A Crack in the Great Wall: Too-Big-To-Fail Them: A Societal Perspective

Posted: 10 Sep 2013 Last revised: 11 Apr 2019

See all articles by Janos Nathan Barberis

Janos Nathan Barberis

The University of Hong Kong - Faculty of Law

Date Written: August 31, 2013

Abstract

This research is a prospective analysis of what the future of China’s financial regulation might hold. By considering that the people are ‘too-big-to-be-failed’, this paper argues that if a crisis is affordable in nominal terms (especially with the trillions of dollars in reserve), its social impact could well suffice to undermine the stability of the CCP. Thus there is a necessity to develop redundancies within the credit intermediation process so as to limit the economic effect and social impact of a future financial crisis.

To achieve this, it is submitted that Shadow Banking offers two transmission mechanisms (Instalment Plan and Peer-to-Peer lending) that should be promoted, albeit with limits, in order to maximize the benefits, whilst minimizing the risks.

The solution comes from an in-depth analysis of the political, economical and societal dynamics within the country so as to ensure that reform is feasible. Furthermore, by applying recent developments in the field of Complex Adaptative Systems, the possibility to make the Chinese financial system more robust is also envisaged.

Overall, this paper represents a necessary intermediate step before a(nother) great leap forward. This will be characterized by opening up China’s financial sector so as to unlock the currently foregone economic growth, caused by a dysfunctional allocation of resources within the economy.

Keywords: China, Shadow Banking, Financial Crisis, Financial Reform, China Shadow Banking, credit intermediation, complex adaptative system, chaos theory, systemic risk, parallel financial markets, financial regulation, financial stability, social stability, rawls

Suggested Citation

Barberis, Janos Nathan, A Crack in the Great Wall: Too-Big-To-Fail Them: A Societal Perspective (August 31, 2013). Available at SSRN: https://ssrn.com/abstract=2323408 or http://dx.doi.org/10.2139/ssrn.2323408

Janos Nathan Barberis (Contact Author)

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

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