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.
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.