Shadow Banking Modes: The Chinese versus US System

41 Pages Posted: 10 Dec 2019

See all articles by Tri Vi Dang

Tri Vi Dang

Columbia University - Department of Economics

Loretta Liu

affiliation not provided to SSRN

Honglin Wang

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Aidan Yao

affiliation not provided to SSRN

Date Written: October 2019

Abstract

Using newly collected data this paper shows that Chinese shadow banking is different from the US counterpart in two important dimensions. The Chinese system creates information insensitive investment products by implicit guarantee rather than financial engineering and operates on a banking platform instead of capital markets. The theoretical model analyses why Chinese shadow banking is bank-centric and discusses the role of the Chinese government and welfare implications. This paper also formalizes the conceptual differences between implicit guarantee and securitization as well as asymmetric perception of implicit guarantee and neglected risks.

Keywords: Information Sensitivity, Shadow Banking

JEL Classification: E51, G21, G23, P51

Suggested Citation

Dang, Tri Vi and Liu, Loretta and Wang, Honglin and Yao, Aidan, Shadow Banking Modes: The Chinese versus US System (October 2019). Available at SSRN: https://ssrn.com/abstract=3491955 or http://dx.doi.org/10.2139/ssrn.3491955

Tri Vi Dang (Contact Author)

Columbia University - Department of Economics ( email )

420 West 118th Street
New York, NY 10027
United States

Loretta Liu

affiliation not provided to SSRN

Honglin Wang

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR) ( email )

3 Garden Road, 8th Floor
Hong Kong
China

Aidan Yao

affiliation not provided to SSRN

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