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China's shadow banking system worth US$3.6t, report says

China's shadow banking system worth US$3.6t, report says

CHINA'S rapidly growing shadow banking system was worth 22.9 trillion yuan (US$3.6 trillion) by the end of last year and does not pose an immediate systemic threat to the financial system, a private report said today.

Shadow banking credit was equivalent to 34 percent of total loans in the Chinese banking industry and 44 percent of gross domestic output last year, Standard & Poor's Ratings Services said in a report published today.

"Over half of the shadow banking credit has lower risk than average bank loans," said Liao Qiang, credit analyst at S&P.

Outstanding bad loans on China's mainland totaled 493 billion yuan by the end of last year with a bad loan ratio of 0.95 percent, according to data from the China Banking Regulatory Commission.

"We believe major Chinese banks' capitalization, earnings, and liquidity profiles provide a comfortable buffer to absorb any possible hit from shadow banking and credit risks in the wider Chinese economy," said S&P's credit analyst Ryan Tsang. "We view China's shadow banking more as a symptom than a cause of some emerging systemic risks to the banking sector and the wider economy."

Wealth management products, part of China's shadow banking system, may have reached 13 trillion yuan last year, according to Fitch Ratings.

The CBRC introduced new measures this week to rein in the rapidly growing business by ordering lenders to keep separate accounts for each product and set aside capital as a buffer by the end of this year.

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