Government efforts to tamp down on China’s less-regulated shadow banking sector appear to be working, but that may not bode well for smaller companies seeking funding, Reuters reported. In the three months ended September 30, the shadow banking portion of what China calls total social financing – a broad measure of liquidity in the economy – contracted for the first time on a quarterly basis since the 2008/09 financial crisis. However, curbing risky forms of lending might undercut Beijing’s stated goal of expanding lending to small and medium-sized enterprises, since major banks often avoid lending to smaller companies in favor of state-owned enterprises on fears that the former will default.
Categories