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The effects of securitization on financial and economic stability in China


Project Description

Chinese government has recently announced a string of measures to open up China’s financial markets to foreign capital by removing various restrictions and granting international investors unfettered access to the world’s second-largest capital market – the mainland stocks and bonds. These opening up measures may boost domestic liquidity and prices, but with significant implications to banking and economic stability. As China exposes itself to “the whims of global speculators, the fickleness of foreign financial investors and importantly the volatility resulting from the potentially widespread use of trading algorithms”, China becomes vulnerable to financial and economic instability caucused by potential financial disruptions from abroad (Brennan, 2019). Meanwhile, as the world’s second-largest economy and an integral part of the global economy, China’s financial and economic stability have significant global influences and may pose threat to the stability of the whole global financial and economic system.

This project focuses on one of the rapidly growing areas in the Chinese financial sector – securitization. Securitization has experienced rapid development in advanced economies (i.e., the US and European countries) over the past two decades. Securitization (linking closely to shadow banking booming) has contributed to the GFC in 2008 (Gorton 2010; Gorton and Metrick 2012; Patti and Setta 2016). Securitization gained its momentum in China after the GFC and it is of great interest to examine it’s impact on the financial and economic stability in the context of new opening up era. By doing so, this project extends literature on securitization from the perspective of emerging economies, given the existing research mainly has mainly focused on developed economies. This project is of great timely policy relevance to policy makers in China with significant implications to international financial markets and investors.

Funding Notes

The Elphinstone Scholarship covers the payment of tuition fees a the appropriate rate per annum for the 3 years of supervised study

Candidates should apply for a PhD place in the normal way, stating:
o ‘Elphinstone PhD Scholarship’ in the Intended Source of Funding section
o The name of the lead supervisor in the Name of Proposed Supervisor section
o The title of the specific research project (subject to any agreed modifications in discussion with the lead supervisor) in the Outline
summary section
o Within their project proposal, how they intend to address the specific project title.

References

Brennan, L. 2019 China’s financial path is a threat to global stability, FT, 14 Nov 2019.
https://www.ft.com/content/c77e9426-0617-11ea-a984-fbbacad9e7dd

Gorton, Gary B. 2010. Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007. New York: Oxford University Press.

Gorton, Gary, and Andrew Metrick. 2012. "Securitized Banking and the Run on Repo." Journal of Financial Economics 104 (3): 425-451. doi:10.1016/j.jfineco.2011.03.016.

Patti, E. and Setta, E. (2016). Did the securitization market freeze affect bank lending during the financial crisis? Evidence from a credit register. Journal of Financial Intermediation, 25: 54-76.

Related Subjects

How good is research at Aberdeen University in Business and Management Studies?

FTE Category A staff submitted: 13.30

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