Lenders in China have shifted away from a drive to deleverage and toward “rescuing leverage with leverage” via innovative, opaque methods for loaning money to companies that need to buy their own shares on government orders to buoy already leveraged positions, South China Morning Post reported. Banks had lent between RMB4.5 trillion and RMB6.8 trillion (around 5-8% of total bank loans) into the market as of July 9, Yuanta Securities estimated. Since the central government stepped in to relieve heavy losses at the Shanghai and Shenzhen stock exchanges, several banks have been proactive in advertising shadow funds as a means for company managers and major shareholders to prop up share prices.
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