The Development Of China's Shadow Banking System And The Countermeasures Of Commercial Banks

Economic system relates resource demand and supply,and price plays a vital role in this subtle and elegant device.The essence of modern economy is credit,and liquidity is very important in economic policy and economic activity.The burgeoning of shadow banking greatly impacts money policy and money supply,and also influences endowment price and resource allocation.From macro perspective,shadow banking increases the uncertainty during the process of credit creation,bringing more risk to the effective implementation of money supply.From micro perspective,shadow banking provides new method of financing,thus reduces corporates' financing cost,accelerating the operating efficiency of capital markets.Global financial crisis beginning in 2008 throws this tops to keen focus.While,the germination of shadow banking system in China results from China specific context and financial system.Its basic definition and business constitution is subtly different from international standards,with its importance even more highlighted.It's a crucial aspect of the development of Chinese-style market economy system.It's of theoretical necessity and practical imperativeness to research on the topic of China's shadow banking system.Containing four parts,this paper researches the generation and development of China's shadow banking system,the risk it involves,and traditional banking system's countermeasures.In the first part,this paper talks about the research background,and introduces related literatures within and abroad of China,and summarizes the main content and methodology.Besides the impact of global financial crisis,the financing difficulty of small and medium-sized enterprises and the development of non-traditional financial institutions is also a respect of the essential of China's shadow banking research.The second part focuses on the China's context of economic development history,recapitulating the basic concept of China's shadow banking.Different from its international counterpart which emphasizes securitization,China's shadow banking sprouts based on the fact that the steady economic growth has higher and higher level of demands for reforms of the economic system,specifically financial system.This fact involves deeper reasons such as transition of national economic strategy,rapid development of communication technologyand so on.The third part analyzes the generation of China's shadow banking in the perspective of binomial tree model.Since shadow banking in China enjoys the invisible deposit protection,which bringing up moral hazard problem.Embedded option can best describe shadow bank's default incentive,greatly facilitating the revenue and cost analysis for shadow banking.We can see clearly here that the net revenue of shadow banks is not badly affected in adverse conditions since they choose to default,which grants them a noticeable advantage in their competition with traditional banks.The fourth part considers the risk control and regulatory measures for shadow banking.Since some traditional banks themselves also conduct shadow banking businesses,the relationship of shadow banking system and traditional banking system is even more complicated,which makes macro prudential regulation even more difficult.The regulatory of shadow banking should be in line with the regulatory of traditional banking,and we need utilize international experience and underline China's context to best develop multi-level financial markets.It's our goal to implement the general principle of finance serving real economy,and to foster the healthy and sustainable development of China's socialist market economy.