China ‘shadow banking’ worries Aso

Kyodo

Finance Minister Taro Aso expressed concern Tuesday over the potential impact of China’s so-called shadow banking system, under which a large amount of loans have been provided by a range of nonbank entities in the nation.

“I think a bubble related to real estate such as land is seemingly on the brink of bursting,” and under the circumstances the shadow banking system “could exert a big impact” on China’s economic growth, Aso said at a news conference.

“The problem is that nobody understands” the real concept of shadow banking, he said, indicating that the Japanese government will closely monitor economic developments in China.

Aso’s remarks came as some analysts say shadow banking could trigger risks similar to those that brought about the U.S. subprime mortgage crisis in 2007, which culminated in the collapse of U.S. investment bank Lehman Brothers and helped trigger the global financial crisis the following year.