A bid by China to rein in its “shadow banking” activity is producing results, thanks to slowing economic growth and tighter regulation.
But some success for a policy drive to curb risky lending is not all good news for Beijing, as smaller companies may face even bigger struggles to find funding. A cut in interest rates, announced by Beijing on Friday, is unlikely to help them much.
Shadow banking includes off-balance-sheet forms of bank finance plus lending by non-traditional institutions, all of which is less regulated than formal lending and thus considered riskier.
At the end of 2013, China had the world’s third-largest shadow banking sector, according to the Financial Stability Board, a task force set up by the G20 economies. It estimated that Chinese assets of “other financial intermediaries” than traditional ones were then just under $3 trillion.
In the three months ended Sept. 30, the shadow banking portion of what China calls total social financing – a broad measure of liquidity in the economy – contracted for the first time on a quarterly basis since the 2008/09 financial crisis.
via Property, manufacturing woes help trim China’s shadow banking | Reuters.
