China continues shadow banking crackdown

Via Caixin:

Financial regulators have instructed 12 more trust companies to keep their investments in real estate in check and stop illegally funding developers, in an effort to stave off speculation in the rebounding property market.

The widening clampdown on trust financing of real estate projects is a sign of regulators’ unease that the rapid growth in a key source of early funding for the industry might be exacerbating risks in the market.

The 12 trust companies come on top of 10 others that were summoned to meet with China’s banking regulator on July 3. At that initial meeting, the China Banking and Insurance Regulatory Commission (CBIRC) instructed the trust companies to control growth in their real estate financing businesses. Later in the month, the CBIRC’s Beijing office separately issued the same instructions to 12 more trust companies.

Hypocritical stuff from the CBIRC. It may be that china is succeeding in preventing private speculation in housing development via WMPs:

But it sure ain’t stopping the government from doing it via SOEs:

With the end result being massive capital misalloaction into empty apartments:

Deck chairs on the Titanic comes to mind.

David Llewellyn-Smith

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