The Rise of Shadow Banking in China

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A Beijing opera performer. UN Photo/John Isaac

The shadow banking sector has surged in China over recent years says the International Monetary Fund (IMF).

The agency says shadow banks are not officially banks at all but institutions outside of the banking system that loan money. The loans accounted for a third of the rise in lending last year.

Savers are attracted to the better returns offered by shadow banks. But those higher returns are only possible because loans are made to riskier clients.

The continued growth of this largely unregulated sector has garnered headlines and prompted concerns about the threat to China's financial sector and the wider economy if these unregulated loans go belly up.

Jocelyne Frank asked Economist David Dollar of the Brookings Institution to explain in detail what constitutes a shadow bank.

Duration: 3'47"

 

Filed under Today's Features.
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