According to the figures from Chinese Academy of Social Sciences’ ‘Chinese financial industry supervision report’, the official figures show the shadow banking industry reached an AUM at the end of 2012 of about CNY14.6tn, but other research shows that the actual market is much larger, about CNY20.5tn. The number is so large that it even takes 40% of GDP according to the numbers and 2013 is expected to be even higher.
The shadow banking system in China is not sufficiently regulated and often many of the products created are carry high risks which are not explained clearly to the investors. In general, a more regulated shadow banking system should be beneficial to the banks and investors in long-run. If the current issues were not solved effectively, then the dramatic volume increase could be a financial time bomb that might severely damage the Chinese economy and financial stability.
|
Year 2012 |
Scale of Chinese shadow banking (CNYtn) |
Proportion of GDP |
Proportion of total asset of banking industry |
|
Official data |
14.6 |
29% |
11% |
|
Actual Market |
20.5 |
40% |
16% |