Shadow Bank And Excess Production Capacity

China is accelerating its pace in optimizing economic structure with Supply-side structural reform,both the shadow bank system and the excess production capacity industries are the key problems for Chinese economy.Reviewing the existing Literature,there is few research focus on the relationship between shadow banking system and excess production capacity,but,what happened to shadow bank and excess production capacity? Or we say what is the relationship between them? On purpose to explore the relationship between them,I employed both theory in macroeconomics and corporate finance fields,includes business cycle,financial accelerator theory,financial innovation theory,financing constraints,soft budget constraints and perking order theory.Firstly,based on the provincial panel data of China,the question had been given the answers.The results show that,there is a symbiotic relationship between the shadow bank system and the excess production capacity industries,which the shadow bank system relax financial constraints of these industries,especially,in the provinces have higher non state-owned economy output ratio.Furthermore,my work find this phenomenon may be caused by credit constraints policy of nation's Macro-control.These Results implies that,the future policies for both the shadow bank system and the excess production capacity industries should be considered together,not setting along.Secondly,we used listed companies data to explore the role of different size firms in the symbiotic relationship between the shadow bank system and the excess production capacity industries.The results show that,the listed company have totally different role in the relationship,actually,they are “depositors” of shadow bank system.The mechanism behind the role is that,as the listed companies enjoy the soft budget constraints,they have less financial constraints than middle and small-sized enterprises.Considering huge wealth hold by them,The value of asset is preserved and increased only by investment in shadow bank system.Finally,this work explore the motivation of listed firm to financialization.The regression results support those above,the listed firm with lower rate of capacity utilization has more incentive to financialization,since its higher profit demand,which facilitate investment in financial products might be provided by shadow bank system.