VOX  CEPR Policy Portal

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.