The Analysis Of Social Welfare Effects Caused By Chinese Non-Financial Enterprises’ Participating In Shadow Banking Business

As the development of Shadow Banking, the study in this field has obtained remarkable achievements. Because of the special conditions in China, it is necessary to specially study the Chinese-Style shadow banking. One characteristic of the Chinese-Style shadow banking is that some non-financial enterprises also participate in. More and more non-financial enterprises begin to be engaged in the shadow banking business as credit agency.The significant difference in financing status between different kinds of enterprises causes the distinction of the enterprises in advantageous financing position and those which do not. As a result, advantageous enterprises have a mount of low-cost excessive funds depends on their own advantageous status. On the other hand, those disadvantageous enterprises have to face financing dilemma and bear high-cost funds. Capital profit chasing leads the enterprises to be keen on lending their excessive funds in a high interest rate to the disadvantageous enterprises. Such an economic behavior will cause financial misallocation, higher financing cost, inequality of financing status. All of these effects will result in a social welfare loss through a negative effect on productivity.This paper describes the current development of shadow banking business which the domestic non-financial enterprises are engaged in, and analyzes the social welfare effects brought by such a phenomenon combining qualitative analysis with quantitative analysis. Although, this paper pays most of attention to the negative effects of non-financial enterprises’participation in the shadow banking business on the social welfare, it doesn’t deny that such a choice will do good to increasing the resource efficiency. From the current reality, the non-financial enterprises’ participation in the shadow banking business has brought some adverse impacts, and the overall performance is a negative effect. Focusing on these negative effects can help us to find more measures to solve this problem. At last, it is demonstrated that the participation of non-financial enterprises in shadow banking business will cause social welfare loss. The welfare loss model gets the amount of net loss in social welfare. Based on the result of study, some suggestion is given to strengthen the supervision and restriction for the participation of non-financial enterprises in Shadow Banking business.