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China Shadow Banking and the Real Estate Market

Asia Pacific Major Report | June 2014

In recent years domestic banks in China have turned more cautious towards lending to the real estate sector and bank loans have become increasingly difficult to obtain. As a result, more developers are seeking ​alternative sources of financing to fund their growth and expansion. One option is to raise debt through the shadow banking market.

The shadow banking system in China encompasses a collection of non-bank financial intermediaries which provide services similar to commercial banks but are not subject to the banking regulations. There are a wide range of intermediaries including underground banks, microcredit companies, off-balance sheet loans for domestic banks, private equity funds and trust products.

Due to the recent slowdown in the residential market, defaults are starting to emerge. Xingrun Real Estate in Zhengjiang, Zhejiang has been the most high-profile victim to date, leaving a total of RMB 3.5 billion of unpaid debt. These recent events have prompted talk of:

  • whether there will be more default cases?
  • how these will impact the overall real estate market?
  • whether they will have a knock-on effect on the already slowing economy in China?

This paper will examine these issues and discuss the implications for the China real estate market.


Contacts


Henry Chin, Ph.D.
Head of Research, Asia Pacific
+852 2820 8160
Email
  Ada Choi, CFA
Head of Capital Markets Research, Asia Pacific
+852 2820 2871
Email
  Frank Chen, CFA
Head of Research, China
+86 21 2401 1369
Email​
         
Nick Crockett
Executive Director, Asia Pacific
+65 6229 1136
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  Canon Yau
Director, Asia Pacific
+852 2820 6597
Email
  Sharon Law
Director, Asia Pacific
+852 2820 6559
Email


Infographic





China Shadow Banking and the Real Estate Market

中国影子银行及其对房地产市场的影响