Asset Growth of China’s Banking Sector Plunges Following Shadow Banking Crackdown

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The Chinese banking sector has seen a sharp decline in asset growth following a crackdown on various forms of shadow banking.

Official data indicates that the domestic and foreign currency assets of Chinese banking sector institutions stood at 281.58 trillion yuan as of the end of the second quarter of 2019, for YoY growth of 8.2%.

According to a report from 21st Century Business Herald the growth rate at the end of the second half marks a sharp decline compared to sector-wide YoY asset growth of around 15% at the outset of 2017, as well as translates into a growth shortfall of approximately 54 trillion yuan.

The past two years have also seen a sizeable contraction in the Chinese shadow banking sector following heavy pressure from regulators.

High-risk assets have shrunk by approximately 14.5 trillion yuan over the past two years, while the interbank wealth management balance has dropped by roughly 85% compared to the start of 2017.

At a press conference held on 11 September Xiao Yuanqi (肖远企), chief risk officer for the China Banking and Insurance Regulatory Commission (CBIRC), said the excessive rapid growth in banking sector assets had been attended by considerable risk.

“It’s very hazardous for a normal organisation to maintain very rapid asset growth over the long-term,” said Xiao.

“If US banks see very rapid growth, regulators will engage in focused investigations and call for rectification within a set time period, as well as demand a cap on growth.”

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