Beijing Will Continue to Dismantle Shadow Banking, Contain Real Estate Bubble: Guo Shuqing

One of the Chinese banking system’s top regulators has flagged continued pressure on the shadow banking system and real estate speculation.

Guo Shuqing (郭树清), party secretary of the Chinese central bank and chair of the China Banking and Insurance Regulatory Commission, said at a recent meeting in Jiangxi province that China needed to “continue to dismantle shadow banks and restrain the trend towards bubbles in the real estate sector.

According to an official statement published by the Chinese central bank on 26 November Guo also called for “actively cooperating with local governments to deal with hidden debt,” as well as “deeply rectify various forms of financial conduct in breach of regulations [and] firmly strike against various forms of illegal financing activity.”

Guo outlined key work areas including:

1. Targeted handling of illegal financial institutions and financial groups;
2. Orderly disposal of shadow banking risk, large-scale reductions in cross-sector financial operations;
3. Firmly striking against illegal fund-raising, illegal acceptance of deposits and other illegal financial activities, and continuing to engage in the specialist rectification of internet finance risk;
4. Vigorously exposing and disposing of non-performing loans during the process of supporting economic structural adjustments, effectively preventing traditional credit risk;
5. Working hard to stabilise the overall leverage ratio of the economy and the leverage ratios of key sectors focused reduction in the debt levels of state-owned enterprises;
6. Firmly containing quantitative increases in local government hidden debt, while steadily reducing related risk;
7. Further containing the financialization and “bubbleization” of real estate, stabilisation of real estate prices, land prices and expectations;
8. Actively supporting in-depth reform and risk prevention for small and medium-sized banks, encouraging multiple channels for capital supplementation;
9. Appropriate handling of external shocks, maintenance of the renminbi exchange rate at a fundamentally stable, rational level.