A rapid increase in non-bank lending may prompt China’s central bank to focus on stabilizing the country’s financial system, Bloomberg reported. The People’s Bank of China said in a December 28 statement that it would seek “stable and appropriate” growth in loans, stocks and bond sales, a signal that concerns have grown on the possibility of social unrest as a result of default. During the past two years, lending and wealth management products (WMP) outside the formal banking sector have increased. An arm of Citic Group, China’s biggest state-owned investment company, said on December 21 that it missed a payment to investors on a WMP after a steel company failed to pay interest on a loan. “China’s central bank is in a very delicate situation,” Mizuho Securities Asia chief Asia economist Shen Jianguang said. “It wants more bank loans and greater financial support for economic growth next year, but it also has to keep a close eye on risks in the shadow banking system.”
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