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This China Center members-only chart shows newly issued net Total Social Finance (TSF) in China on a quarterly basis, broken down into its constituent parts. Local currency bank loans constitute the traditional formal finance sector, while the other parts constitute the more informal (and previously less relied upon) finance sector.
The share of non-bank finance has grown markedly: it shot up in 2009, has stayed elevated since that time, and in recent quarters has been pushed to an extreme level. In the first month of 2013 local currency bank loans (i.e. the type of credit over which regulators have the most direct control) comprised only 43 percent of total recorded credit creation. In other words, 57 percent of debt instruments were created outside of the normal banking channel.
The increased reliance on non-bank-loan credit is worrying for several reasons. Please download the full document for a full analysis.