China’s shadow banking in 2020–2022: an empirical study

Abstract Despite renewed regulatory attention, shadow banking across the globe is still a nonnegligible part of economic life. This paper researches China’s shadow banking during 2020–2022, a stage marked by COVID-19 and strengthened global regulation on Non-Bank Financial Intermediation (NBFI). Its business model surprisingly resembles its Western peers, funding underserved sectors and having similar exposure to balance sheet mismatch. Uninsured interbank funds and wealth management products support massive holding of bond investment (36.6% of the total assets), making risk contagion easier. This paper re-summarizes growth dynamics in a “Pull-Push” framework and proposes the concept of reintermediation corresponding to disintermediation. Consecutive regulation on NBFI and the real estate sector kept dragging on growth, rendering it in liquidity surplus. We provide empirical evidence on the relationship of China’s shadow banking with macro-finance and note several breakdowns of pre-pandemic relations among economic and financial indicators. The most remarkable breakdown is the weakened functionality of the monetary policy transmission channel. Besides, it continued to twist financial regulatory indicators to a lesser extent.