The Risk And Regulation Of Shadow Banks In China

Financial reform and financial innovation is a key point during the period of the twelfth five-year guideline. The liberalization of interest rate is an inevitable trend in the future. Shadow Banks in foreign countries have been increasingly mature. In2007the subprime crisis makes people deeply realize huge risks behind shadow banks and it is paid attention to the regulation of the shadow banks by international society. In recent years shadow banks in our country gradually develop different sorts of new products, involving ordinary residents, government agencies and enterprises of various kinds of size. The rapid development of China’s shadow banks can’t be apart from the reality of current background. Although in the process of deepening financial reform, as a developing country, there are still serious financial repression phenomena. Loan interest rates in our country do not enjoy more freedom until July in this year. Two kinds of interest rate are applicable in China, including government’s regulation of interest rates and spontaneous market interest rates. Apart from this, according to the economic situation, the government takes the macroeconomic regulation and control, often setting the loan conditions and limiting lending. Many financing entities in our country cannot meet the normal reasonable financing desire through traditional financial way. Shadow Banks are able to avoid regulation and the form is more flexible. Besides products investment rate is generally higher than the deposit interest rate, so shadow banks are sought after by financing side and investors in the market.Shadow banks in China start later than the foreign ones. The products are not based on the complex securitization chain, so the product design is not particularly complex and not like shadow banks abroad which will cause systemic financial crisis at present. But because China’s shadow banks are in expanding scale now, the regulatory policies and supporting legal facilities apparently can not keep up with the speed of the shadow banking expansion. In recent years, there have been shadow banks payment crisis in some areas. The money idle phenomenon begins to appear in the market. China’s regulators have gradually realized the risk of shadow banks and issued several files to standardize financial market. In June of this year, in the face of banking money shortages, the government does not give timely assistance as usual, but to wait and see. The move of central bank is intended to alert the whole financial industry to pay attention to the shadow banks risk, directing funds into the real economy, not only in the shadow banks circles. Shadow banks have a positive influence on our country economy. But because of its maturity mismatch problem and credit creation ability, the potential risks can not be ignored.This paper analyzes the Chinese shadow banking in detail based on the research of predecessors. Part1:Background and significance of topic domestic and foreign literature review and the innovation of this article. Part2:The clear exposition of shadow banks’concept and operational mechanism. This part of the paper is the basis of in-depth study of the shadow banking risk and regulation. Part3:Situation analysis of shadow banking and its constitution. Shadow banking can be classified into three categories and this paper describes every part respectively and the regulatory status of shadow banking. In addition, I described the current regulation of shadow banking in our country. Part4:Risk analysis of Chinese shadow banking. There are many differences between foreign and Chinese shadow banking. Products are not particularly complex and its leverage are not very high. I analyzed shadow banks’risk and systematic risk. Part5:The paper put forward the useful policy suggestions on the basis of the foregoing analysis.This paper combines theory with reality and combine induction with deduction’ to research shadow banking. This article innovation is accurate definition of shadow banking, which is the foundation for after analyzing. This paper use deductive reaso ning to put forward the applicable regulatory policy through summary analysis of th e risk of the shadow banking in our country. At the same time there are still some sh ortages in this paper. The analysis of this paper is not enough and risk analysis and r egulation research is based on the domestic situation, which did not draw lessons fro m foreign experience of the shadow banking. Because the definition of shadow bank ing in our country is unified, Statistical caliber is not exactly equal, so shadow banki ng scale is not accurate. After this article, I will continue to study the shadow bankin g and improve the deficiencies to achieve the quantitative and the qualitative analysi s unifies.