Shadow Banking, Financial Risk and Regulation in China

Hang Xia

Master's thesis

Abstract:

Abstract: The thesis is devoted to the analysis of the shadow banking, financial risk and regulation in China. The objective of the thesis is to identify both the positive effect of the shadow banking and more importantly the potential risks of this activity. The results will help the investor and the authority to understand the Chinese shadow banking problem comprehensively and systematically. And the possible solutions we have suggested to enhance the regulation and reduce the risk can somehow help the investor to make the decision. We have use the comparison method and qualitative method which we have investing the case of shadow banking in Chinese economy. We can conclude that the shadow banking on the one side can act as a complement to the traditional banking system; shadow banks play an active role in serving the real economy and enriching investment channels for ordinary citizens. On the other side, it has been argued that shadow banking is not properly regulated, and its size and rapid growth does raise debt levels and make credit flows less transparent and more risky. We suggest the tightening of the regulation imposed on WMPs management and increase the collaboration between banks and trust companies. And it could be a possible solution to implement the stress tests on banks and disclose the results to the public and to reform banking regulation and interest rate liberalization.

Abstract:

Abstract: The thesis is devoted to the analysis of the shadow banking, financial risk and regulation in China. The objective of the thesis is to identify both the positive effect of the shadow banking and more importantly the potential risks of this activity. The results will help the investor and the authority to understand the Chinese shadow banking problem comprehensively and systematically. And the possible solutions we have suggested to enhance the regulation and reduce the risk can somehow help the investor to make the decision. We have use the comparison method and qualitative method which we have investing the case of shadow banking in Chinese economy. We can conclude that the shadow banking on the one side can act as a complement to the traditional banking system; shadow banks play an active role in serving the real economy and enriching investment channels for ordinary citizens. On the other side, it has been argued that shadow banking is not properly regulated, and its size and rapid growth does raise debt levels and make credit flows less transparent and more risky. We suggest the tightening of the regulation imposed on WMPs management and increase the collaboration between banks and trust companies. And it could be a possible solution to implement the stress tests on banks and disclose the results to the public and to reform banking regulation and interest rate liberalization.

Keywords

Shadow banking, Financial regulation, Wealth management products, Financial risk, Financial repression, Trust products, Securitization, Financial innovation.

Keywords

Shadow banking, Financial regulation, Wealth management products, Financial risk, Financial repression, Trust products, Securitization, Financial innovation.

Language used: English

Date on which the thesis was submitted / produced: 25. 4. 2015

Thesis defence

• Date of defence: 28. 5. 2015
• Supervisor: Zuzana Kučerová
• Reader: Josef Novotný

VŠB - Technical University of Ostrava

Ekonomická fakulta

Master programme / field:
Hospodářská politika a správa / Finance