There have been many articles about the dilemma of the real estate market and the financial pressure of developers. This paper focuses on shadow banking.
Shadow banking, as its name implies, is an intermediary business of banks outside the formal channels. Including off-balance-sheet financial intermediary business of banks and financial intermediary business of non-bank institutions and individuals, mainly including trust products, entrusted loans and private lending.
Trust financing product is a popular financing method in Chinese mainland in recent years, and it is also the main way for the real estate industry to absorb private funds. At the beginning of project development, developers design trust products according to the cash flow of the project through trust companies, and raise funds in the society through bank financing companies and other channels. Trust products are often mortgaged by real estate, and often have a minimum guaranteed income (far exceeding bank interest), and the term is generally three to five years. Many of these trust products are sold in bank branches, but banks do not guarantee the risk of default. Official data show that the scale of trust products is10.7 trillion yuan, which may be underestimated. The next two years will be the peak period for trust products to repay debts.
Entrusted loan refers to the government, enterprises and individuals providing funds to banks, and then issuing loans to specific enterprises or individuals through banks. This kind of loan often has a pre-agreed purpose, interest rate and repayment period. Banks are only agents, responsible for the issuance, follow-up, supervision and recovery of loans, and basically do not bear the default risk of loans. At present, the total amount of entrusted loans is about 1 trillion yuan.
Private lending is one of the most complicated, diverse and least transparent shadow banks. Private lending completely bypasses the intermediary participation of banks, and private capital surplus parties (large state-owned enterprises, private entrepreneurs and individuals) provide funds to capital shortage parties (real estate developers and small and medium-sized enterprises) to provide loan funds. Private lending often takes a long period of time, with guarantee companies or individuals leading the way, high interest rates and even usury. Although private lending itself does not involve banks, a lot of funds come from banks, but loans have been misappropriated and changed hands many times, leaving the bank's field of vision. If the private debt chain breaks, I believe that many bank loans may suddenly turn into bad debts. The scale of private lending is about 4 trillion yuan. After the "running road" incident in Wenzhou last year, private lending did not panic.
Shadow banking is a "substitute banking intermediary" born by luck when the formal banking business can't meet the capital demand of economy and market. Informal financial intermediation has a long history, which makes up for the shortage of formal banking business to some extent and meets the capital needs of some enterprises and individuals that cannot be covered by bank credit. The explosive growth of shadow banking started from 20 10, which coincided with the contraction of China's loan policy. In just over a year, the People's Bank of China raised the deposit reserve ratio by 600 basis points, and the bank's loanable currency suddenly tightened, forcing it to shrink the loan front. Quantitative austerity has pushed a number of enterprises and individuals out of the door of banks, but they still need financing, so they turn to informal intermediary and non-loan products. At the same time, the deposit interest rate is too low to make up for the depreciation of funds caused by inflation, so funds flock to non-savings financial products. The supply of funds and the demand side hit it off, and each has its own place. The prosperity of real estate has also reduced the vigilance of both sides against risks.
Compared with formal banks, shadow banking has four obvious characteristics:
First, the proportion of funds entering the real estate sector is abnormally high. In trust products and private lending, the industry estimates that at least 60% of the funds will eventually enter the real estate sector, and the risk concentration is extremely high. Therefore, shadow banking is very sensitive to the trend of housing market, real estate policy and cash flow of developers.
Second, the loan term does not match the project cash flow. Most long-term construction projects are supported by short-term financing capital, and the capital flow is maintained by issuing new debts and repaying old debts. Once there is a problem in the monetary environment, industrial environment or self-credit, the new debt is unsuccessful and the risk of capital chain breakage is high.
Third, there are many investors, which usually have mutual influence on the debt chain. Once a project breaks the contract, it involves a very large area, which will directly affect consumption and even social stability. The complicated creditor structure and low transparency will inevitably affect the timeliness and effectiveness of government crisis management.
Fourth, there are many blind spots in the supervision of shadow banking. The supervision, tracking and risk control of these financial activities are seriously inadequate.
Shadow banking in the United States (mainly mortgage-related derivatives) once hit the American financial system and caused an uproar in the global economy. Unlike the United States, China's shadow banking has no leverage and less direct contact with banks. However, shadow banking operates complex financial products bred from the blind spot of supervision, and there are also complex implications and interactions between products. China's shadow banks are sitting on an undeveloped real estate bubble, and they are closer to the general public. The shadow banking accident is estimated to be a major event; An accident in the shadow bank is bound to cause a chain reaction.
It is necessary to shift the focus of monetary policy from quantity management to price management, return all off-balance-sheet business of banks to on-balance-sheet, bring private lending into the supervision system and properly control the scope, so as to return interest rates to an appropriate level. It is urgent to normalize the monetary environment.