Shadow Banking and Systemic Risk in Europe and China

CITYPERC Working Paper Series No. 2013/02

21 Pages Posted: 12 Feb 2013

See all articles by Sara Hsu

Sara Hsu

State University of New York at New Paltz

Jianjun Li

Central University of Finance and Economics (CUFE)

Yanzhi Qin

Central University of Finance and Economics (CUFE)

Date Written: February 1, 2013

Abstract

We compare the European and Chinese shadow banking systems. While the European shadow banking system is better developed than the Chinese shadow banking system, herd behavior and other factors in European markets create systemic risk, which contributed in part to the financial crisis. Dispersion of risk across the "under-developed" shadow banking system in China has led to some cases of localized, concentrated risk, but not to systemic risk. We discuss proposed European shadow banking regulation and its implications for systemic risk, and discuss what lessons China might glean from such policies. We also discuss what lessons China's diverse and systemically uncoordinated shadow banking sector might provide for Europe.

Keywords: China, Europe, shadow banking, systemic risk, CITYPERC

JEL Classification: P16

Suggested Citation

Hsu, Sara and Li, Jianjun and Qin, Yanzhi, Shadow Banking and Systemic Risk in Europe and China (February 1, 2013). CITYPERC Working Paper Series No. 2013/02. Available at SSRN: https://ssrn.com/abstract=2215233 or http://dx.doi.org/10.2139/ssrn.2215233

Sara Hsu (Contact Author)

State University of New York at New Paltz ( email )

JFT 812
600 Hawk Drive
New Paltz, NY 12561
United States

Jianjun Li

Central University of Finance and Economics (CUFE) ( email )

Beijing, Beijing
China

Yanzhi Qin

Central University of Finance and Economics (CUFE) ( email )

Beijing, Beijing
China

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