China's shadow banking system can be described as credit intermediation involving entities and activities outside the regular Chinese banking system. China's shadow banking system has experienced rapid growth since the global financial crisis.
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Overview
Shadow banking in China must be viewed in the context of a system which remains dominated by banks, especially large state-controlled banks, and in which the state provides a great deal of direction to banks, through a variety of regulations and formal and informal guidance. In China, where banks are discouraged from lending to certain industries and are mandated to offer frustratingly low interest rates on deposits, non-banks fill the gap. About two-thirds of all lending in China by shadow banks are "bank loans in disguise".
History
Like the US shadow banking system, the China shadow banking system emerged to get around banking regulations. Scholars such as Douglas J. Eliott, Arthur R. Kroeber and Yu Qiao believe that the following pressures have fueled the growth in China shadowing banking:
Wealth management products and trust products
The two most important categories of China's shadow banking products are wealth management products (WMPs) and trust products.