China bans collective asset management plans from investing in loans - sources

BEIJING, Jan 11 (Reuters) - Chinese authorities have banned collective asset management plans from investing in entrusted loans or other credit assets, two people with knowledge of the matter told Reuters on Thursday.

The Asset Management Association of China has halted registration services for the type of investment pools that China calls collective asset management plans, they said.

Existing plans cannot be extended or increased, they added.

The China Securities Regulatory Commission and the asset management association did not respond immediately to requests for comment on restrictions on investment pools.

The move comes as financial regulators are increasing scrutiny and tightening regulation on the entrusted loan market, a rapidly growing segment of China’s shadow banking sector.

Last week, China’s banking regulator issued rules to increase regulation on commercial banks’ entrusted loans.

Entrusted loans are a form of inter-company financing in which one firm serves as the ultimate lender and records the loan assets on its balance sheet while banks act as intermediaries, for a fee.

Reporting by Xiaochong Zhang and Ryan Woo; Writing by Shu Zhang; Editing by Richard Borsuk