieved credit intermediation usually through wealth management products, often using the problematic asset-pool model. They are also substantially influenced by the unique political economic dynamics in China, such as the rigid financial licensing regime and credit policy control. Both the supply and demand ends of funding have provided those activities with new features, for instance, the P2P lending marketplaces and local government financing vehicles. Chinese government agencies have interplayed responsively and proactively with the market via rulemaking and enforcement, in particular recently, with the aim to fix loopholes, level the playing field and limit regulatory arbitrage. However, further efforts are imperative in order to develop moderate and appropriate regulation and draw clearer legal boundaries.

Type
Articles
Copyright
Copyright © T.M.C. Asser Press and the Authors 2014 

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