Research On Chinese Shadow Banking Regulatory Issues

The outbreak of the US subprime mortgage crisis led to the global financial crisis. The shadow banking regulatory failures in particular have been identified as one of the core reasons for the outbreak of the crisis. The shadow banking system had since become one of the focal points of economic research. In recent years, with the reform and development of China’s financial markets, size of the shadow banking system has been growing at a rapid rate in order to meet the diversified financial needs on both the economic and social level. At the same time, problems such as non-standardized business practices, lack of supervision, and regulatory arbitrage have been exposed. As the shadow banking system grows and develops, it challenges and hinders our country’s economic development and financial stability in various aspects. As the global shadow banking regulatory starts to reform, strengthening the supervision of the shadow banking has become essential. Therefore, it’s essential to analyze the issue of shadow banking supervision in order to prevent systemic risks in the shadow banking system. As a result, China’s shadow banking system will start to grow in a way that benefits and contributes to the development of China’s financial industry. With the goal of providing an effective plan to promote the healthy development of the shadow banking, this paper analyzes and summarizes the existing literature on the approaches to reform international shadow banking supervision, as well as the shortcomings of China’s existing shadow banking system supervision and regulatory practices. Based on the capital expansion model, this paper analyzes the optimal regulation of the shadow banking system, and attempts to define the general direction of China’s shadow banking supervision.This paper consists of five key sections:The first section is an introduction that provides an overview of the background, significance and, research status and achievement of the shadow banking system. In addition, this part also states the structure and framework of this paper.The second section states the theoretical basis of this paper. It starts off with summarizing the definition and characteristics of the domestic and international shadow banking system. Following the overview, this part also discusses the root cause of the status quo of China’s shadow banking. Finally, this part provides an analysis on the shortcomings of China’s shadow banking system in terms of risks, regulatory issues, as well as lack of supervision.The third section focuses on analyzing the optimal shadow banking practices. By expanding capital regulation model, the necessity of shadow banking supervision could be identified and emphasized. By analyzing the impact implementing social welfare policies of different regulatory on traditional banks and shadow banks, we could provide a theoretical basis for the shadowing banking regulatory policies.The fourth section provides a summary of the international shadow banking regulatory approach, drawing on the United States, the European Union, the Council of the shadow banking financial supervisory experience, in order to identify valuable information and insights for China’s shadow banking supervision.The fifth section of this paper focuses on approaches to improve the shadow banking supervision. The approaches include guiding the development of the shadow banking, expanding the scope of regulation, avoiding regulatory vacuum, improving financial regulation, actively promoting market-oriented interest rate reform, encouraging shadow bank information disclosure. The overall objective for this section is to contribute thoughts and analysis for the development of our countries show banking system.