Shadow Banking and Its Regulation in the U.S. and China

This article presents such a study of shadow banking and its regulation in these two countries, with a view to providing findings to facilitate the international community’s policy making in this area. It is found that while shadow banking varies in the U.S. and China in terms of its definitions, scopes, risks, legal origins and regulations, there are a number of similarities in order to create credit beyond the heavy regulated section, which can be viewed via the lens of the Theory of Money and Credit and the Endogenous Money Supply Theory. The authors believe that their findings would encourage the regulators to solve shadow banking problems from the monetary perspective instead of merely an institutional one.

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