Olivier Darmouni, Kerry Siani, 29 October 2020

With the spread of COVID-19 and its economic consequences, many firms were in need of increased liquidity. This column documents that instead of relying on bank loans, firms preferred to issue corporate bonds on capital markets. Over 40% of bond issuers left their credit line untouched, and a large share of bond issuance was used to repay existing bank loans. Bond issuance was also used to increase holdings of liquid assets rather than for real investment. This suggests that the V-shaped recovery of bond markets is unlikely to lead to a V-shaped recovery in real activity.

Kaiji Chen, Jue Ren, Tao Zha, 24 March 2016

The rise of shadow banking in China after the Global Crisis helped stabilise output growth. This column looks at entrusted lending, a unique feature of Chinese shadow banking. Banks played a prominent role in the rapid rise of entrusted lending during the period of monetary tightening following the Crisis; the bulk of shadow lending was channelled by non-state banks into risky industries. Such financial distortions will eventually hamper the progress of transforming from investment-led growth to balanced growth, unless proper regulations are put in place. 


CEPR Policy Research