Dynamic Effect Analysis Of Shadow Banking And Formal Credit In China

With the development of financial innovation and the restriction of financial supervision,"informal finance" is gradually rising.In response to the needs of fundraisers,shadow banking system is emerging,which not only broadens the"financing channels" of social capital pools,but also speeds up the flow of funds,and improves the utilization and activity of funds.Shadow banking is directly affected by the credit cycle,the economic cycle and so on.When the financing threshold in the credit market is raised,the scale of shadow banking business would expand as a supplement to formal credit.The departments with less formal credit funds will raise funds from the shadow banking business channel.However,unlike the shadow banking system built by the asset securitization in developed economies,the development of domestic shadow banking business mainly consists of commercial banks,which build financing platforms to achieve credit creation and innovation of financial instruments.Then the bank could bypass the regulatory constraints and be easy getting the credit.Specifically,China's credit-based shadow banking business mainly includes the entrusted loans,trust loans,non-discounted bank acceptance of commercial bills and other business.These businesses are derived from the traditional credit business of commercial banks.Thanks to the cross-correlation of these shadow banking business,the domestic shadow banking which closely links with the development of formal credit in China,has strong linkage for credit fluctuations.On January 5,2018,CBRC promulgated the Regulations on the Management of Commercial Banks Entrusted Loans.This paper gives the standards of entrusted loans--the "core" shadow banking business of and fills the gap in shadow banking supervision.Exploring the dynamic response between shadow bank system and formal credit in Chinese credit market can not only provide reference for the policy orientation,but also make a good surrounding for the development of shadow banking business.Firstly,this paper makes a theoretical analysis of the development of shadow banking in China and puts forward the hypothesis that as a supplement to formal credit,shadow banking will gradually expand its scale with the development of credit business.Secondly,because of the business relevance,the shadow banking system can promote the expansion itself and expand the effect of shadow banking.Based on the assumptions,this paper makes a preliminary conclusion that the shadow bank system moves adverse to the credit at first,by analyzing the size of the shadow bank system.Then a three-variable TVP-VAR model including shadow banking and formal credit is constructed to explore the time-varying dynamic impact.After the empirical test and analysis of this model,the paper finds that the expansion of commercial bank-led credit shadow banking business will have a restraining effect on the traditional credit business in the previous few periods,and will have a smaller role in promoting the traditional credit business,but overall,the role of substitution is dominant.The expansion of formal credit will replace the related business of shadow banking in the short term,and then promote shadow banking.Business development,in the long run,plays a leading role.This article draws the following conclusions:there is a dynamic effect between shadow banking and formal credit in China.In the long run,the development of shadow banking as a supplement to formal credit will have an alternative effect on traditional credit business.Because of the expansion of shadow banking,it will expand the effect of shadow banking,and the investment of formal credit will restrain shadow banking in the short run.It will finally promote the development of the shadow banking system by stimulating the economy to expand the financing needs.According to the results,the paper puts forward a series of suggestions,such as strengthening the supervision of shadow banking,improving the credit monitoring system,reasonably considering the impact of shadow banking system when introducing corresponding credit policies,etc.It also makes a reasonable credit policy according to the dynamic effects of shadow banking and formal credit to guide the healthy development of shadow banking business in China.The structure of saving Credit provides reference basis.