A record year for defaults in China led the nation to dispose of around 2 trillion yuan in non-performing loans in 2019.
Total assets of the country’s shadow banking sector decreased by 16 trillion yuan ($2.3 trillion) over the past three years, according to a «Reuters» report citing a statement from the China Banking and Insurance Regulatory Commission (CBIRC). The watchdog added that it would continue to «dismantle» the shadow banking sector and intensify punishments against regulatory violators.
Meanwhile, loans to the real economy grew to reach 17 trillion yuan ($2.5 trillion) in 2019, up seven percent year-on-year, with commitments to support specific sectors. They include a promise to greater loan access for the struggling pig farming sector and the introduction of more green financing for environmental protection.
The sizeable loan disposals were natural given a record-low year for China’s bond market which reportedly registered defaults totaling $18.6 billion, according to Fitch. The Chinese government has responded with a multitude of initiatives including plans to improve the mechanism used to deal with bond defaults through greater monitoring, stabilization of market expectations and a crackdown on payment dodges, according to a senior central bank official.
