China to peer inside its shadow banking world via a new database
The new statistics platform is to measure all financial activity, from leveraged securities investment to local government borrowing, the People’s Bank of China said
Beijing will establish a data bank in support of its campaign to clean up its unruly shadow banking system and control financial risk as it continues to learn from the lessons of the stock market turmoil of 2015.
In its latest assault on financial activity conducted by unregulated institutions, the government will set up a statistics platform that will measure all financial activity, from leveraged securities investment to local government borrowing, the People’s Bank of China said on Monday.
The move significantly advances the Chinese government’s endeavour to get at the root of the 2015 stock market meltdown – grey-market margin lending beyond the purview of regulators, including by shadow banks.
The potential for a market collapse was set when retail investors used a variety of lenders to borrow against their initial small stakes at high interest rates and invest in hot stocks. When a wave of tumultuous panic selling took hold, it wiped more than US$3 trillion of value off mainland shares in just three weeks.
The fiasco ultimately destroyed US$5 trillion of wealth and tarnished Beijing’s reputation as a capable economic manager.
