Research of Chinese Shadow Banking System Essay

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Research of the Chinese Shadow Banking System: What it is? How would it affect us? How should we treat it? Chen Zhu Econ 4597.01 Instructor: Bruce Bellner Date: 02/26/2014 Abstract In this paper, the main topic would be the Chinese shadow banking system. This paper would develop the thesis from three aspects: the different definition for Chinese shadow banking system, compared to the U.S. shadow banking system, positive and negative effects of shadow banks have over the market, solution for the problem it brought to us. It may contain some facts with no back-up, and under such a circumstance, these numbers would be an estimate. Key Word: Chinese shadow banking, pros and cons, solution for shadow banking’s problem Research of Chinese Shadow Banking System In the past half of the year, after the boost of the Shibor at June, the Chinese debt crisis and shadow banking risks seems to become the hot topic among the presses. Some presses showed their pessimistic view of the Chinese government and enterprises debts, like the Bridging the fiscal chasm (2014) from Economist, a typical news addressing the pressure of the localities debt. The part of their pessimistic mood came from the fast growing Chinese shadow banking system. For these presses, they might misunderstand the whole system of Chinese economy, and the status of the shadow banking system in this economy. As a socialism country with a really different economic system from west, the old way to view the shadow banking activities may need some alternation under such an environment. In this paper, the Chinese shadow banking system would be introduced as follows: the definition of “Chinese shadow banking”, compared to the U.S. shadow banks, the pros and cons, and rightness of its existence, and finally how should we treat it in the future. 1 What it is? 1.1 U.S. shadow banks

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