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在线翻译:
szdaily -> Markets -> 
Shadow banking may face fresh crackdown
    2018-04-24  08:53    Shenzhen Daily

INVESTORS who pushed up Chinese bank shares last week on news of lower reserve requirements may have been celebrating too soon.

The subtext to last Tuesday’s move is an effort to prepare the banks for a painful new phase in China’s campaign to reduce financial sector risks, as regulators free up deposit rates and accelerate their crackdown on the nation’s US$16 trillion shadow banking sector.

“China is gearing up to crack a hard nut with deleveraging and financial reforms, and the central bank is offering some coordinated policies to ensure it will be a smooth transition,” said Xia Le, chief Asia economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong.

The People’s Bank of China’s decision to free up more liquidity for banks by slashing reserve ratio requirements, at a time when funding conditions are plentiful, shows the central bank is trying to insulate lenders for the next phase of reform, said Ming Ming, head of fixed income research at Citic Securities Co.

A key element of that reform process is a plan to give banks greater freedom to set interest rates, flagged by Yi Gang, central bank governor, at the Boao forum earlier this month. That will help banks better compete for deposits from Chinese savers and hasten the shift away from shadow instruments such as wealth management products.

Already, China Construction Bank Corp., Bank of China Ltd. and other large lenders have started trying to attract funding by rolling out certificates of deposit with sharply higher interest rates.

But the move away from off balance sheet wealth management products to on-balance sheet deposit funding is likely to be painful. Guosen Securities Co. analyst Wang Jian described interest rate liberalization as like “throwing a bomb at banks” in an April 11 note, saying the need to offer higher deposit rates to attract funds could push them into riskier lending, to real estate for example, in order to protect profits.

That helps explain the lifeline thrown to banks last week with the 1 percentage point reserve requirement ratio cut for large commercial banks and some other banks, effective Wednesday.

The move will help banks to repay 900 billion yuan (US$143 billion) in outstanding medium-term lending facility loans they borrowed from the central bank, according to the central bank.

It is expected to unleash another 400 billion yuan in liquidity, which can be used to raise lending. (SD-Agencies)

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