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Title: The function of the 'shadow banking sector' in the Chinese financial system : a systemic analysis of China's third financial sector
Author: Schmidt, Eric
ISNI:       0000 0004 7660 1427
Awarding Body: King's College London
Current Institution: King's College London (University of London)
Date of Award: 2018
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When we think about economic development, the impact of the financial system is rarely the first thing that comes to mind. That is not to say, that development economics does not appreciate the contribution that the financial system makes to development. The importance of it however is not contested. Lucas (1988) for example sees the role of the financial system in economic development as widely overstated. Robinson (1952) put it more bluntly when he said 'where enterprise leads, finance follows'. In recent years the view of a positive impact of the finance-growth-nexus, the relationship between economic development and strong financial institutions, has gained wide prominence (e.g. Haber et al, 2008; Rühle, 1997; Barth et al, 2006; Cihak et al, 2012; Beck et al, 2005, Krahnen & Schmidt, 2004). Most literature on the finance-growth-nexus has focused on the relationship between the formal sector of the financial system and its impact on economic growth. It has categorized financial systems using a bank-based vs. market-based dichotomy (e.g. Aybar & Lapavitsas, 2003; Chakraborty & Ray, 2006; Demirguc-Kunt & Levine, 1999; Demirguc-Kunt & Maksimovic, 2002; Levine, 2002). The shadow-banking sector, referring to all institutions that engage in bank-like activities without being regulated as a bank, has in the past often been overlooked or outright ignored in these discussions. It is the somewhat less attractive cousin of the formal banking system, considered to rarely provide anything positive and thus deserving to be marginalised. Its importance is less understood and analysed because it is assumed that it will wither away in time as the country moves along its development trajectory (e.g. Ayyagari et al, 2010;). Moreover, in recent years, it was precisely this part of the financial system that was quickly blamed for emergent financial instabilities. Certainly, following the 2008 financial crisis the potentially destabilizing qualities of certain parts of this sector should not be ignored. Nevertheless, given the aforementioned positive role of the formal financial system in supporting economic growth, and in view of instabilities sometimes even faced by formal financial systems, there is good reason to believe that shadow banking has the potential to make its own meaningful positive contributions to economic growth and development. Scientific evidence on this shadow banking sector, the functions it provides and its impact on economic development is however still rare. Hence, the purpose of this study is to examine this issue in greater detail: What function does the shadow banking sector provide to the financial system in China?
Supervisor: Knoerich, Jan Michael ; Pacheco Pardo, Ramon Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available