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China Banks Face Funding Challenge as Deposit Base Eroded

Lenders rely more on debt including off-balance wealth management products

Chinese banks face a growing challenge in attracting deposits, forcing them to resort to less stable and more costly interbank borrowings as well as off-balance wealth management products. Deposits accounted for 61 percent of banks’ total liabilities and equity as of June, down from 78 percent in 2008, according to Fitch Ratings. At mid-sized banks, the share fell to less than 50 percent. Policy makers have stepped up efforts since April to curb interbank and shadow borrowings to limit risks.

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