ប្រទេសចិនប៉ាន់ប្រមាណថាស្រមោលធនាគារមានតម្លៃ ១២,៩ ទ្រីលានដុល្លារអាមេរិកខណៈដែលខ្លួនបានផ្លាស់ប្តូរដើម្បីសម្អាតវិស័យដែលមានហានិភ័យខ្ពស់

Chinese regulators say shadow banking sector equivalent to 86 per cent of gross domestic product in 2019

Industry must be ‘constantly dismantled’ as part of China’s financial de-risking campaign, authorities say

China’s banking regulator has for the first time clearly defined shadow banking activities and estimated their value to be about 84.8 trillion yuan (US$12.9 trillion) in 2019, a step that may lead to further cleaning up of the opaque sector that authorities say endangers financial stability.

The China Banking and Insurance Regulatory Commission (CBIRC) said in a report last Friday that, broadly defined, shadow banking – including wealth management fund products, entrusted loans, small credit and peer-to-peer (P2P) loans – was equivalent to 86 per cent of gross domestic product and 29 per cent of China’s total banking assets.

A narrower definition – which excludes wealth and asset management products from banks and insurers, as well as asset-backed securities – found the sector to be worth 39.1 trillion yuan.

“Such high-risk businesses must be constantly dismantled,” the regulator said on social media, adding solving the issue was an important part of China’s financial de-risking campaign.

Though authorities had moved to clean up parts of the sector, CBIRC warned that “some high-risk shadow banking activities may come back in the name of innovation”.

The regulator is under pressure to tackle unregulated borrowing and lending, which provides a lifeline for some of the country’s most vulnerable consumers and small businesses that cannot access the traditional banking system, because it has led to instances of fraud and social unrest in China.

Beijing is currently taking stock of its broader financial vulnerabilities, which have been brought into sharper focus due to the economic damage resulting from the coronavirus pandemic. It has recently moved to tighten regulation of its financial technology giants and troubled small lenders backed by local governments.

In an article published last month, CBIRC chairman Guo Shuqing vowed to put all financial activity under supervision, set higher regulatory requirements for important financial institutions and prevent risks across markets.

Already, Chinese authorities have moved swiftly to completely dismantle the P2P industry, shutting more than 5,000 platforms that had sprouted up over the past several years. Many later proved to be online Ponzi schemes.

Rating agency Moody’s estimated that the value of China’s shadow banking industry rose by 650 billion yuan in the first half of this year, led by asset management related business, which was funded by wealth management products and undiscounted bankers’ acceptances.

To help the economy recover from the coronavirus pandemic, China’s asset management sector, which accounts for most shadow banking activity, has been given until the end of 2021 to meet tighter requirements introduced by the central bank.

CBIRC has pledged closer monitoring of shadow banking activities, but no quantitative targets were revealed in the report.

Chinese authorities have tried to clean up the sector before. Between 2017-19, broad-based shadow banking activity was reduced in value by 16 per cent from its peak of 100.4 trillion yuan. Under the more narrow measure, the size of the sector dropped by 23 per cent over the same period to 39.14 trillion yuan.

Shadow banking back in vogue in China as assets grow for the first time since 2017

Shadow banking assets grew 100 billion yuan (US$14 billion) to 59.1 trillion yuan (US$8.4 trillion) in the first quarter of 2020, according to a report from Moody’s

China had been tightening its control over off-balance sheet lending by banks since 2016 to curb financial risks, but credit growth is needed to rescue the coronavirus-hit economy

Informal lending by Chinese banks, so-called shadow banking, is back in vogue after two and half years of regulatory clampdown as Beijing pledges faster credit growth to rescue its coronavirus-hit economy, according to a new report.

Overall shadow banking assets in China rose for the first time since 2017, a report published by American business and financial services company Moody’s on Wednesday showed.

The report detailed how shadow banking assets in the world’s second largest economy grew 100 billion yuan (US$14 billion) to 59.1 trillion yuan (US$8.4 trillion) in the first quarter of 2020, compared with a 1.2 trillion yuan decline to 60.2 trillion yuan during the same period in 2019.

This rise suggests that Beijing, which had been tightening its control over off-balance sheet lending by banks since 2016 to curb financial risks, has switched its focus to supporting economic recovery by slowly allowing shadow credit to expand again, according to the rating agency.

Increased policy focus to support economic recovery will fuel further expansion of shadow credit. However, a rapid rebound is unlikely as financial systemic stability still remains one of the authorities’ main policy objectives

“Increased policy focus to support economic recovery will fuel further expansion of shadow credit. However, a rapid rebound is unlikely as financial systemic stability still remains one of the authorities’ main policy objectives,” Moody’s said.

Shadow banking had previously increased rapidly in China, mainly driven by the need for borrowing among small and medium-sized companies in the private sector which are unable to obtain loans from banks, which often prefer to lend to state firms and larger listed private companies.

Wealth management products, which are essentially off-balance-sheet substitutes for deposits without the regulatory interest rate ceilings offered by banks to savers, were a big driver to the growth of shadow credit in the first quarter, Moody’s said.

Issuance of wealth management products with investment terms of three months or less rebounded to 43 per cent of the total volume in the first three months of 2020, the highest increase since the second quarter of 2018.

The deterioration in trust asset quality will likely continue for the rest of the year as trust borrowers’ financial performance remains under pressure amid slowing economic growth

Wealth management products constitute the largest shadow banking segment in China and are often invested in a range of loans and securities that have high exposure to speculative areas such as real estate and stocks or funding weaker borrowers.

The central government has sought to balance the need to curb the growth of shadow banking as default risks rise in wealth management products and trust products, while leaving some room for the private sector to access credit, but Moody’s expects asset quality to continue to deteriorate this year in the trust sector.

Trust companies do not face the same government-imposed lending quotas as state banks, giving them more flexibility to hand out loans or pick investment choices.

“The total amount of trust assets classified as prone to default and repayment risks exceeded 643 billion yuan at the end of the first quarter, a record high since data became available in 2014,” said Moody’s.

“The deterioration in trust asset quality will likely continue for the rest of the year as trust borrowers’ financial performance remains under pressure amid slowing economic growth.”

The recent Covid-19 outbreak in Beijing points to a rising risk of a second wave and suggests the economy is still far from a full recovery

Yi Gang, the governor of the People’s Bank of China (PBOC), said last week that the central bank would maintain ample financial system liquidity in the second half of the year as the economy recovers from the impact of the coronavirus, but would need to consider withdrawing that support at some point, reflecting concerns with the growing debt risks.

Nomura said in a research note this week that regulators were attempting to strike a “difficult balance” between carrying out policy stimulus and reining in potential shadow banking-driven asset bubbles.

“The recent Covid-19 outbreak in Beijing points to a rising risk of a second wave and suggests the economy is still far from a full recovery,” said Nomura’s note.

“Globally as well, the pandemic is far from over and will surely weigh on China’s exports. Thus, it seems it is too early for the PBOC to reverse its easing stance.”

SCMP