China must guard against any rebound in off-balance sheet lending in the so-called shadow banking sector, and must dispose of non-performing assets as soon as possible.[BEIJING] China must guard against any rebound in off-balance sheet lending in the so-called shadow banking sector, and must dispose of non-performing assets as soon as possible, the head of the country's banking and insurance regulator said on Sunday.
In recent years, China has clamped down on shadow banking, concerned about the hidden risks in the high volume of complex and potentially risky loans in the sector. But as a weakening economy puts pressure on businesses and individuals, authorities fear shadow lending and illegal loans might surge. After the outbreak of the new coronavirus this year, high-risk banks with complex structures may stage a comeback, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, wrote in an article published in the Communist Party journal Qiushi.
"A slight relaxation of regulations may lead to a full resurgence, and all previous efforts would go to waste," Mr Guo wrote. Due to the coronavirus epidemic, leverage is expected to rebound significantly in the Chinese economy this year, and bad debts of financial institutions may rise substantially, he warned.
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