The paper "The Cause and Rectification of Economic ‘Shifting from Real to Fictitious’: Understanding Institutional Reform in the Financial Sector Based on the 19th CPC National Congress Report", co-authored by Assistant Professor Yuchao PENG and Professor Zhigang HUANG who is the assistant dean of the School of Finance, was published as the first article in the 9th issue of "The Journal of World Economy" in 2018. The paper was selected as one of the articles in the topic of studying the 19th CPC National Congress.

Abstract: Deepening institutional reform in the financial sector and strengthening the capacity of financial services to better serve the real economy have been the fundamental requirements derived from the report issued by the 19thNational Congress of the CPC. From the perspective of financial institutions，this paper constructs a two-sector model，including endogenous financial constraints，to investigate economic shifting from real to fictitious. In the model，banks finance heterogeneous risky firms differently，leading to corporate financialisation and shadow banking formation，resulting in greater financial risks. Enterprises with less risk can get more credit from banks，which in turn places an excess of money into the shadow banking system，resulting in corporate financialisation. This impact is also more pronounced in regions with a lower proportion of state-owned banks. Based on the above，this paper puts forward a systematic framework for the reform of the financial system in order to achieve the simultaneous improvement of financial stability and economic efficiency．

Keywords: Shifting from Real to Fictitious; Financial Institutions Reform; Corporate Financialisation; Financial Constraints