This paper argues that ffnancial lease, a dominant representation of shadow banking in China, plays a special role in improving the capital allocation efficiency. In a two-sector general equilibrium model with heterogeneous firm, information asymmetry and financial frictions, this paper shows that existence of finance lease market increases aggregate TFP by allowing low productivity SOE firms to lend out and allowing high productivity POE firms to leverage up. Due to the repossession advantage, financial leasing is a “good“ form of shadow banking that does not necessarily cause financial systemic risks.