The Research On The Impact Of Shadow Banking On The Financial Fragility In China

Since the international financial crisis in 2008, the shadow banking has been gradually received extensive attention from the academia and practitioners. As a kind of financial innovation, shadow banking also get rapid development in our country, many kinds of shadow banking products, such as financial products, entrusted loans, trust products, folk lending, P2P network loan and so on, have become an important part of the financial system in China. Meanwhile, the risks hidden in shadow banking and its impact on the financial fragility have become the focus of attention.At first, on the basis of domestic and foreign research and the current situation of the development of the shadow banking in our country, this article analyses the general mechanism and present situation of our country between the shadow banking and financial fragility. Then the paper dissect the effect of the relative size of the shadow banking (shadow Banks scale/GDP) on the financial fragility through the empirical research by using the annual data of 2002-2013. The empirical result reveals that there has a threshold effect between the relative size of the shadow banking and financial fragility. The rising of the relative size of the shadow banking can reduce the financial fragility and improve ecological environment of the financial system when it is less than 60.7%. On the contrary, the expansion of shadow banking will increase the financial fragility when the relative size of the shadow banking is more than 60.7%.According to the conclusions above, this paper considers that the social should take a dialectical attitude toward the development of shadow banking, and make the most of its positive effects to the financial fragility by reasoningly and objective understanding the basis of shadow banking, and minimize the negative impact to the economic and financial system by establishing a unified and standardized shadow banking supervision system, and encouraging financial innovation, as well as legitimately leading the healthy development of the shadow banking.