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The Rise of China’s Shadow Banking System

It is hard to believe that just almost a decade ago, almost all types of lending made in China was done by conventional banks. Now, as Satyajit Das rightly puts, China’s burgeoning Shadow Banking system has exacerbated the worsening debt situation of China, where debt is 210% of China’s GDP as of 2013.

Easy credit has certainly helped to fuel China’s economy, and despite capital regulations imposed on banks earlier this year, all the regulations have done is to tip lending into the shadow banking system’s favour, where trusts and wealth management products (WMPs) can promise returns as high as 12%. While many analysts believe that the increasing debt would not translate into a harsh landing for China, the risk of the pricking of a property bubble in a nation where many properties serve as collaterals as loans and other forms of debts, would result in an alarming slowdown in China’s economy.

It looks like investors of China’s promise should look to increase their level of caution when it comes to investing in Chinese firms and always always, check on the management, any red flags in the annual report before pouring their money in.

Read the original article of how Shadow Banking has evolved at http://forbesindia.com/printcontent/38108

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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