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FINANCE

Chinese Regulators Tighten Grip on Disguised Loans

By Wu Hongyuran, Zhang Yu, and Dong Tongjian
As part of the country’s ongoing campaign to slim down its bloated financial system and rein in hidden and possibly toxic debts, the People’s Bank of China decided early this year that it would take the lead and coordinate with often-territorial regulators, forcing them to work together. Photo: IC
As part of the country’s ongoing campaign to slim down its bloated financial system and rein in hidden and possibly toxic debts, the People’s Bank of China decided early this year that it would take the lead and coordinate with often-territorial regulators, forcing them to work together. Photo: IC

(Beijing) — Channel lending in China, albeit sprawling, is still caught in a regulatory no-man’s land.

Chinese banks have been skirting more-stringent requirements on capital and loan-loss provisioning by disguising loans routed through non-banks, or so-called “channels,” as asset-management plans (AMPs).

AMPs fetch high returns from investing in high-risk local government financing vehicles, less-capitalized property projects, or companies whose credit profile is too weak to secure conventional bank loans. These AMP-disguised loans as a result have managed to stay off the radar of traditional debt indicators.

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