Regulators in China are making further progress in reducing risks to the financial system, according to fresh figures on Wednesday that showed a drop in assets in the trust industry, which is often linked with shadow banking.
Outstanding total assets in China's trust industry fell 3.18 percent from the start of 2018, China Banking and Insurance Regulatory Commission (CBIRC)said, as it vowed to continue its clampdown on "market chaos" in the industry.
Banks and other financiers often lend via trust firms to risky borrowers they would otherwise be prevented from lending to - such as property developers - by regulators.
Using trust firms as a conduit allows lenders to bypass buffers put in place to reduce lending risks, and this process also makes it harder for regulators to gauge their exposure.
At end-April, outstanding assets in China's trust industry totaled 25.41 trillion yuan ($3.97 trillion).
The CBIRC said it will continue to tighten scrutiny of trust firms in line with new rules on the asset management industry.
The regulator said that through on-site inspections, policy guidance and ratings, it urges "trust companies to transform from high-speed growth to high-quality development and to vigorously support the development of the real economy."
The use of multi-layered structures designed to conceal the identities of the ultimate lender and borrower has been "significantly" reduced, it added.
The total value of loans to provincial government platforms and the financial industry fell 155.3 billion yuan from the beginning of the year.
Trust loans dropped by 11.11 billion yuan since the beginning of the year to 8.39 trillion yuan at end-April.
While risky loans fell, the regulator said it had little impact on trust firms' revenue, which grew year-on-year. Profitability was stable, it said.
Chinese authorities are in the third year of a campaign to reduce riskier financing practices and slow a rapid build-up in debt, but they have been proceeding cautiously to avoid a hit to economic growth.
On Friday, regulators issued draft guidelines on banks' management of syndicated loans to contain credit risks.
Also last week, China's securities association asked brokerages not to provide finance based on over-the-counter stock pledges, according to two people with direct knowledge of the matter.
