Chinese Economy to Suffer From Shadow Banking Squeeze : SocGen

        0642 GMT [Dow Jones] Societe Generale is pleased that Beijing hasn't flinched from financial sector reform in the face of economic slowdown in China, but measures aimed at reining in shadow financing will hurt growth anyway, the bank says. "This should pay off slowly but surely," SocGen says. "However, we think that the net impact of the reforms and regulations announced so far is more likely to be negative for economic growth in the near term, given the significant contribution of shadow banking to total credit growth." China needs both more equity financing and more bond sales, SocGen says, adding that expanding local government bonds should be a priority to deepen capital markets while reducing reliance on shadow finance in one go. Total social financing, the broadest measure of credit creation that includes shadow finance, fell 25.9% to CNY1.55 trillion in April. (gregor.hunter@wsj.com; Twitter: @gregorhunter)
        (END) Dow Jones Newswires

        May 29, 2014 02:42 ET (06:42 GMT)