Ma Jun, chief economist at the research bureau of the People’s Bank of China (Photographer: Brent Lewin/Bloomberg)

PBOC’s Ma Says China Weighing Impact of Shadow Banking Rules

(Bloomberg) -- China’s regulators will consider potential market impacts when they introduce additional regulations on the shadow banking sector, according to a top central bank researcher.

Any new rules on wealth management products and other asset management offerings will be rolled out gradually, Ma Jun, chief economist of the research bureau of the People’s Bank of China, said at an economic forum in Washington. The rebounding economy has created room for expedited structural reforms, Ma said.

PBOC’s Ma Says China Weighing Impact of Shadow Banking Rules

Ma Jun

Photographer: Brent Lewin/Bloomberg

To curb risks in shadow banking -- where financial institutions create off-balance sheet vehicles to channel funds to riskier borrowers for higher interest rates -- regulators are working to draft sweeping new rules, Bloomberg reported in February. Greater controls on an industry managing assets worth more than three-quarters of China’s $11 trillion economy may raise funding costs for borrowers and tighten liquidity in the financial system.

"The central bank is seeking to calm the market and doesn’t want it to over-interpret the regulations or act on sentiment," said Ming Ming, a former PBOC monetary policy official and head of fixed-income research at Citic Securities Co. in Beijing. Still, Ma’s comments "don’t mean there will be a weakening in the regulatory transition toward curbing risks."

Economic growth that’s exceeded expectations and subdued consumer inflation have created favorable conditions for structural reforms including shutting down zombie firms, swapping debts for equity, reducing non-performing loans, and further opening the bond market, Ma said.

Those conditions also help policy makers manage capital flows, he said. Supply and demand in China’s foreign exchange market is more balanced and the PBOC has reduced interventions, said Ma, who was chief China economist at Deutsche Bank AG in Hong Kong before joining the central bank in 2014.