Growth in China’s Off Balance Sheet Financing Accelerates

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The latest data from China’s central bank indicates its macro prudential assessments have been able to curb accelerating growth in off balance sheet financing by lenders.

Figures released by the People’s Bank of China indicate that social financing – a broad measure of credit extension in the Chinese economy, increased by 6.93 trillion yuan in Q1, for a year-on-year gain of 226.8 billion yuan.

The results come as a surprise to many observers given efforts by Chinese regulators to curb off balance sheet lending via macro prudential assessments (MPA).

According to analysts however, there is strong demand for financing amongst enterprises, who are turning to off balance-sheet financing as a result of the central bank’s strict controls of on balance sheet credit.

At the same time MPA’s macro prudential assessments are not as effective at curbing off balance sheet assets as they are those posted on balance sheets.

Entrusted loans and undercounted bank acceptance bills increased their share of off balance sheet financing in the first quarter.

Entrusted loans grew by 1.37 trillion yuan in Q1, for a year-on-year rise in growth of 661.8 billion yuan to comprise nearly a fifth of social financing.

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