Amy Dalton
Thought Leadership Brief
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With support from
The Rise of Shadow Banking in China: The Political Economy of
Modern Chinese State Capitalism
Kellee Tsai,
Head & Chair Professor of HKUST’s Division of Social Science and
HKUST IEMS Faculty Associate, explores China’s response to the 2008 global
financial crisis, after which time Chinese enterprises both large and small have
engged in unprecedented levels of off-balance sheet activities, which are now
estimated to account for an astounding 26-69% of China’s total GDP.
Bi-Annual Report, 2013-2015
This report details the progress the Institute has made over its first two years.
Highlights include descriptions of the 28 individual research grants funded
by HKUST IEMS, as well as short write-ups on our wide array of events and
publications from the founding of the Institute to June 30, 2015, which include
16 conferences and workshops, 11 policy and business talks, 20 academic
seminars, 9 thought leadership briefs, and 27 academic working papers.
Read the brief at
Read the bi-annual report at
Stay connected with HKUST IEMS on social media
Naubahar Sharif
ThoughtLeadershipon
EmergingMarkets
Bi-AnnualReport2013-2015
HKUST IEMS APPOINTS 3 NEW MEMBERS TO
EXECUTIVE COMMITTEE
HKUST IEMS
is pleased to announce that our Faculty Associates
have selected 3 nominees amongst themselves to serve on
the Institute’s Executive Committee. The three new committee
members are
Naubahar Sharif
, Associate Professor of Social
Science;
Sujata Visaria
, Assistant Professor of Economics; and
Amy Dalton
, Associate Professor of Marketing.
These new members will replace outgoing executive committee
members
Sam Garg
, Assistant Professor of Management;
Xiaogang Wu
, Professor of Social Science; and
David Zweig
,
Chair Professor of Social Science.
Sujata Visaria
Issue
China’s pattern of state capitalism is
associated with directed credit and financial
repression, which has privileged state-owned
enterprises (SOEs) over private firms.However,
the monetary expansion of the late 2000s,
coupled with new technologies of finance,
have led to a remarkably “liberalized” financial
environment, in which both state and non-
state actors are involved in shadow banking.
Novel forms of Internet financing, wealth
management funds, and local government
financing vehicles have flourished in the last
five years. Yet this pluralization of financial
products from financial marketization did not
result from de-regulation or liberalization of
interest rates. Instead, continued financial
repression, combined with monetary
expansion and new technologies of finance,
has fueled shadow bankingwithin the broader
context of state capitalism in China.
Assessment
Although over 99 percent of registered
firms are small andmedium enterprises, state-
affiliated firms receive over 85 percent of loans
extended by state-owned commercial banks,
and account for over 60 percent of publicly
listed businesses on China’s stock markets.
Private businesses have thus relied on a
variety of informal financingmechanisms since
the earliest years of reform. More recently,
the scope of informal finance has expanded
into the broader universe of shadow banking,
involving not only private entrepreneurs, but
alsomiddle-class professionals seekingwealth
management products and local governments
facing unfundedmandates. The contemporary
map of informal finance and shadow banking
has intersected with vested interests in the
state sector.
Informal finance refers to financing,
savings, and investment vehicles that are not
sanctioned by the People’s Bank of China,
but most types are not explicitly banned.
Various informal financing arrangements and
non-banking financial institutions are either
registeredwith other official entities—or quietly
condoned because they provide financial
services to underserved localmarkets.
The least institutionalized forms of informal
finance include interest-free, uncollateralized
loans among friends, families, and business
associates. Similarly, extending trade credit is
a standard operating practice among private
vendors. Borrowing from individual money
lenders andmoney brokers (called
qianzhong
,
AUGUST
•
2015
THOUGHT
LEADERSHIP
BRIEF
No.10
1
Piggy Bank onMoney Stack by
DNY59/E+/Getty Images
BY-NC 2.0.
The Rise of Shadow
Banking in China:
ThePoliticalEconomyofModern
ChineseStateCapitalism
Kellee S. Tsai
KEY POINTS
China’s response to the global
financial crisis created an
unprecedented expansion
of bank lending after 2008,
spurring a host of state-
sponsored economic actors—
including SOEs, state banks, and
local governments—to expand
their off-balance sheet activities.
Off-balance sheet activities and
shadow banking are estimated
to account for 26-69% of China’s
entire GDP (see figure on page 2
for details).
To reduce some of the risks
associatedwith shadow banking,
Chinamust implement deeper
SOE reforms, increasemarket
access in the services sector,
establish small- andmedium-
sized banks, and set up channels
for debt issuance by local
governments.
1508358_UST IEMS_Thought LeadershipBrief-Issue10.v5.indd 1
2015/9/4 上午11:41
