Victor Shih

China’s central bank PBOC is dressing up its figures. Financial analyst Victor Shih, author of Factions and Finance in China: Elite Conflict and Inflation, has for Bloomberg a look at the methods the bank is using.


Including asset-backed securities in its measure is a way for the central bank to “dress up” the aggregate financing number to show financial resources are still on the rise, said Victor Shih, a professor at the University of California in San Diego who studies China’s politics and finance.

The sudden growth of asset-backed securities may suggest that the authorities are allowing funds and trust companies to use interbank leveraging to finance purchases of asset-backed securities, which will once again jump-start off-balance-sheet credit growth, he said.

“Since 2011, marginal financing has come mainly from off-balance-sheet shadow financing,” he said. “Regulations in the past year have made the growth of shadow finance problematic. Thus, the increase in on-balance sheet lending was not enough to make up for the shrinkage of shadow financing.”

More at Bloomberg.

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