Shadow Banking System in China after the Global Financial Crisis: Why Shadow Banks Can Distort the Capital Market Order

Peking University Law Journal, Vol. 3(2) (2015), pp 361-384

University of Hong Kong Faculty of Law Research Paper No. 2015/024

21 Pages Posted: 17 Jul 2015 Last revised: 11 Mar 2016

See all articles by Emily Lee

Emily Lee

The University of Hong Kong - Faculty of Law

Date Written: June 3, 2015

Abstract

This article first examines the composition of the shadow banking system in China and then critically analyses its interconnectivity with the traditional banking system and global capital markets. It argues that whilst shadow bank lending in China contributes to the country’s economic growth, the normal functionality of capital markets could be impaired if shadow banks continue to operate on a high-risk/high-yield business model which could potentially pose a systemic risk. It also addresses the concerns arising from high-leverage shadow bank lending practice and cautions against shadow banks operating in a black hole area that enables them to escape from regulatory purview. The article suggests that future regulatory (law) reform should guide shadow banks towards consumer protection by establishing an effective internal control system, enabling sufficient risk controls and requiring material information disclosure; towards safeguarding capital markets; and towards reducing their high levels of leverage.

Keywords: shadow banking, China, capital market, global financial crisis

JEL Classification: E44, E63

Suggested Citation

Lee, Emily, Shadow Banking System in China after the Global Financial Crisis: Why Shadow Banks Can Distort the Capital Market Order (June 3, 2015). Peking University Law Journal, Vol. 3(2) (2015), pp 361-384, University of Hong Kong Faculty of Law Research Paper No. 2015/024, Available at SSRN: https://ssrn.com/abstract=2631343

Emily Lee (Contact Author)

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

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01257

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
347
Abstract Views
1,568
rank
94,160
PlumX Metrics