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How Big is China's Financial System (2025 Update)
The Chinese financial system hit a new all-time high in 2024, reaching 532% of GDP and overtaking the peak in 2016. While not a return to the frenetic credit expansion of the early 2010s, the system is re-leveraging again.
The composition of that growth is more concerning than the aggregate numbers suggest. The expansion was partly driven by an expansion of bank credit, but it was the surge in NBFI assets, particularly trust companies and insurance companies, that was a key source of growth. At the same time, other parts of the system such as rural lenders, policy banks and off-balance sheet vehicles stagnated or shrank.
Trust sector assets under management reached a record in 2024, marking the fastest pace of expansion since 2016 - even as fee income collapsed to an all-time low, reflecting a pivot to passive administrative trust structures. This is a risky signal, and we will have more to say about the trend in future research.
Deposit dynamics point to a looming inflection point. The extraordinary deposit expansion that powered asset growth in 2022-23 reversed sharply in 2024, with deposit formation hitting its lowest level in over a decade in as a share of GDP. With loan demand weak and term deposits still expensive, this points to a likely period of unintentional bank deleveraging.
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