According to a recent report published by the Chinese Academy of Social Sciences (CASS), the huge scale of shadow banking system has reached 14.6 trillion Yuan (based on official data) or 20.5 trillion Yuan (based on market data). Besides breaking the boundaries of traditional banks, securities and insurance, the Chinese shadow banking phenomenon poses a great challenge to the separate regulation systems governing the financial sector. To solve the problem, we should promote the reform of financial regulation organizations and build a new regulation system which suits the emerging trend of mixed operation.