China Shadow Banking Fears

Concerns about shadow banking in China are overblown, the chairman of China Investment Corporation (CIC) which is responsible for managing some of the country’s massive currency reserves, told CNBC.

“The issue of shadow banking in China has been exaggerated. Yes there are issues, but on the whole the financial system in China is sound,” CIC chairman Ding Xuedong, told CNBC on the side lines of the St Petersburg International Economic Forum in Russia.

Shadow banking refers to how financial intermediaries create credit in ways that may be overlooked by government regulation.  Often these financial instruments are highly complicated and unregulated and the growth of their use in China in recent years has raised concerns about the financial risks facing the world’s number two economy.

CNBC

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