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The Rise and Fall of Shadow Banking in China( Source- The Diplomat / Author- Sara Hsu)

Shanghai stock exchange ( Image credits- Wikimedia Commons / Heurik) Source- The Diplomat Author- Sara Hsu The conditions that gave rise to shadow banking in China before the bursting of the real estate bubble were unique; a finance-fueled stimulus package, coupled with moral hazard, under changing financial regulations, produced a shadow banking system that fomented institutional risk and threatened to bring about systemic risk. This was tightly managed by the Chinese government, which monitored developments, allowing some freedom while reining in the shadow banking sector when its costs outstripped its benefits. Shadow banking, which rose after the global crisis hit, appeared to be a matter of political expediency rather than careful planning, and its decline was absorbed into the greater concept of the “New Normal.” Shadow banking lost its luster and converted from a lending boom into a debt debacle that was absorbed under the umbrella of restructuring. As a br