This project will provide a comprehensive study of the interbank market in China including its overall stability, its consequences for investment and its support for new productive ventures.

The Macro Finance Research Program (MFR-China) will explore financial market evolution, banking reform, debt, and reform of state-owned enterprises. Researchers will investigate the many questions facing China’s increasingly dynamic financial markets—from privacy issues to credit worthiness and systemic risk—including the emerging challenges facing China’s regulators. This research will provide important insight for Chinese policymakers, as well as build resources for future research.

As regulators are growing their new teeth in China, it becomes of particular value to have researchers explore systematically the costs and benefits of the proposed restrictions and to study the potential impacts of financial regulation on the future growth of the Chinese economy.

“China has demonstrated an amazing ability to innovate within its financial sector, especially in terms of financial technology. However, such innovation is not the norm among its state-owned financial institutions. While the rise of a shadow banking system can help fill the gaps left by a slow-to-respond state infrastructure, it can also give rise to risks for which China’s regulators are unprepared to face.”

Lars Peter Hansen, MFR Program Director