Business / Markets

Shadow banking offers no cause for alarm: Experts

By Hu Yuanyuan (China Daily) Updated: 2014-03-07 08:19

Shadow banking offers no cause for alarm: Experts 

Yang Kaisheng, CPPCC member and former chairman of the Industrial and Commercial Bank of China, answers questions at a news conference on Thursday afternoon. Zou Hong / China Daily 

Leverage in sector remains low due to China's limitations on derivatives

China's banking sector remains solid, with the shadow banking sector well under control, Yang Kaisheng, former chairman of Industrial and Commercial Bank of China, the country's largest lender, said on Thursday.

By the end of 2012, China's shadow banking sector accounted for about 10 percent of GDP, while the figure in the US was 150 percent, according to Yang, a CPPCC member.

Shadow banking offers no cause for alarm: Experts
Shadow banking offers no cause for alarm: Experts
"Compared with some developed countries, the total amount of China's shadow banking is not a big number. More important, its leverage was low, as some of the popular derivatives in the West were prohibited under China's regulatory framework," said Yang.

Shadow banking is a term for the collection of non-bank financial intermediaries that provide services similar to traditional commercial banks.

The recent default crisis that affected several Chinese trust companies triggered concerns about the country's shadow banking, and some economists worried that it could lead to a possible financial meltdown.

In the latest case, Jilin Province Trust, which raised 1 billion yuan ($162.5 million) to invest in a private coal miner in north China's Shanxi province, told its clients that it had no repayment timetable as the debtor itself was mired in debt.

The trust company missed payments for five tranches. The sixth is due to mature March 11. That followed a similar product default by China Credit Trust Co in January.

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