IMF warns shadow banking poses high risk to China’s financial stability
Unregulated lending adding to massive debt levels and murky investment products sold by insurance sector also a threat, says US-based organisation
China has been urged by the International Monetary Fund to address threats to its financial system by increasing oversight of shadow banking from unregulated lenders and exercising tighter control of the fast growing insurance sector.
The IMF said unregulated lending risked adding to massive debt levels in China and that risky investment products sold by the insurance sector need far greater oversight from the authorities.
“The large-scale and opaque interconnections of the Chinese financial system continue to pose stability risks,” the Washington-based organisation said in a half-year report on global financial stability released on Wednesday.
The IMF has long warned of China’s murky shadow banking activities and its threat to the financial system of the world’s second largest economy.
The fresh warning came on the heels of Beijing’s reshuffle of its financial regulatory regime.