Chinese Experts Dismiss Shadow Banking Fears

Some of China’s top experts are playing down the risks associated with the country’s shadow banking sector, a rapidly growing but opaque part of the financial system.
Victor Chu, a leading Chinese investment banker and CEO of First Eastern Investment Group, acknowledged that shadow banks were issuing debt at a very fast pace. But he believes this is good for the economy and not a source for concern.

“It’s still a manageable part of the system … It’s totally manageable,” he said during a panel discussion on China at the World Economic Forum in Davos, Switzerland.
Chu said government officials had a firm grasp of the situation.

Shadow banks — sometimes called secondary banks — have carved out a niche trade in China. These firms offer loans to companies or individuals that may have trouble securing traditional bank financing. Often, the loans are then packaged and sold to investors looking for higher returns.
The sector’s exact reach is unknown, but some estimates put its size at roughly 60% of China’s GDP.


Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza