The Macro Effects Of The Shadow Banking System In China

After the outbreak of the American subprime crisis in 2007,some scholars believe that the shadow banking system,which has long been free of supervision,is one of the causes of the crisis.At the same time,with the rapid development of economy,the pace of China's financial innovation has accelerated and the financing channels which outside the banking system have played an important role in the social financing,which lead to increasingly development of the shadow banking.In 2008,in coping with the impact of the subprime mortgage crisis,China introduced a stimulus policy of “four trillion”,resulting in a sharp increase in the credit scale.To relieve such condition,moderately tight monetary policy was adopted in 2010.To continue to meet the need of financing,some main market players received support through trust institutions,securities institutions and other nonbanking financial institutions.Therefore,nonbanking financial institutions had seen rapid growth and mixed operation became more and more remarkable,which promote increasing development of the shadow banking system.Given this,supervision departments were more worried about the risk of shadow banking.Under such circumstance,the future of shadow banking,that is,allow it to develop in its own way or exercise intensified supervision has become the focus of discussion of the theoretical field and the practice field in China.Taking China's shadow banking system as the research object,from the research perspective of the intermediary function and macro effect of the shadow banking system,this paper attempts to expound whether the shadow banking system,which is a new component of China's financial market,can affect China's monetary policy,as well as the way and path through which it affects China's macro economy.Besides,the countermeasures and suggestions for generating the healthy development of the shadow banking system in china are put forward.Based on sorting out relevant theories and literatures,the composition,scale and development motivation of China's shadow banking are analyzed,the influence of China's shadow banking system on the intermediate target and transmission mechanism is explained in theory,the influence of the shadow banking system on economic growth,price of commodities and other macro economic indexes is simulated with DSGE model,finally,the influence of shadow banking on macroeconomic indexes is tested by empirical analysis,and relevant policies and suggestions are put forward.With the combination of normative research and empirical research,this paper investigates the action mechanism of the influence of China's shadow banking on macro economy,and draws the following important conclusions: first,the innovation of the shadow banking system can force China's financial reform,the shadow banking system is tending towards marketization in aspects of intermediary mechanism and pricing,and exerts certain role in promoting China's current financial market reform and interest marketization;second,The credit creation function and interest rate pricing mechanism of shadow bank can also affect the currency transmission mechanism;expand the credit transmission channel;strengthen the interest rate transmission mechanism and the transmission of monetary policy to asset price channels,which create the condition for the transformation of China's monetary policy from quantitative to price-based;third,the shadow banking system can somewhat shore up the economy.As the process of financial deepening,it expands the production possibility frontier and strengthens the input-output balance.The empirical result reveals that the growth of the shadow banking can stimulate investment and improve productivity,so the existence of the shadow banking has certain positive effect on promoting economic growth.But in terms of the strength of the function,it is weaker than the effect of bank credit on the economy;fourth,The shadow banking system has changed the dynamic track of economic activity.Tight monetary policy has confinement effect on traditional commercial bank credit.At the same time,it will enable the bank to enlarge the amount of financing provided by its external shadow banking business.Thus,the fluctuation of real economy variables that might have been more severe originally could be reduced.Shadow banking can be supplementary to traditional bank credit,it can mitigate the extent of economic downturn so as to avoid the risk of economic overshoot.In conclusion,shadow banking has extended the financial functions of financial system,generated abundant financial instruments and products and met diversified investment and financing needs,and is capable of giving better play to the role of market mechanism in financial development.Moreover,shadow banking plays certain positive role on macro economy.Therefore,with the experience of American financial reform after the financial crisis,this paper suggests that shadow banking in China should focus on guiding financial institutions to serve substantial economy.It should be also suitable for the development stage,level of China's financial market,tolerance of investors and capacity of regulatory.This paper finally puts forward the following suggestions and countermeasures to promote the healthy development of the shadow banking system in China: first,sunlight should be brought to the business of the shadow banking system by means of increasing information transparency and developing asset securitization;second,the range of the funds market participation of shadow banking should be moderately expanded by means of risk hedging and product innovation;third,interest marketization should be comprehensively promoted and improved;fourth,the supervision methods and means of the shadow banking system should be innovated.