China has been cracking down on the shadow banking sector, reducing high-risk financial assets by a net 13.74 trillion yuan ($1.98 trillion) over the past two-plus years, the country’s top banking regulator said Thursday in Shanghai.

Currently, there’s a deregulation trend around the world that allows shadow banking to regain momentum, which China should be highly vigilant about, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said at the Lujiazui Forum, an annual gathering of senior financial regulators, experts and market participants.

Besides, Guo said it’s necessary to face up the issue of the financialization of the real estate industry in some regions. In recent years, the leverage ratios of some cities’ household sectors have soared and a large proportion of households have seen their debt ratios grow to “unsustainable levels,” he said.

“Excessive financing in the real estate industry not only takes up much of the credit resources that could have gone to other industries, but also tends to promote property speculation,” Guo said.

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Contact reporter Timmy Shen (hongmingshen@caixin.com)