China's shadow banking lacks sufficient regulation - central bank

BEIJING (Reuters) - China's central bank said on Tuesday the shadow banking sector lacks sufficient regulation and the bank would give more prominence to financial risk controls.

Compared with traditional bank lending, the opaque nature of shadow banking products make it easier for them to bypass regulatory requirements and provide credit to restricted areas, the People's Bank of China (PBOC) said in its annual China Financial Stability Report released online.

The central bank will increase supervision over the rapidly growing asset management industry to curb shadow banking risks, it said.

Since the first quarter, the PBOC has included banks' off-the-balance-sheet wealth management products in its examination of broad credit in its Macro Prudential Assessment (MPA) risk-tool.

The world's second-largest economy faces major challenges, including excess industrial capacity, sluggish growth, high corporate leverage, mounting local government debt, property bubbles in some regions, and the deterioration of banking assets, the PBOC said in its report.

As the economy still faces relatively big downward pressures, the bank pledged to create a favourable monetary and financial environment for the development of the real economy this year.

The central bank also said it would strengthen coordination with other financial regulators to fend off systemic financial risks.

(Reporting by Beijing Monitoring Desk and Shu Zhang; Editing by Neil Fullick, Robert Birsel)