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Shadow banking has long been the ghost at the feast of Chinese banking. Mainland banks lead the world in market capitalization these days and their growth trajectory is promising, but the entire system’s outlook is clouded by this opaque sector.
Shadow banking has dodged regulation so extravagantly that it has at times been worth as much as 87% of China’s GDP: Nomura has estimated the sector as being worth RMB122.8 trillion ($18.5 trillion).
It was with this in mind that the China Banking Regulatory Commission (CBRC) published a draft regulation in January, in a move that would bring the country in line with the Basel Committee on Banking Supervision’s framework for controlling large exposures of commercial banks.
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