Chinese regulators may loosen restrictions on trust products to ensure sufficient bank deposits to sustain lending, further accelerating the trust industry’s rapid rise.

The authorities have begun 2012 by showing an intent to keep defaults to a minimum in both property and LGFV segments to avoid systemic risk.

The readiness of Beijing to order rescue efforts for Wenzhou companies hit by the shadow banking crisis is representative of a wider imperative to launch assistance initiatives in several parts of the economy.

As things stand, there appears to be little to prevent the clear stress in the underground banking system from developing into private enterprise crisis.

The People’s Bank of China (PBoC) injected a net Rmb 28bn through open market operations this week, signalling a neutral to loose liquidity posture at the start of a month in which Rmb 900bn in central bank bills is due to mature. The move ends four consecutive weeks of withdrawals totalling Rmb 315bn.

Banks’ borrowing costs have been rising by a greater margin than lending rates due to three asymmetric interest rate hikes. But what does this mean for net-interest income?

Banks are seeking to offset lost revenues from reserve requirement ratio hikes and other factors by hiking borrowing rates for individuals and SMEs.