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Banks Face Crackdown on Entrusted Loans

By Wu Hongyuran and Leng Cheng
By the end of 2016, entrusted loans had grown to 13.2 trillion yuan ($2.03 trillion), accounting for 8.5% of outstanding total social financing, the country’s broadest measure of credit. By the end of November 2017, that proportion had dropped slipped to 8%. Photo: IC
By the end of 2016, entrusted loans had grown to 13.2 trillion yuan ($2.03 trillion), accounting for 8.5% of outstanding total social financing, the country’s broadest measure of credit. By the end of November 2017, that proportion had dropped slipped to 8%. Photo: IC

China’s banking watchdog has taken another step in its campaign to curb financial risks, introducing tighter scrutiny of lenders’ activities in one of the main segments of the country’s shadow-banking industry – entrusted loans.

The China Banking Regulatory Commission (CBRC) announced a set of sweeping new rules to control such lending in a statement dated Jan. 5. It said that a lack of unified regulations on entrusted loans had created “certain hidden risks” and that the time was ripe to strengthen risk control and guide credit to better serve the real economy.

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