Fiscal Stimulus, Deposit Competition, and the Rise of Shadow Banking: Evidence from China

The paper was circulated previously under the title “In the Shadow of Banks: Wealth Management Products and Issuing Banks’ Risks in China” (CEPR Discussion Paper No. DP14957). The authors are grateful for helpful comments from Victoria Ivashina (the editor), an associate editor, two anonymous reviewers, Zhuo Chen, Quirin Fleckenstein, Kinda Hachem, Zhiguo He, Nirupama Kulkarni, Robert Marquez, Yiming Qian, Hong Ru, Tianyue Ruan, Vineet Srivastava, Hao Wang, Hao Zhou, and seminar/session participants at the Central University of Finance and Economics, Fudan University, Korea University, NYU Stern, the Shanghai University of Finance and Economics, Tsinghua PBC School of Finance, University of Nottingham Ningbo China, the Asian Econometric Meetings (Hong Kong), the China International Conference in Finance (Xiamen), the China Financial Research Conference, the National Bureau of Economic Research China Working Group Meeting (Cambridge, MA), the conference on the Chinese economy at Princeton University, the Summer Institute of Finance, and the Western Finance Association meetings (Whistler, Canada). The authors gratefully acknowledge research assistance from Vanya Petrova, Dayou Xi, and Yang Zhao, and financial support from Fudan University, New York University, and Tsinghua University. The authors are responsible for any remaining errors.