That’s a big (click to enlarge) chart from Moody’s on how they define “shadow banking” in China, via a Q&A comment on the growth of the sector. Read more
The China Banking Regulatory Commission last week issued several strict-sounding new rules applying to the issuance of Wealth Management Products. The investment products have seen massive growth in the past year, with assets tripling to RMB10tn in the past two years, equivalent to 10 per cent of all China’s bank deposits.
Apart from upsetting share prices of mainland Chinese banks, what are the new rules actually going to achieve — if anything? Read more
A new and scary note is out about China’s risk from GMO’s Edward Chancellor and Mike Monnelly, who make a good argument that China’s financial system is showing many of the hallmarks of a not-too-distant bubble:
China’s thriving shadow banking system has much in common with the American version, which thrived before Lehman’s collapse: trust loans that finance cash-strapped property developers have a whiff of the subprime about them; wealth management products that bundle together a miscellany of loans, enabling the banks to generate fees while keeping loans off balance sheet, bear a passing resemblance to the structured investment vehicles and collateralized debt obligations of yesteryear; while thinly capitalized providers of credit guarantees are reminiscent of past sellers of credit default insurance.