Shadow banks paralyzed amid China’s leverage cleanup
Total social financing (TSF) declined to 1.39 trillion yuan (US$201.4 billion) in April from 2.12 trillion yuan in March
Bread-and-butter bank loans have once again become the core lifeline for the Chinese economy amid regulatory efforts to straighten up the country’s shadow financing channels in the non-bank financial sector.
Total social financing (TSF), a broad measure of credit and liquidity in the economy that helps to illustrate the pace of growth of non-traditional banking activities, declined to 1.39 trillion yuan (US$201.4 billion) in April from 2.12 trillion in March, data from the central bank showed on Friday.
The crackdown in alternative financing to businesses has evidently pushed borrowers back to rely on banks, as seen in the pickup of new yuan loans in April, to 1.1 trillion, from 1.02 trillion in March, exceeding expectations of a pullback to 815 billion yuan, according to the median estimate polled by Bloomberg. Loans accounted for nearly 80% of last month’s TSF, up from two-thirds during Q1.
Shadow banking activities came to a screeching halt in April following a fairly active start of the year, with negligible sums of undiscounted bankers’ acceptances and even a marginal contraction for entrusted loans. There was 147 billion yuan worth of trust loans in April, but that is still small when compared with a total of 735 billion during the first quarter.
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales. It can also hint at trends in China’s vast shadow banking sector.