Chinese Shadow Banking Contracts $2.3 Trillion in Three Years: CBIRC

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China’s banking regulator says it will continue to maintain tight scrutiny of the domestic banking system following a sharp decline in shadow banking in response to a three-year crackdown.

On 3 January the China Banking and Insurance Regulatory Commission (CBIRC) released the “Guidance Opinions Concerning Driving High-quality Growth of the Banking and Insurance Sectors” (关于推动银行业和保险业高质量发展的指导意见).

The Opinions set the goals of achieving “a more optimised financial structure” and “the formation of a multi-tier, broad-coverage differentiated banking and insurance institutional system” by 2025.

At a press conference held on 6 January to interpret the new Guidance Opinions Shao Yuanqi (肖远企), CBIRC’s chief risk officer, revealed that during the three years since the launch of a crackdown on shadow banking in 2017 the shadow banking sector in China had contracted by 16 trillion yuan (approx. USD$2.3 trillion), leading to the “effective containment of risk.”

A recent report from Moody’s indicates that the assets of China’s broadly defined shadow banking sector fell by 2.1 trillion yuan in the first three quarters of 2019, dropping to 59.2 trillion yuan as of the end of the third quarter.

Yuan said that regulators would use “multiple channels to expedite the effective conversion of residential savings into long-term funds for the capital market.”

“The core is the cultivation of institutional investors for capital markets, including securities markets, and not allowing savings funds to directly enter the stock market.

The Opinions make reference to “effectively making use of the direct financing function of wealth management, insurance and trust products, to cultivate the concept of value investment and long-term investment, and improve the structure of capital market investors.”

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