LOOMING GRAY PLAYERS
When discussing "shadow banking", a non-traditional financial sector in the gray area of supervision considered to be a threat to China's economic well-being, delegates argued there is a need for close monitoring, better data collection and a stronger framework to identify and address problem institutions and market practice.
Chinese investors put money into trusts and wealth management products due to a lack of investment avenues in the country. The money pooled from the sale of these trust products is used to fund local government projects and industries such as mining.
Alarmist analysts warned that the shadow banking system is shaping up to be the country's "Lehman" or "Bear Stearns" moment, likely to trigger a financial crisis similar to the one in 2008 caused by the subprime mortgage crisis in the United States.
However, Chunhua Capital Group Chairman Hu Zuliu argued that shadow banking does not represent a systemic threat.
China does not have the same high interconnectivity among different regions and sectors, so the risk of an expansive crisis is low, Hu said.
UK Standard Life chairman Gerry Grimstone echoed Hu's argument and believes non-traditional lending can be complementary to traditional financial services if well regulated.
Noting that the growth of shadow banking was fuelled by regulated interest rates on both deposits and lending, Hu said that liberalizing rates and creating a bond market may help ease liquidity pressure.
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