Topic: Shadow Banking: China’s Dual-Track Interest Rate Liberalization

Speaker: Honglin Wang, Fellow of Hong Kong Institute for Monetary Research

Date: June 12th (Fri.)

Time: 10:00-11:30a.m.  

Location: Building 4, Room 102

Language: English

Abstract:

Shadow banking in China is mainly conducted by commercial banks to evade regulatory restrictions on deposit rate and loan quantity. It essentially constitutes a dual-track pragmatic approach to gradually liberalize the country's repressed interest rate policy. We show in equilibrium that shadow banking improves social surplus given high deposit reserve requirement and inefficient bond market. Full interest rate liberalization leads to additional gain in social surplus. The dual-track approach to interest rate liberalization avoids the potential economic turbulence caused by an otherwise single-track one-step approach.

About the speaker:

Honglin Wang is a fellow of Hong Kong Institute for Monetary Research (HKIMR). Wang received a B.A. in Economics and International Business from Renmin University of China in 1998, and a M.A. and a Ph.D. in Agriculture Economics and Economics from Chinese Academy of Agricultural Sciences and Michigan State University (MSU) respectively. His papers have appeared in Journal of Econometrics, International Journal of Central Banking, International Finance Review and other leading economic journals. His research interests are mainly in monetary policy, real estate, bank and capital market and applied econometrics.