NSE Seminar   

In the Shadow of Banks: Wealth Management Products and Issuing Banks’ Risk in China

Time：15:30-17:00, March 17, 2017

Venue：Small Classroom, Wangzhong Building, NSD, PKU

Host：Prof. Yong WANG, Prof. Xin WANG, Prof. Jiajun Xu

Speaker：Jun QIAN (Shanghai Advanced Institute of Finance)

 

【Abstract】

To support China’s massive stimulus plan in response to the global financial crisis in 2008, large state-owned banks pumped huge volume of new loans into the economy and also grew more aggressive in the deposit markets. The extent of supporting the plan was different across the ‘Big Four’ banks, creating a plausibly exogenous shock in the local deposit market to small and medium-sized banks (SMBs) facing differential competition from the Big Four banks. We find that SMBs significantly increased shadow banking activities after 2008, most notably by issuing wealth management products (WMPs). The scale of issuance is greater for banks that are more constrained by on-balance sheet lending and face greater competition in the deposit market from local branches of the most rapidly expanding big bank. The WMPs impose a substantial rollover risk for issuers when they mature, as reflected by the yields on new products, the issuers’ behavior in the inter-bank market, and the adverse effect on stock prices following a credit crunch. Overall, the swift rise of shadow banking in China seems to be triggered by the stimulus plan and has contributed to the greater fragility of the banking system.

 

【Speaker】

Jun Qian is Professor of Finance at Shanghai Advanced Institute of Finance (SAIF), Director of the DBA/EMBA/EE programs, and Deputy Director of China Academy of Financial Research, Shanghai Jiao Tong University. Prior to joining SAIF, he was a finance professor with tenure at the Carroll School of Management, Boston College. He received his Ph.D. from University of Pennsylvania and his B.S. degree from University of Iowa. He also enrolled at Department of International Economics, Fudan University, as an undergraduate.

Professor Qian's research interests span many topics of theoretical and empirical financial economics. He has published many papers in top academic journals. One of his best-known papers, published in the Journal of Financial Economics, is elected as an “All-Star” paper based on its large number of citations. In the paper he and his coauthors explained how China has achieved its impressive economic growth without strong formal institutions or an efficient, ‘standard’ financial system that includes a stock market and a banking sector. He is on the editorial board of the Review of Finance and Frontiers of Economics in China, and a Fellow at the Financial Institutions Center of the Wharton School. He also served as a visiting or special-term professor at MIT’s Sloan School of Management, School of Economics and Management of Tsinghua University, and Shanghai University of Finance and Economics.

For more information about the speaker, click here