Shadow Banking in China


Shadow Banking in China

Risk, Regulation and Policy

9781784716769 Edward Elgar Publishing
Shen Wei, Dean and Professor of Law, Shandong University Law School, China
Publication Date: 2016 ISBN: 978 1 78471 676 9 Extent: 480 pp
This timely book investigates the dynamic causes, key forms, potential risks and changing regulation of shadow banking in China. Topics discussed include P2P lending, wealth management products, local government debts, and the underground lending market. Taking policy considerations into account, the author provides a comprehensive analysis of the regulatory instruments tackling the systemic risks in relation to China’s shadow banking sector. Central bank’s role, interest rate formation mechanism, exchange rate reform and further deepening reform of the regulatory regime and financial markets are also thoroughly discussed in the context of China’s continuing financial reform.

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In light of the current regulatory regime in China’s banking sector, this book investigates the causes, key forms, potential risks and regulation of shadow banking in China.

The first China-specific book of its kind, the author takes policy considerations into account whilst providing an analysis of the regulatory instruments tackling the systematic risks in its banking, as well as shadow banking sectors. Key shadow banking subsectors discussed include P2P lending, wealth management products, local government debts and the underground lending market.

This book will be of interest to students and scholars in the legal field, as well as those from other disciplines including social science, business and finance. It will also be of use to lawyers, policymakers and regulators looking for practical solutions in tackling the issues facing a rising shadow banking sector today.
Critical Acclaim
‘Already an accomplished scholar, Shen Wei offers a masterly study of the Chinese shadow banking sector in context. The book constitutes a thorough analysis of the nature of the Chinese shadow banking sector and of the political events, economic rationales and institutions that have shaped it. Beyond offering expert legal analysis, this book is also very rich on information and research about the institutional and economic necessities that have shaped the Chinese financial system in its present form, giving rise to a mighty shadow banking sector. The book is very well-organised and competently drafted, thus it is easily accessible to both the expert and non-expert reader. I have no doubt that this is bound to become the standard reference work for everyone wishing to study the nature of the Chinese shadow banking sector and the institutions underpinning it in context.’
– Emilios Avgouleas, University of Edinburgh, UK

‘Shadow banking has become one of the most important areas of study in domestic and international finance. China''s sector is recognised as particularly significant, not least because of its size, and potential to destabilise. This work by a leading scholar contains a detailed factual explanation of the sector, and places it in the context of China''s financial and regulatory system as a whole. The book is a valuable source of information and analysis that will provide a solid basis for practitioners, regulators and academics alike.’
– Sir William Blair, Justice of the Queen’s Bench Division, Commercial Court, President of the Board of Appeal of the European Supervisory Authorities

‘Shadow banking is attractive to those who like the informal sector and other alternatives to the highly regulated state. For some observers, it is frightening and global financial crises are blamed on it. Shen Wei informs and appeals to both groups in this comprehensive and innovative book on Shadow Banking in China. I highly recommend it to anyone interested in modern China, the regulatory strategies of the modern state, or money and banking.’
– Saul Levmore, University of Chicago, US

‘Shadow Banking in China: Risk, Regulation and Policy by Professor Shen Wei is a timely book, presenting readers with a comprehensive and coherent conceptualization of shadow banking in China. It systematically defines shadow banking, describes how the different types of shadow banking subsectors—including wealth management products, peer-to-peer lending, local government financing vehicles, and underground lending—are growing, and examines how Chinese regulators are responding. It also explains the risk-taking, economics, and behavioral aspects of each of these subsectors, revealing the endogenous market forces driving their expansion and describing how shadow banking is innovatively helping to channel funding to the cash-starved private sector and real economy."
– from the Foreword by Steven L. Schwarcz, Duke University School of Law, US

‘If one wants to understand either the past or the future of the world financial system, one must understand the nature, impact, and role of shadow banking. If one wants to understand shadow banking, one must understand what the Chinese Communist Party might call “shadow banking with Chinese characteristics” This book by a highly respected legal and economic scholar explains both.’
– Frank Upham, New York University School of Law, US

‘This book is written by one of the most eminent banking law and corporate governance scholars in China with multiple professorial appointments in the US and China. This work is perhaps one of the most valuable, lucid and comprehensive books about shadow banking in China available to date. . . ''
– Journal of International Banking Law and Regulation

Contents: Foreword 1. Decoding Shadow Banking: A Primer 2. Myth of Chinese Banks’ Success and Shadow Banking 3. Financial Regulatory Architecture: Status Quo 4. Central Bank and Monetary Policy 5. Regulating Wealth Management Products 6. The Logic (or Illogic) of Local Government Debts Out of Control 7. Optimizing the Regulation of Internet Lending: From Popularity to Risks 8. Removing Underground Lending Markets out of the Shadows 9. Credit Crunch and Liquidity Supply in China’s Banking Sector 10. Interest Rate Reform: Full or Partial Liberalization? 11. Renminbi’s Ongoing Exchange Rate Reform 12. “A Tale of Three Zones” and Financial Reforms 13. Is China’s New Deposit Insurance Scheme a Panacea? – a Functional Analysis 14. No Conclusion Yet: Bringing China’s Shadow Banking into the Light Index
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