Shadow Banking in China

Camilla Skjoldgaard Clasen & Katja Haizmann Larsen

Student thesis: Master thesis

Abstract

This thesis concerns itself with the subject of shadow banking in China. More specifically it will study the underlying factors that can be related to shadow banking entering the Chinese financial markets and its high growth following the latest financial crisis. Furthermore it will outline the risks that shadow banking may involve and discuss whether it give rise to a financial reform. Especially the tight regulation performed by the Chinese government gave motive for many small and medium-sized enterprises, as well as financial institutions, to enter the shadow banking market. Through the shadow banking market, smaller private banks could achieve credit expanding, while small and medium-sized enterprises could achieve financing, although they had not been successful through the formal system, exploiting regulative arbitrage and thereby creating an opaque system with insucient regulation. Especially the current financial regulation system has been accused of creating opportunities for shadow banking operations. The sector-divided regulatory regime creates loopholes through which shadow banking thrives. Many argue, that tighter regulation will not solve the problems, but that a complete reformation of the regulatory set-up is needed. It is crucial that the communication and data-sharing between the regulation entities is improved, if the goal of reducing the scope of shadow banking is to be reach. Furthermore the Chinese authorities and regulation entities must start to analyse cross-sector operations on the financial market, to clarify the real risk that is currently hiding.

EducationsMSc in Business Administration and Management Science, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2017
Number of pages120