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Part of the problem with tracking the development of shadow banking in China is that there is no commonly accepted definition of what constitutes shadow banking. The closest thing we have to an official definition is from the Financial Stability Board (FSB), which was tasked by the G-20 to monitor and propose reforms to the [...]
Chinese equity markets are beginning to crackdown on loss-making companies. The Shenzhen Stock Exchange recently delisted two loss-making companies – Jiangsu Chinese Online Logistics and Powerwise Information Technology Co. These were the first two companies be delisted from mainland exchanges since December 2007. The delisting procedures were part of efforts by the China Securities Regulatory [...]
We’ve followed the development of wealth management products (WMPs) with interest on this blog. These financial products act as alternative to deposits, soaking up funds from investors seeking to escape low interest rates on bank deposits. While many analysts have greeted the proliferation of WMPs as backdoor interest rate liberalization, we’ve been more skeptical. Source: CNBenefit A [...]
Chinese banks are setting aside more money for loan impairment losses, in effect reducing current profits by accounting for expected losses. An increase in expected losses seems puzzling at first given that banks’ loan portfolios have been improving over the past several years as shown by a steadily declining non-performing loan (NPL) rate, as reported [...]
The RMB727 billion drop in deposits in the banking system this past month may further limit the ability of credit-strapped banks to make loans. The fall in deposits is another example of the impact of distorted interest rates. Negative real interest rates on deposits (averaging -.5 percent since 2004) has slowed the accumulation of new [...]
Over the past two years China’s authorities have constricted the growth of credit in an attempt to combat inflation and rein in excessive loan growth. This has made it more difficult for a variety of businesses to obtain credit, particularly bank loans. As a result, firms are increasingly turning to the shadow banking industry to [...]
There’s quite a bit of buzz surrounding the rapid increase of wealth management products (银行理财产品) in China. What role do these products play in China’s financial system and what risks do they present to financial stability? Wealth management products (WMPs) are a relatively new type of financial instrument that act as an alternative to traditional [...]