Date
19 November 2017
China Credit Squeeze Prompts Suicides Amid Offer To Sever Finger

The Big Picture: SHADOW BANKING

Eight government agencies, including the China Banking Regulatory Commission and the National Development and Reform Commission (NDRC), have jointly ordered a crackdown on irregularities in non-financing guarantee firms, according to a statement on the NDRC website Monday.

Some of the firms have illegally taken deposits, raised funds, and been involved in loan sharking, the statement said. Governments at all levels have until the end of August to inspect the companies and remedy the behavior.

The Chinese Academy of Social Sciences estimates that the shadow banking market could be worth as much 20.5 trillion yuan (US$3.38 trillion) as of the end of 2012. Tighter oversight will help manage systemic risks in the sector, Lian Ping, chief economist of Bank of Communications, was quoted as saying in a report by China Business News on Monday.

Shadow banking needs to be regulated amid rising risks in the financial sector, observers said.

The cap on deposit rates will continue to push cash-rich investors to allocate part of their portfolios to some high-yield investment products. Under a relatively tight liquidity market, small and medium-scale enterprises (SMEs) also have a strong demand for private funding. Thus, a shadow banking market has been expanding in China over the past few years.

Such a problem will not be resolved until the country’s deposit rate is liberalized, observers said. More private banks should also be allowed to start business and serve the SMEs.

CBRC to limit private bank approvals

The China Banking Regulatory Commission (CBRC) will take a cautious approach in approving license applications for privately held banks, the China Securities Journal reported Tuesday. The banking regulator will approve no more than three to five such licenses initially. Meanwhile, the CBRC will encourage private capital to help in the reform of the banking sector, the report said.

CSRC chief urges stronger investor protection

China’s chief securities regulator wants listed firms to be accountable to small investors, the official Xinhua news agency reported Monday. At the same time, investors should be responsible for their own investment decisions, Xiao Gang , chairman of the China Securities Regulatory Commission (CSRC), was quoted as saying. Investor protection is not a guarantee that investors will not lose money but it should provide them equal rights and privileges, he said. The CSRC is planning to roll out measures along these lines, including online voting, a cumulative voting system and the right to propose the dismissal of a director, the report said.

– Contact HKEJ at [email protected]

JP/CG

 

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