China's Shadow Banking 'Worth USD 4.4. Trillion'

Business » FINANCE | May 13, 2014, Tuesday // 12:34| Views: 876 | Comments: 0
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shadow banking: China's Shadow Banking 'Worth USD 4.4. Trillion' Photo by EPA/BGNES

China's shadow-banking sector is valued at USD 4.4 trillion, according to the Chinese Academy for Social Sciences (CASS), a think tank considered close to government.

This huge parallel system could pose a risk to the country's finances, CASS has warned as quoted by Channel New Asia.

The research organization believes an immense network of lending outside formal channels exists in China and proves intangible to regulators.

Its findings come against the background of a tightened Beijing grip on the banking system combined with a move to reduce the state pressure on economy and finance.

Online finance platforms, credit guarantee companies and micro-credit firms are involved in shadow activities.

If the numbers are correct, illicit activity in the country is equivalent to one-fifth of the domestic banking sector's assets and somewhere between a third and a half the size of its economy.

CASS estimates nevertheless lower Moody's calculations, which in 2012 put he share of shadow banking in China at USD 4.8 trillion.

Experts from the prominent think-tank have suggested that big risks in the shadow system could spread to real banking an hurt the real economy.

In October 2013, the organization also issued a warning over the amount of non-regulated activity, which it then put at 40% of GDP.

Experts believe each potential disturbance in China, the world's second-largest economy and a candidate for the top place over the next years, could have a significant impact on an international level.

Beijing's government is also alarmed by possible negative developments related to shadow banking and is pushing to stem the flow of non-regulated capitals.

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Tags: CASS, China, shadow banking, illicit activity. Beijing, Moody's
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