Shadow Banking | South China Morning Post
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  • Apr 20, 2015
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Shadow Banking

Rural mini-bank run highlights perils of deregulation in China

Rural co-operatives were set up to channel funds to farmers who were unable to secure loans from big state banks, but many shifted into riskier forms of lending. Photo: Xinhua

Depositors wanting to withdraw money from a rural bank in prosperous Jiangsu province before the Lunar New Year holiday found the doors locked, their money gone and employees offering a simple explanation.

Friday, 7 March, 2014, 12:39am

Mainlanders use ‘free money’ from Hong Kong banks to earn higher returns at home

When tax bills arrive from the Inland Revenue each year, Hong Kong banks aggressively market loans to customers. Photo: Garrige Ho

Mainland Chinese working in Hong Kong have found a way to use “free money” from local banks to invest in profitable financial products across the border.

They take advantage of cheap personal loans aggressively hawked by banks in an attempt to expand their business. The borrowers quietly turn around and invest the cash on the mainland for higher returns.

27 Feb 2014 - 12:42am 8 comments

Investors' funds at risk as trust product sold by CCB defaults

The trust product raised 289 million yuan from wealthy clients of CCB. Photo: Reuters

A high-yield investment product backed by a loan to a debt-ridden coal company failed to repay investors when it matured on Friday, state media reported yesterday, in the latest sign of financial stress in the mainland's shadow banking sector.

14 Feb 2014 - 5:17pm

Near-default must spur action on China's shadow banking sector

Did the Industrial and Commercial Bank of China fully perform its duty of care as the distributor of China Credit Trust? Photo: Reuters

On the eve of the Lunar New Year, news that a default on a 3 billion yuan (HK$3.8 billion) trust product had been averted brought relief to some in China. This was the trust industry's most serious crisis to date. The danger may have passed for now, but the last-minute bailout has shone a light on the growing risks lurking in the country's shadow banking sector.

13 Feb 2014 - 1:57am 1 comment

Troubled shadow bank product tests no-default policy in China

ICBC's shares have fallen amid speculation the bank would be forced to help repay investors in the off-balance-sheet investment product. Photo: AFP

A high-yielding investment product based on a loan to an indebted coal company is offering the latest test of Beijing's willingness to permit defaults in the mainland's shadow banking system.

17 Jan 2014 - 12:58am

In the shadows, the quickness of the loan deceives the eye

In the shadows, the quickness of the loan deceives the eye

Want a crash course on shadow banking on the mainland? There is no better place to start than China Chengtong Development. It is a Hong Kong-listed company. Everything you are going to read here comes from its annual reports and announcements. For so-called shadow banking does not happen in the shadows.

8 Jun 2013 - 3:39am

The real problem behind China's shadow banking

Illustration: Craig Stephens

In China today, the term "shadow banking" has a negative meaning. Over the past year, the China Banking Regulatory Commission has issued numerous policy directives to try to contain its explosive growth. Xiao Gang , the head of the Chinese securities watchdog, called shadow banking "a Ponzi scheme" in an opinion piece he penned last year while still serving as chairman of the Bank of China.

31 May 2013 - 5:35am 1 comment

Illuminating confessions from a shadow banker

Illuminating confessions from a shadow banker

Everyone knows China's shadow banking market is big. According to the ratings agency Moody's, the shadow market was worth 20.5 trillion yuan (HK$25.9 trillion) at the end of last year, or 39 per cent of China's gross domestic product.

15 May 2013 - 4:01am 4 comments

Shadow banking expansion to brake

Shadow lending is key for firms that struggle to get bank loans.

Shadow banking on the mainland is likely to grow at a slower pace, but the sector remains a key source of funds for smaller companies, rating agency Moody's Investors Service said.

14 May 2013 - 4:27am 1 comment

'Shadow banking' expands as Hong Kong brokers lend to Chinese businessmen

Wu Changjiang, founder and former chairman of NVC Lighting

Many Hong Kong brokerages have a new and profitable business, despite the economic downturn: lending money to mainland entrepreneurs at high interest rate, sometimes more than 30 per cent.

Such private financing activities are a new and fast-growing business for many mid-sized and large local brokerages in the city.

13 May 2013 - 7:58pm 5 comments

Danger lurks in China's shadow banks, says Fitch

Fitch Ratings has downgraded China's long-term local-currency debt rating to A-plus from AA-minus on Tuesday.

The mainland's formal banking sector is "significantly exposed" to the shadow banking system, a source of growing risk to the stability in the world's second-largest economy, Fitch Ratings says.

11 Apr 2013 - 5:07am

George Soros tempers praise for Beijing with warning on risks

George Soros attends a forum in Hong Kong. Photo: Thomas Yau

Billionaire investor George Soros, who has fallen foul of governments as far afield as Malaysia and Britain during a 60-year career, has praised China's system of financial regulation. But he warned that Beijing faces "exceptional difficulties" in its economic transition in the near term.

7 Apr 2013 - 9:30am 3 comments

Shadow banking 'not biggest risk' to system

Shadow banking 'not biggest risk' to system

Banks' loan exposure to local governments and property developers is a far more serious and imminent threat to the mainland's financial system than shadow banking, according to Standard & Poor's.

29 Mar 2013 - 4:16am

Chasing shadows

Illustration: Emilio Rivera

One year after the mainland's leaders picked Wenzhou to start a pilot programme designed to curb and regulate the city's informal shadow-lending networks, it's clear the plan isn't working. Small firms it intended to benefit still can't access loans because they lack collateral and are struggling to stay afloat. 

28 Mar 2013 - 6:31am

Premier Wen Jiabao focuses on shadow banking risks for first time

Chinese Premier Wen Jiabao delivers the work report at the opening session of the annual National People's Congress in Beijing. Photo: AP

The government work report delivered by Premier Wen Jiabao yesterday singled out risks in the mainland's financial sector for the first time. That reflects mounting concerns over the default dangers banks face and the under-regulated yet burgeoning shadow banking system.

6 Mar 2013 - 1:35pm