China To Create Five New Private Banks

China will create up to five banks funded by private investment this year, its banking regulator announced.

More competition in China’s economy

private banksThe move aims to open up the financial sector and increase competition in the industry.

China will allow the creation on a trial basis under the support and management of Chinese banking authorities.

Private finance will be used to either restructure existing financial institutions or build new ones “bearing their own risks.”

The country has been looking to open up its tightly-controlled financial sector to support economic growth.

According to China Banking Regulatory Commission (CBRC), strict procedures and standards will be set for the pilots.

Shadow banks

Over the past years, lending by non-banking institutions has grown rapidly in China, which fuelled a surge in debt levels.

Prompted by this issue, Chinese legislators have introduced new regulations for the sector. The draft rules have not been publicly revealed, but various media reports claim they have called for greater supervision and monitoring of the shadow banks.