Moody's: Shadow banking contraction to moderate

China's shadow banking sector continued to contract in the first half due to the government's strengthened efforts to curb its expansion, but the "de-risking" of the financial sector is likely to moderate, according to Moody's Investor's Service.

Shadow banking assets declined as a percentage of GDP to around 73 percent at the end of June, compared with 79 percent at the end of 2017 and a peak of 87 percent at the end of 2016, according to data from the rating agency released Monday.

In absolute terms, shadow banking assets fell by 2.7 trillion yuan in the first six months this year to 62.9 trillion.

"We expect the contraction in shadow banking assets to moderate during the rest of 2018, with regulators taking a more gradualist approach in response to slower credit growth and a more challenging external environment," the rating agency said.

There are already signs of a relaxation in previously tight credit conditions, after top policymakers pledged to use more accommodative fiscal and financial policies to support economic growth.

Amid recent relaxation in policy implementation, the overall policy objectives of containing financial risks and deleveraging remain intact, Moody's said.