The business of #shadowbanking is something that traditional financial institutions cannot do, which involves what some regulators regard as part of the “virtual economy” such as the #realestate sector and over-capacity，said CF40 member Wu Ge,1/6 cf40.org.cn/uploads/201910…
This reflects the problem of insufficient financial supply in China. Currently, the central government has proposed to promote the structural reform of the financial supply side. 2/6
This has emphasized the need for more diversified entities to provide financial products and services, rather than “eliminating” the financial supply side. 3/6
After years of development, China’s capital market still failed in reaching expectation, which is really confusing. To a large extent, shadow banking is connected to the capital market. 4/6
Objectively speaking, the deposit and loan model of commercial banks cannot adapt to the complicated and ever-changing real economy. Commercial banks are limited by the issue of maturities. Their funds are short-term and cannot meet the needs of long term. 5/6
Moreover, the investment behavior of commercial banks is mostly based on historical data. They lack the ability to timely respond to emerging commercial activities. In this case, capital market financing, including shadow banking, is still critical.6/6
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