Business / Markets

China's ICBC chairman says shadow banks actually productive

(Agencies) Updated: 2014-06-25 14:14

The chairman of Industrial and Commercial Bank of China , the world's largest bank by market capitalisation, defended Chinese shadow banks on Tuesday, saying they support genuine economic activity.

China's ICBC chairman says shadow banks actually productive
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In an oblique denial of criticisms that Chinese shadow banks encourage speculators, Jiang Jianqing said cash originating from the notoriously opaque sector is put to productive ends in the manufacturing and construction industries.

"Credit and loans in China's financial system are basically invested in the real economy," Jiang told a forum. "Even the money that comes from the shadow banking system is invested in the real economy. This is very strange phenomenon in China.

"No matter whether the funds come from trusts, wealth management products or other channels, they will be invested in areas such as urban construction, or in the property and manufacturing industries."

Many financial regulators, including the International Monetary Fund and China's own central bank, have warned about the financial dangers of the fast-growing Chinese shadow banks.

The worry is that lax lending standards will stymie the banking sector with bad loans as China's maturing economy slows - growth is forecast to cool to a 24-year low of 7.3 percent this year.

Last month, a senior China central bank official scolded the wealth management sector, which is a part of shadow banks, for encouraging Chinese savers to behave like gamblers in a process that he said was unduly raising funding costs.

Another central bank official said over the weekend that China's wealth management industry had assets totalling 12.8 trillion yuan ($2.06 trillion) at the end of May.


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