China's shadow banking in 2020-2022: an empirical study

This paper investigates China's shadow banking sector during 2020-2022, a period marked by the COVID-19 pandemic and intensified global regulation. The study reveals that China's shadow banking, despite regulatory efforts, exhibits similarities to its Western counterparts, funding underserved sectors and facing risks from asset-liability mismatches. A significant portion of its assets (36.6%) is invested in bonds, funded by uninsured interbank funds and wealth management products, increasing contagion risk. The paper analyzes growth dynamics using a "Pull-Push" framework and introduces the concept of "reintermediation", contrasting it with "disintermediation." Continuous regulation and the real estate sector's struggles contributed to liquidity surpluses. Empirical evidence highlights breakdowns in pre-pandemic relationships among economic and financial indicators, notably a weakened monetary policy transmission channel.

Wenzhe Li