World Bank Warns on Shadow Banking Of Chinese Debt

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    Helmholtz Watson

    Shadow banking is probably even bigger than the world Bank surprise – would think the Bitcoin crackdown is related to this also in China.


    Yes couple that have the fictitious Chinese companies over the years and you can see the downside risk here.


    China’s shadow-banking sector has shrunk in response to the regulatory clampdown launched in early 2017, which could address certain risks to the financial system if it continues over the medium term, says Fitch Ratings.

    Key points
    Declining shadow-banking activity could create potential liquidity shortages, but the recently announced targeted cut to the required reserve ratio (RRR) illustrates that the authorities will use policy tools to guard against a significant impact on prioritised sectors.

    Fitch expects the economy to start slowing in 3Q17, but the deceleration is likely to be gradual, with GDP forecast to grow by 6.3% in 2018, down from 6.7% in 2017.


    Fitch doesn’t put numbers on it, even if its material I see though they say “This could help address certain risks to the financial system if it continues over the medium term” – I get the implication for them is if one off with the continues question.

    Helmholtz Watson

    PBOC Drafts New Regulations 17 Nov


    financial institutions will be punished for providing implicit guarantees for asset management products
    financial institutions not allowed to use asset management products to invest in commercial banks’ credit assets
    financial institutions need to provision 10% of asset management products fee income as risk reserves

    More to follow in upcoming story 🙂

    Helmholtz Watson

    The World Bank with their latest China Economic Update

    Overnight The bank leaves its estimate for China GDP growth unchanged:

    6.5% 2018
    6.3% 2019
    Sees drags from tighter policy and trade ‘moderation’
    Sees gradual growth slowdown still
    Says external risks for China have become ‘more prominent’

    Helmholtz Watson

    China jails executives behind shadow banking Ponzi scheme: newspaper

    SHANGHAI (Reuters) – A court in China sentenced 10 people to prison for running “a 40 billion yuan ($5.84 billion) Ponzi scheme”, the collapse of which sparked protests by jilted investors and made headlines, state media reported on Thursday.
    Xu Qin, a founder of Zhongjin Capital and related companies, was given a life sentence by the Shanghai No. 2 Intermediate People’s Court on Wednesday, the official Shanghai Daily newspaper reported. The court gave nine others sentences ranging from five to 12 years, it said.

    The Zhongjin empire grew quickly and even opened an imposing office on Shanghai’s historic – and expensive – Bund, luring eager investors seeking the double-digit returns it promised on short-term financing products, part of a then-thriving “shadow banking” sector.
    However, the image of riches and success that it cultivated came crashing down in early 2016. Police arrested 21 executives linked to Zhongjin, including Xu, on suspicion of “illegal fundraising”.

    The Shanghai Daily said Xu and the nine others who were sentenced on Wednesday had been unable to make a profit “so used online ads, offline promotions and TV commercials to convince people that Zhongjin companies were rich and reputable”.

    “They fabricated financing products with short-term, yet extremely high, returns to pull in investors,” it said. They had illegally collected 40 billion yuan, it said, and much of the money was spent cultivating an image of wealth and reputability.

    Xu was detained on April 4, 2016, attempting to board a flight out of Shanghai, the newspaper said.

    The 10 people sentenced still owed more than 12,000 investors more than 4.8 billion yuan, it said. Their personal assets and company properties were frozen to pay debts.

    Helmholtz Watson

    Bank of France Governor Francois Villeroy de Galhau in a France Inter radio interview on Saturday.

    Specialized investors have stepped in to swell the European Union’s shadow-banking system to more than 42 trillion euros ($49 trillion) in assets at the end of 2017, or about 40 percent of the bloc’s financial system, according to the European Systemic Risk Board.

    Francois Villeroy de Galhau said
    “One of the main risks we have to look at today is outside the banking system, it’s what we call shadow banking, which has been less regulated. It’s the big investment funds, they are partly American. We have to strengthen things in this area because it’s been a bit forgotten as regulation has been strengthened.”

    Corporate and household debt was at 190 percent of worldwide gross domestic product in 2001, rising to 210 percent in 2007 as the financial crisis began. Since then it has continued rising to 240 percent, he said.

    “Advanced economies have seen it reduce a bit, and it has risen a lot in emerging countries,” Villeroy said.

    Asked if he saw a “risk of contagion,” the central bank governor said: “Today, we don’t see it. I think of China, where Chinese authorities have the means to act, but we have to be extremely vigilant: everywhere rising debt means rising risks.”

    Helmholtz Watson

    [color=red]Anil @anilvohra69

    The phrase “Lehman moment” has different translations in other countries:
    In China, it’s “Baoshang Bank moment” and it’s happening now.[/color]


    [b]BEIJING — The World Bank raised its forecast of China’s economic growth this year to 8.5% from 8.1% and said Tuesday a full recovery requires progress in vaccinations against the coronavirus.
    The report adds to positive signs for China, the first major economy to rebound from the pandemic. Factory and consumer activity are back above pre-outbreak levels, though authorities have re-imposed travel controls in some areas to counter outbreaks of new variants of the virus.

    Chinese economic growth is likely to decline to 5.4% next year as the rebound from last year’s history-making global slump fades and activity returns to normal, the World Bank said.

    Its forecast was an increase over a report in April that said China and Vietnam were the only East Asian economies to achieve a “v-shaped” recovery in 2020 with output back above pre-coronavirus levels.

    China is on track to vaccinate 40% of its population by early summer, but “a full recovery will also require continued progress toward achieving wide-spread immunization,” the World Bank said.

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