Effects Of The Shadow Banking On China’s Economic Development

The concept of the shadow banking system was first proposed in2007, it meansnon-banking financial institutions, which is free of the regulatory system, butexercising similar functions with the traditional commercial banks, providing creditand financing. The global financial crisis, breaking out in2007, spread to manycountries and regions of the world. The origin doesn’t come from the traditionalbanking system, but from the shadow banking system which is closely associatedwith traditional commercial banking system. The feature of its own high leverage,maturity mismatches and opacity with the close contact between the internal systemand between commercial banks is the root triggering the global financial crisis. Sothe world’s banking regulators and experts from many countries begin to criticallyexamine the country’s financial system, the operating mechanism and risks of theshadow banking system. They propose regulatory approach so as to minimize therisks.Compared with the American and European countries, Our shadow banks startlate with lower degree of asset securitization. But with the gradual development ofthe economy, the demand for money continues to increase, and our shadow bankinghas also been developing rapidly. The development of the shadow banking systemprovides a diversity of financial products for investment and effectively solves thefinancing problems of small business. But the defects and the risks of the systemitself will also produce a negative impact on the stability and monetary policy of thefinancial system. The world’s experts concern more about the operation and risks ofthe shadow banking system, and to make regulatory proposals. But about the impactof the shadow banking on economic development, the study was not thorough.Domestic scholars focus more on the adverse effects which the shadow banking makes on the monetary policy, but mention less the positive role of the shadowbanking. This may cause us produce biased understanding of the shadow banking.This article is produced on this basis, intending to comprehensive study the positiveimpact and the negative impact the shadow banking makes on China’s economydevelopment qualitative and quantitative.The first part of this article makes a complete and comprehensive exposition onconcept of the shadow banking, and then analyzes the differences in the sources offunds, financial innovation, manifestations and risks between the domestic andforeign shadow banking system, and reveals the different mechanisms the shadowbanking from traditional commercial banks in source of funding, financing mode,information transparency and financial regulation and finally reveals thecharacteristics and risks of shadow banking have. The second part describes thecurrent situation of our shadow banks: starting late and having low degree insecurities. And this part also says that our shadow banks stagger with traditionalcommercial banks, and have significant institutional characteristics. The third part isthe core of this paper, in this part I conduct research on the shadow bankinginfluence qualitative and quantitative, both from the economic growth and from theimpact on monetary policy. It shows that the shadow banking play a catalytic role inthe growth of the economy, but the effect on monetary policy is not significant. Theshadow banks only have weak impact on money supply. In the fourth part, I thinkimproving monetary policy and strengthening financial supervision can make us dealwith the risks better.