CHINA is readying twin initiatives to curb opaque financing practices that threaten the stability of the country’s US$864 billion investment trust industry and booming corporate paper market, sources with direct knowledge of the plans said.
The moves, coming separately from the People’s Bank of China (PBOC) and the China Banking Regulatory Commission (CBRC), form part of a campaign to clean up China’s financial system as it opens up domestic capital markets to diversify funding options for cash-strapped firms in the world’s second largest economy.
Two sources close to the CBRC said China’s big four managers of bad loans — so-called asset management companies (AMCs) — would be banned from lending directly to investment trust companies under the pretext of acquiring bad debt.
Meanwhile, continuing a clampdown on the corporate bill that began in 2011, the PBOC will, from next year, stop bankers’ acceptances and similar products from being used to camouflage off-balance-sheet lending to firms, sources with direct knowledge of the situation said.
Trade in commercial bills began to cause concerns in Beijing when the economy showed signs of overheating on a flood of cheap credit in 2010 and an issuance of such notes exploded.