Shadow Play: How China's Unregulated Banks Feed Its Boom And Bust Economy

Shadow Play: How China's Unregulated Banks Feed Its Boom And Bust Economy by The Conversation

More turbulence on the Chinese stock market highlights just some of the challenges facing the world’s second-largest economy. Following losses of US$3 trillion in the three weeks from mid-June, the Shanghai Composite has since recorded its biggest one-day fall for more than eight years. It’s clear that regulatory reform is needed in the country’s financial sector and China’s large shadow banking sector is one area in particular need of government intervention.

Shadow banking refers to the collection of non-bank financial institutions that provide services similar to traditional commercial banks. In particular they provide consumers with credit. But they are not regulated...