The Credit Creation Function Of China's Shadow Bank And Its Influence On Financial Stability

After the subprime mortgage crisis,domestic and foreign regulators began to pay attention to the impact of shadow banking on financial stability.Compared with developed countries such as Europe and the United States,China's shadow banking appeared late,but it has risen rapidly.It also has credit intermediary and credit creation functions as commercial banks.Due to the ambiguity of the definition of shadow banking and its difficulty in being regulated,there is a possibility of affecting the stable operation of finance.Therefore,China needs to focus on the formulation of macroeconomic policies.First of all,this paper introduces the generation,characteristics and main business of shadow banking,expounds the principle of shadow banking credit creation,and analyzes the harm of shadow banking risk accumulation to financial stability.Secondly,by constructing a VAR model,the paper analyzes the mutual influence of shadow bank size,money supply,seven-day interbank lending rate,real estate prosperity index and Shanghai Composite Index,and explains the impact of shadow banking's credit creation ability on financial stability.The conclusions of this paper are as follows:First,the credit creation function of shadow banking replaces the credit creation of commercial banks.Due to the lack of effective supervision and strict control,the shadow banking credit is more creative.Second,shadow banking has weakened the effectiveness of national monetary policy to a certain extent,interfered with the original credit transmission channels of monetary policy,weakened the state's control over financial markets and money supply,and reduced the role of benchmark interest rates in regulating the size of deposits and loans.Third,shadow banking continues to accumulate risks during operation and increase the probability of systemic risks.At the same time,the shadow banking business is highly innovative,making it difficult for investors to recognize and discover potential risks when making financial investments.As risks accumulate and erupt,Caused a wave of oversold,affecting financial stability and reducing bank credibility.The empirical results show that the expansion of the shadow bank scale will effectively increase the broad money supply,inject liquidity into the market,and influence the domestic credit scale through the“currency multiplier”.At the same time,the expansion of shadow banking scale and credit creation will cause an increase in liquidity le,vel,and the increase in liquidity level will affect the inter-bank lending rate,real estate prosperity index,Shanghai Composite Index and other variables.These variables are financial stability to some extent.In summary,shadow banking affects the liquidity of money and the stability of financial markets.The policy recommendations in this paper are as follows:First,the choice of central bank financial policy instruments and the implementation of financial supervision should be under a unified macro-prudential framework,and under these conditions,the existing monetary policy framework and system should be further improved to ensure that it matches the current domestic economic structure and financial development status.Develop emergency measures under the overall and forward-looking conditions of maintenance policies to cope with the occurrence of short-term non-systematic financial risks,and guide and stabilize financial markets;Secondly,incorporate the liquidity created by shadow banking into the existing liquidity statistics.Broaden the statistical caliber of money supply and liquidity levels,and realize the sharing of information among different regulatory agencies.Strengthen investor risk awareness and reduce the probability of financial risks arising from shadow banking.Finally,accelerate the process of China's interest rate marketization,further reduce the mismatch of market resources,and actively build a more reasonable financing structure;at the same time,the government and commercial banks help to broaden the sources of corporate funds,and effectively reduce the private cooperation between enterprises and shadow banks.Actively guide the shadow banking to accept the transformation and promote the further improvement and development of China's banking industry.