China estimates shadow banking worth US$12.9 trillion as it moves to clean up high-risk sector
- 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.
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.