The government's tightened management of shadow banking will boost the cost of private financing but will benefit the market in the long run, experts said.
In its latest efforts to deal with growing financial risks, the State Council approved new rules included in Document No 107 to strengthen regulation of the shadow bank lending that has helped fuel an explosion in debt since 2008,
The regulations include new restrictions on banks' cooperation with trust companies, securities brokerages and other intermediaries that help carry out off-balance-sheet business.
"The stricter control over the shadow banking will have a big impact on the country's capital and wealth management market by boosting the cost of private financing," Zhang Chenhui, director of the finance research institute at the State Council Development Research Center, told the China Wealth Management 50 Forum.
"But it will benefit the wealth management market in the long run as it helps to reduce high leverage and heads off potential financial risks," Zhang said.
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