China Crackdown On Shadow Banking Sector Prompts Warning

China’s efforts to curb predatory lending to the country’s small and medium-sized enterprises could harm the sector rather than helping it by cutting off access to crucial finance, analysts have warned, the Financial Times reported. Multiple shadow banking lenders have told the Financial Times they would stop servicing medium to high-risk borrowers after the Supreme Court announced a plan last month to “significantly” cut the interest rate shadow banks could charge. The figure could fall to as low as 15 per cent a year from 24 per cent, affecting nearly Rmb7tn ($1tn) in outstanding loans, according to people involved in developing the rules. Beijing hopes the move will prevent SMEs, which are a significant employer, from falling victim to exorbitant interest rates. Read more

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