While China has attempted to crack down on shadow banking activities, unregulated lending is in fact growing, said China Beige Book.
According to the advisory firm, the proportion of loans from non-bank lenders in the country have grown to nearly 40% in Q4 of 2017, versus 29% in the same period in 2013.
The said quarter is also the third consecutive one where shadow banking represented about 40% of loans made.
In addition, Q4 of 2019 was the quarter when both borrowing in both the loan and bond markets grew.
According to the firm’s latest survey, more than 30% of firms in the four core sectors of manufacturing, retail, services, and property report are borrowing money.
In April 2018, China unveiled far-reaching rules for its financial industry as part of an effort to reduce risk.
Banks were required to spin off their wealth-management arms, which helped funnel credit to the private sector.
Bank were given three years—till December 2020—to adopt the new rules.
As a result, the industry contracted by 1.6 trillion yuan (US $229 billion) in 2019, after shrinking by 2.9 trillion yuan in 2018.