A Matter Of “Trust”: A Look Inside China’s Crackdown Of Its $3 Trillion Shadow Banking Industry

Jon Banking

As discussed here in mid-August, when China reported its latest credit data, for the first time in 9 months China’s trillion Shadow Banking Industry – defined as the sum of Trust Loans, Entrusted Loans and Undiscounted Bank Loans – contracted.
***
These three key components combined resulted in a 64BN yuan drain in credit from China’s economy, the first negative print since October, seen by analysts as more evidence that Beijing’s campaign to contain shadow banking and quash risks to the financial system, is starting to bear fruit.
***
And, as a follow up report from Reuters overnight details, the crackdown against unregulated shadow financing is accelerating, noting that as the flood of unregulated cash swirls through the Chinese economy, Beijing has been taking aim at the trust companies whose unrestrained lending practices are worrying regulators. The trusts, which as we have discussed previously are at the heart of a vast shadow banking industry, are being pressured to step up compliance and background checks, and are being pushed towards greater transparency.

This post was published at Zero Hedge on Sep 10, 2017.