Finance Leases: A Hidden Channel of China’s Shadow Banking System
By analyzing a hand-collected transaction-level dataset on the finance leases of China’s public firms for the period 2007-2019, this paper sheds light on China’s financial leasing industry. We find that banks use their affiliated leasing firms to provide credit to constrained clients in order to circumvent the government’s targeted monetary tightening policy. Finance Lease offsets the expected decline in traditional bank loans in affected industries, and therefore hampers the effectiveness of the monetary policy. Although this regulatory arbitrage may accumulate systemic risk at the macro level, bank-affiliated leasing firms charge lower leasing rate and exert tighter risk control than non-bank-affiliated leasing firms at the micro level. This finding indicates that banks use finance leases as a channel to keep low-risk clients rather than to make excessive profit.
Jinfan Chang ;
Finance Leases: A Hidden Channel of China’s Shadow Banking System （2022年06月27日）http://www.cfrn.com.cn//lw/yhyjrjg/syyhlw/65d74a6786404a6a84d12f0ba0002e7e.htm