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.
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