China’s Cabinet Imposes New Rules in Shadow Banking Fight

China’s Cabinet imposed new controls on the multi-trillion-dollar shadow-banking industry with an order that targets off-the-books loans and shores up enforcement of current rules, three people familiar with the matter said.

The rules include a ban on transactions designed to avoid regulations, such as moving interbank loans off balance sheets to reduce reported levels of lending, said the people, who asked not to be identified because the order hasn’t been made public. Such operations are part of shadow finance, a term that describes lending outside the banking system. In a separate step to reform the system, the bank regulator said it will let as many as five privately owned lenders start operating this year.