China’s “shadow banking” system is masking the rise in indebtedness in China, Moody’s Investors Service said in a report Wednesday.
“The growth in overall leverage may be understated, because some of the fastest growing components of shadow banking are not included in TSF (total social financing),” said Michael Taylor, Moody’s chief credit officer for Asia Pacific.
We estimate the potential understatement to be significant, amounting to at least RMB16 trillion ($2.4 trillion) or 23 percent of GDP at end-2015, equivalent to around one-third of shadow banking,” Taylor added.
Moody’s said TSF flows were being sustained by formal bank credit flows supported by accommodative monetary policy.
The increasing leverage was worrying.
“The rise in overall leverage and further expansion of shadow banking activity are pushing up financial risks,” said Stephen Schwartz, a Moody’s senior vice president.
Moody’s had a Aa3 rating on China but lowered the outlook on the country’s credit rating from stable to negative in March.
Same story about China’s massive pile of debt, bad loans, and illiquid shadow banking system. I like the heads up but the market doesn’t seam to care….
How long do u think that’ll last? Any hypothesis on when the Shanghai index going to trend lower again?
To be honest, after getting burned years ago, I try not to follow the Chinese markets. Posts like this are my way of warning people – don’t do what I did…
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