China’s $8.4 trillion shadow banking industry has surged back to life this year, as regulators scale back deleveraging in an effort to spur economic growth, said the Financial Times.
Financial regulators in China have for several years grappled to control the country’s massive shadow lending sector, which includes many forms of off-balance-sheet lending from banks, peer-to-peer lenders and credit extended by asset managers.
The opaque industry has long been associated with financial risks, and became the target of a regulatory crackdown in 2018, part of a central government attempt to maintain financial stability. But following the onset of the trade dispute with the US and slowing economic growth, shadow lending has made an unprecedented return in the second and third quarters of 2019, according to China Beige Book International, a provider of independent data on the Chinese economy.
Shadow lenders accounted for 39% of total lending in the third quarter of the year, and 45% in the second quarter, the highest percentage of shadow financing since at least 2013, according to the report. As recently as the middle of last year, shadow lending had shrunk to just 21% of total loans.