The rise of shadow banking and attendant financial fragility in China can be traced to intensified deposit competition following the global financial crisis (GFC). Deposit competition intensified after the GFC because the GFC slowed down banks’ deposit growth from cross-border money inflows and simultaneously led to fiscal stimulus supported by banks’ credit expansion. Exploiting the fact that one big state-owned bank was particular affected by the GFC through these two channels, we document—by exploring small and medium-sized banks’ branch-level overlap with this big bank—that deposit competition increased banks’ reliance on shadow banking. In particular, exposed banks issued Wealth Management Products (WMPs)—short-maturity, off-balance-sheet substitutes for deposits—creating rollover risks for the issuers, as reflected by higher yields on new WMPs, higher borrowing rates in the interbank market, and lower stock-market performance during liquidity stress.