By Lei Wei, the Research Institute of Finance, the DRC

Research Report No 172, 2013

Abstract:

Although disagreement on the definition of the scope of China's "shadow banking" exists, the Chinese government has paid close attention to its latent risks. The adopted supervision policies have played a positive role in preventing and reducing "shadow banking" risks, but they are far from enough. This report summarizes supervision policies adopted since 2009 and their effects, and provides suggestions on solving existing policy problems and on future reform.

First, the reform will insist on combining deregulation with strengthening supervision in general. Second, short-term reform will focus on identifying supervision priorities, strengthening supervision and coordination, and setting up a supervision standard system targeted at "shadow banking." Third, medium- and long-term reform will speed up the pace of revising and improving the legal framework, unify supervision rules, and reduce arbitrage risks arising from supervision loopholes or inappropriate supervision.