China should guard in opposition to rebound in shadow lending, banking regulator warns
Sheldon Cooper | SOPA Photographs | LightRocket by way of Getty Photographs
Lately, China has clamped down on shadow banking, involved in regards to the hidden dangers within the excessive quantity of complicated and probably dangerous loans within the sector. However as a weakening financial system places strain on companies and people, authorities worry shadow lending and unlawful loans may surge.
After the outbreak of the brand new coronavirus this yr, high-risk banks with complicated buildings could stage a comeback, Guo Shuqing, chairman of the China Banking and Insurance coverage Regulatory Fee, wrote in an article revealed within the Communist Social gathering journal Qiushi.
“A slight leisure of rules could result in a full resurgence, and all earlier efforts would go to waste,” Guo wrote.
As a result of coronavirus epidemic, leverage is anticipated to rebound considerably within the Chinese language financial system this yr, and dangerous money owed of monetary establishments could rise considerably, he warned.
After the “black swan” epidemic, it’s inevitable that asset high quality will deteriorate, and as a result of a time lag, the present asset classification has not precisely mirrored the true danger, he mentioned.
A “black swan” occasion refers to an unexpected incidence that usually has excessive penalties.
Monetary establishments ought to eliminate non-performing belongings as early as doable, and masking up would solely deliver severe penalties, Guo mentioned.
China must also implement focused measures in dealing with establishments with various ranges of danger, he mentioned.
Exterior of China, exterior components might additionally threaten monetary safety, Guo mentioned.
Present worldwide cooperation just isn’t splendid, and the U.S. entity checklist imposed on some corporations together with Chinese language corporations has added uncertainty to the worldwide financial restoration and disrupted monetary stability and safety, he mentioned.
Washington restricts gross sales of U.S. items to corporations on the entity checklist.