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China's chief banking regulator has called on commercial banks to deal with non-performing assets as soon as possible and has warned of a strong resurgence in shadow banking if regulations are relaxed.

In an article published in Qiushi Magazine, Guo Shuqing, the Chairman of the China Banking Regulatory Commission, urged financial institutions to take more cautious accounting measures to expose NPLs and increase loan provisions and capital.

However, he said regulators should not strictly cap the ratio for non-performing loans amid daily regulation as a way to encourage banks to expose the risk.

China will not implement unlimited quantitative easing and unleash a large amount of fluidity directly onto individuals and companies in order to stabilise the economy, since it was likely to bring many long-term risks in the future, said Guo. Thus, it was important for Chinese financial management departments to establish specific policies for organisations on different risk levels.

China will also actively engage in international regulation making processes and financial governance while further opening up China's financial market to the world, Guo said in the magazine which is overseen by the party's central committee.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
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MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
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