China’s Shadow Banking System and Its Risks

Abstract

From a global perspective, the shadow banking system is a new concept but not a new issue. The shadow banking system refers to banking and financial institutions operating outside the existing banking regulatory system. The problem arose in the 1970s, but has developed rapidly in the twenty-first century. Global concern about the shadow banking system emerged after the shadow banking system triggered the U.S. subprime crisis and thereby the global financial crisis and the regulatory authorities of various countries attempted to conclude the financial crisis and pursue financial stability. At present, academia and global regulators represented by the FSB have defined the nature of the shadow banking system as a “bank credit intermediary.” The rough scope includes non-banking financial institutions that play a bank’s core functions (credit intermediaries) but are not subject to bank oversight (FSB 2011a, b).