The China’s shadow banking: issues and policy responses
The China’s shadow banking: issues and policy responses

Summary/Abstract: The purported risks in the Chinese shadow banking are not properly assessed. Given the silver-lining in parts of the shadow banking in China, which fills the gap between the growing demand for better financial services and products, a particularly prudent and balanced policy efforts seem necessary. Unlike the popular belief that stronger regulatory efforts are necessary to stem the negative spillovers of regulatory arbitrage, policy efforts need to concentrate on controlling specific vulnerabilities and fostering a forward-looking financial ecosystem. Better supervisory and regulatory efforts need to be combined with installing infrastructures to develop financial markets and to satisfy the growing needs for safe assets.

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