However, other experts see the move to crack down on excess leverage as an overdue and necessary effort to address structural problems in China’s state-dominated economy.
Since China’s big, state-owned banks are unwilling to lend to any but their biggest, most influential clients, the vast majority of smaller businesses must rely on so-called shadow banking, which in China includes underground banking, trust products and wealth management products, among other activities.
“Recently, shadow banking has been difficult to deal with,” Yi said, adding that the central bank is mainly working to curb speculative dealings.
“The central bank does not really need to do anything,” he said. “If I were the central bank, I would more heavily punish the rampant shadow banking activity among small and medium banks. In the short term, there is no need to make too large a move.”