穆迪__2018Q4中国影子银行报告-2019.3-62页_2mb

Summary of Moody's Quarterly China Shadow Banking Monitor

Core Content

The shadow banking sector in China experienced a significant contraction in 2018, shrinking by RMB4.3 trillion to RMB61.3 trillion, the lowest level since 2016. This decline was concentrated in core shadow banking activities such as trust loans, entrusted loans, and undiscounted bankers' acceptances, which collectively fell by RMB2.9 trillion. The share of broad shadow banking assets relative to GDP also dropped to 68%, down from 87% two years earlier, marking the first annual contraction in both absolute and GDP terms over the past decade.

Main Points

• Monetary Policy Relaxation: The PBOC adopted a more accommodative monetary policy stance in 2018, leading to easier liquidity and corporate financing conditions. However, credit growth remained weak and skewed toward short-term instruments.
• Formal Bank Lending: Formal bank lending accounted for the majority of adjusted new total social financing (TSF) flows in 2018. The trend of shifting credit supply back to banks' loan books is expected to continue in 2019.
• Policy Impact on POEs: Privately Owned Enterprises (POEs), especially micro and small enterprises (MSEs), faced the greatest disruption in credit availability due to the shadow banking crackdown. While recent policy measures have partially alleviated their distress, access to credit remains uneven, with stronger credit profiles benefiting more.
• Regional Disparities: Credit supply diverged across provinces, with some northern and northeastern provinces seeing a -2.9% decline in net shadow credit supply relative to GDP, while others saw improvements through formal bank lending and direct financing.
• Regulatory Focus: The authorities are expected to moderate their crackdown on shadow banking in 2019, shifting focus to sustaining economic growth and slower deleveraging. However, financial system risks remain a priority, and a strong rebound in shadow credit supply is unlikely.

Key Trends in Shadow Banking

• Composition of Shadow Banking: Broad shadow banking includes various components such as entrusted loans, trust loans, and wealth management products (WMPs). In 2018, WMPs and asset management products (AMPs) were the largest components, but both saw a broad decline.
• WMPs Trends:
  • Outstanding bank WMPs increased slightly in 2018, driven by on-balance sheet WMPs.
  • Off-balance sheet WMPs remained flat throughout the year, with tighter regulations still limiting their growth.
  • Interbank WMPs continued to decline, with outstanding amounts reaching RMB1.2 trillion in 2018, down from RMB3.2 trillion in 2017.
  • The share of short-term WMPs (maturities below 3 months) in total issuance remained low, at 42%, indicating a reduction in maturity mismatch.

Trust Sector Trends

• Trust Lending Contraction: Trust lending flows contracted significantly in 2018, with a reduced reliance on shadow banking.
• Asset Allocation Shift: Trust assets continued to shift toward the property sector, though at a slower pace than in 2017. This trend exposed smaller property developers to refinancing risks.
• Asset Quality Concerns: The amount of trust assets at risk of default rose by 55% year-on-year to RMB216 billion, signaling increasing credit risk in the sector.

Interconnectedness and Spillover Risks

• Reduced Interconnectedness: Commercial banks' net claims on non-bank financial institutions (NBFIs) fell to RMB7.4 trillion, a 34% decline from the previous year, reflecting reduced financial system interconnectedness.
• Wholesale Funding Reduction: Small and midsize banks reduced their reliance on wholesale funding in 2018, with the share of such funding in their total sources of funds falling by 2.5 percentage points.
• NCDs and MPA: New negotiable certificates of deposit (NCDs) issued by smaller banks declined by 2% in 2018, and were included in the MPA framework in Q1 2019, further discouraging short-term wholesale funding.

Regulatory and Market Developments

• Regulatory Relaxation: The PBOC introduced the targeted medium-term lending facility (TMLF) in December 2018 and cut reserve requirements in January 2019 to support POEs and MSEs.
• Corporate Financing: Corporate bond issuance saw a slight increase, but yield spreads for low-rated issuers remained elevated, indicating continued credit risk.
• Property Developers: Property developers increased their offshore bond issuance by 35% in 2018, despite a decline in overall corporate bond issuance.

Conclusion

The contraction in the shadow banking sector in 2018 was a major shift in China's financial landscape, driven by regulatory efforts to reduce systemic risk and economic slowdown. While monetary policy easing has supported formal bank lending, credit growth remains weak, and interconnectedness between banks and NBFIs has declined. The regulatory focus on financial stability and risk mitigation is expected to continue in 2019, with moderate easing in policy and partial improvements in credit access for certain sectors. However, shadow credit supply is unlikely to rebound strongly, and regional and sectoral disparities persist.