Therefore, banks must properly classify their assets and increase loan loss provisions to ensure faster disposal of nonperforming assets. Second, we must strictly guard against any resurgence of shadow banking activities. China’s high-risk shadow banking is different from other countries, as it has the characteristics of “circulating within the financial system” and “being loan-like”.
The size of China’s shadow banking is still large and easy to rebound with a slight chance even after it dropped by RMB20 trillion from the peak after rectification. Efforts must be made to prevent financial institutions from over-leveraged and complex cross-sector financial products, and put an end to all kinds of “loan-like” products before they emerge.