"Grey rhino" risks in China's financial sector rising - c.bank official
* China to step up monitoring of stock, bond, FX markets-
* Says China's markets highly sensitive to external shocks
* Shadow banking sector shrank by $641 bln in 2018 - Moody's
(Adds details, Moody's comment)
BEIJING, March 18 (Reuters) - The "grey rhino" risks in
China's financial sector are rising and regulators will step up
efforts to control them, a senior official at the People's Bank
of China said in remarks published on Monday.
Chinese policymakers have warned of potential "grey rhino"
events - highly obvious yet ignored threats - as the nation
faces increasing uncertainties as the economy slows amid a trade
war with the United States.
Wang Jingwu, head of the central bank's financial stability
department, expressed long-term concerns in an article in China
Finance, a central bank publication.
"We need to pay high attention to the risk that the global
economy will fall into a recession again in the medium- and
long- term, and be alert to its gradual evolution that may
trigger a new round of economic and financial crisis," he wrote.
China's financial markets "are highly sensitive to external
shocks", and risks in local government hidden debt, bond
defaults and property market could trigger financial risks, he
Risks of some Chinese financial holding groups and rural
financial institutions may be exposed and risks of internet
finance, especially online peer-to-peer (P2P) lenders, still
need to be resolved, Wang said.
The stability of China's yuan exchange rate and foreign
exchange reserve faces pressure, he said.
Wang also said the government will step up monitoring of
stock, bond and foreign exchange markets to prevent contagion
risks between different financial markets.
SHADOW BANKING SHRINKAGE
Beijing's policy focus has shifted to supporting growth from
reining in debt risks - although top leaders remain worried
about long-term systemic risks that could derail the country's
In a report released Monday, Moody's Investors Service said
China's shadow banking sector shrank by 4.3 trillion yuan ($641
billion) in 2018 to end the year at 61.3 trillion yuan, its
lowest level since just before Beijing's regulatory crackdown on
the sector began at the end of 2016. https://bit.ly/2HCYrWk
The decline marks a victory for China's regulators, who
embarked on a broad campaign several years ago to curb risky
lending practices in the so-called shadow lending sector and
contain a build-up in corporate indebtedness.
But the de-risking campaign has also cut off a source of
credit for many small businesses. China has said it will control
the pace and intensity of deleveraging efforts.
"While policy priorities are shifting towards sustaining
growth and slowing deleveraging, we do not foresee a rapid
rebound in shadow credit supply, because the authorities are
also retaining their focus on financial system risks," said
Michael Taylor, a Moody's managing director and chief credit
officer for Asia Pacific.
($1 = 6.7131 Chinese yuan)
(Reporting by Kevin Yao, Ryan Woo and Beijing Monitoring Desk;
Editing by Richard Borsuk)
First Published: 2019-03-18 11:15:02
Updated 2019-03-18 12:29:18
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.