ABSTRACT
This chapter analyzes the Chinese shadow banking system and compare it with other countries. It examines six sections: defines and illustrates the shadow banking system; analyzes the shadow banking system and considers whether it should be regulated; describes shadow banking in China; deals with how to monitor such a system; and concludes. The 'internal' shadow banking sub-system is extremely active and important in China. The chapter explains that the traditional banking system now plays a vital role in providing shadow banking services in China. Although shadow banking can increase the efficiency by market-oriented intermediaries, the risks in the shadow banking system cannot be ignored, as its regulation is weak, the risk management is deficient, the leverage ratio is excessive and it is funded mainly by short-term debt. Since the public regulators were under criticism for failing to oversee the risks in the shadow banking system after the crisis.
