Shadow Deposits as a Source of Financial Instability: Lessons from the American Experience for China
In less than a decade, China has developed a shadow deposit system similar in scope and function to money market mutual funds in the United States. Wealth management products in China have emerged as an important source of short-term financing for the Chinese economy and are likely to continue to grow in coming years. These products promise savers higher interest rates than the controlled rates on traditional bank deposits but offer fewer investor protections. As such, these financing pools are vulnerable to rapid retrenchment when financial difficulty forces investors to reevaluate the risk of these investments. Consequently, a source of potential financial instability has been created in the Chinese economy. US experience in regulating shadow deposits offers useful lessons for China to guide its own financial development in a healthier direction.
Year of publication: |
2013-05
|
---|---|
Authors: | Borst, Nicholas |
Institutions: | Peter G. Peterson Institute for International Economics (IIE) |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Maintaining Financial Stability in the People's Republic of China during Financial Liberalization
Borst, Nicholas, (2015)
-
A Blueprint for Rebalancing the Chinese Economy
Lardy, Nicholas R., (2013)
-
China's Credit Boom: New Risks Require New Reforms
Borst, Nicholas, (2013)
- More ...