Study On Shadow Banking And Chinese Financial Stability

In recent years,shadow banking has become an important financing channel,notwithstanding the credit businesses of traditional commercial banks,with the development of financial liberalization and innovation.It plays an important role in expanding the depth and breadth of China's financial markets and improving our financial system.Shadow banking mainly refers to those which copy the credit creation function of commercial banks,subject to less regulated or unregulated financial institutions and their businesses.Our country's shadow banking system has a very complex relationship with the commercial banking system.Shadow banking is an addition to the traditional financing channels;it alleviates the contradiction between capital supply and demand,helps minor enterprises to solve their financing difficulties,optimizes the efficiency of resource allocation,and promotes the transformation of profit and operation models of traditional commercial banks.Nevertheless,because of the lack of financial regulations,shadow banking is more prone to making irrational decisions regarding expansion and investment.Moreover,shadow banking enlarges the systemic risks of our country's finance and can also lead to financial crisis easily for its high leverage,maturity mismatch,liquidity transformation,credit creation,and credit risk transformations.Based on previous research,this thesis generalizes the definition and the development process of shadow banking,analyzes the internal logic of Chinese shadow banking system,and explores the mechanism of action of shadow banking system.At the same time,based on the quarter dates from 2006 to 2016,this thesis tries to count the scale of shadow banking from financing caliber,and calculate financial stability level with factor analysis.What's more,this thesis also constructs two models and uses empirical evidence to analyze the factors which affect the growth of shadow banking,and explore its aftereffect of the growth to financial stability.At last this thesis puts forward several suggestions on how to make shadow banking regulation reform in China.The main conclusions of this thesis can be summarized as follows.First,there is an alternative relationship between shadow banking and traditional commercial banks.When the state macro control tightens credit,instead of traditional commercial banks,shadow banking will be a new financing channel.Furthermore,the size of shadow banking is also related to the operation condition of commercial banks.When the quality of a commercial bank's assets decline or this bank decides to limit the growth of its risk assets,consider of steady operation,this commercial bank will reduce its shadow banking business.Second,long term co-integration relationship and two way granger causality are between shadow banking scale and financial stability.The inner relationship between them is not a simple linear relationship but obtained by inverted u-shaped curve,when the shadow banking scale is below a certain line,financial stability will increase when shadow banking scale expand,but when shadow banking scale is larger than this line,the expansion of shadow banking scale will lead to the decline of financial stability.Therefore,shadow banking should be treated suitably and be incorporated into the regulatory system in order to prevent systemic risks.