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03988 BANK OF CHINA
RTNominal up3.200 +0.020 (+0.629%)
Research Report

30/09/2019 17:53

China shadow banking assets near 3-year low - Moody's

[ET Net News Agency, 30 September 2019] Moody's Investors Service said in a
just-released report that the shadow banking sector in China has further contracted in the
first half of 2019.
"The contraction has been led primarily by the continued decline in the asset management
business originated by banks and non-bank financial institutions," said Michael Taylor, a
Moody's Managing Director and the Chief Credit Officer for the Asia Pacific.
"This shadow banking segment was the initial focus of the regulatory crackdown that
started in 2017," added Taylor.
Moody's points out that broad shadow banking assets shrank by about RMB1.7 trillion in
the first half of 2019 to finish at RMB59.6 trillion; the lowest level since the end of
2016. Specifically, such assets fell to 64% of nominal GDP at 30 June 2019 - from 68% at
the end of 2018 - which was 23 percentage points lower than its peak of 87% at the end of
2016.
Formal bank lending has sustained a new credit supply.
"While the banks have maintained a strong flow of credit to targeted micro and small
enterprises - in response to government policy - they have reined in their lending to the
corporate sector more broadly," said George Xu, a Moody's Analyst.
"With the continued contraction of core shadow banking assets, the net result is a
slower pace of overall credit expansion and a narrower gap between credit growth and
nominal GDP growth," added Xu.
Moody's also explains that the crackdown on shadow banking continues to be eased
selectively, with intensified regulatory scrutiny leading to net flows of trust lending
falling by RMB133 billion between July 2019 and August 2019. By contrast, lending to local
government financing vehicles rebounded in the second quarter, reflecting a pickup in
trust-government cooperation business. (KL)

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