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

Previously circulated under the title “In the Shadow of Banks: Wealth Management Products and Issuing Banks’ Risks in China.” We 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 Univ. of Finance & Economics, Fudan University, Korea University, NYU Stern, Shanghai Univ. of Finance & Economics, Tsinghua PBC School, University of Nottingham, Ningbo, Asian Econometric Meetings (Hong Kong), China International Conference in Finance (Xiamen), China Financial Research Conference, NBER China Working Group Meeting (Cambridge, MA), Princeton China Conference, Summer Institute of Finance, and the Western Finance Association meetings (Whistler, Canada). We gratefully acknowledge research assistance from Vanya Petrova, Dayou Xi, Yang Zhao, and financial support from Fudan University, NYU, and Tsinghua University; Qian and Yang also acknowledge financial support from the National Natural Science Foundation of China (Grant #71972051 for Qian, and Grant #71272024 for Yang). The authors are responsible for all remaining errors. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.