The Influence Of The Growth Of China’s Shadow Banking Sector On Monetary Policy Making

The explosive growth of Shadow Banking System and its great influence on the financial crisis rouse the attention of the supervision authority as well as the academic research boom on Shadow Banking. Similarly, in China, the rapid development of the size and influence of Shadow Bank System is also a hot topic. The boom of Shadow Bank System will have an impact on the direction and intensity of macroeconomic regulation. It will also directly challenge the decision making of monetary policy. This paper starts with the classification of China’s Shadow Banking System and the estimation of its scale. The data we get indicates that China’s Shadow Bank scale has reached the point that should not be overlooked. We also use the VAR model to analyze the impact of the development of Shadow Banking on CPI, money supply and monetary multiplier. Furthermore, this paper analyze the influence from the perspective of credit creation mechanism and the risk-taking channel of monetary policy as well as the specific terms such as intermediate target of monetary policy, policy tools and conduction mechanism of monetary policy. Finally, we draw some policy suggestions such as improving and perfecting the monetary policy making, strengthening financial supervision and continue to deepen the financial reform.