Shadow Banking: Kill It or Save It? Experiences from Taiwan and China

Abstract

Shadow banking is important in financial systems. Its businesses have increased rapidly in the US. It also contributes to the fast economic growth but it also causes high financial risk in China. This paper reviews the literature in the shadow banking and lists it pros and cons. Then the policy implication and a concise history of the shadow banking in Taiwan are discussed. We can learn from the experience of Taiwan and scrutinize the current policies and regulations in China. Further the paper predicts the future trend according to economic theories and historical events.

Keywords: Shadow Banking, Taiwan, China

JEL Classification: G2