A raft of new regulations has managed to curb asset growth among China’s banks. The proportion of interbank assets (loans to and from other banks) has fallen, as have non-performing loan ratios, PwC said in a note about the country.

The firm examines 2017 full-year financial results of the 34 A- and/or H-share listed banks that had reported by 24 April. The banks fall into three categories in terms of size and scope: six large commercial banks, eight joint-stock commercial banks and 20 city commercial and rural commercial banks. The large commercial banks include the likes of , which offer services including private banking.

Recent years have seen moves by authorities to clamp down on the so-called shadow banking system. Complex investment vehicles have sprouted as a result of how financial players sought loopholes and gaps in new controls on the banking system, a process also driven by demand for high-yield investment products. Policymakers in the Communist country fear this relatively opaque sector could be a fault-line in any future financial crisis. Last year, the International Monetary Fund fired a warning about practices in the country's banking sector.

“The China Banking Regulatory Commission launched a crackdown on irregularities and misconduct at the start of 2017, focussing on interbank lending and wealth management products in particular,” Jimmy Leung, PwC China Financial Services Leader, said.

“Regulators required banks to ensure a stable source of liabilities. So we saw a reduction in listed banks’ interbank assets, which we expect to continue as we move through 2018,” Leung continued.

PwC said all three bank categories recorded slower growth of total assets in 2017. Total assets for the six large commercial banks amounted to RMB106.78 trillion, up 7.33 per cent year on year – down slightly from 11.01 per cent growth in 2016. The joint-stock commercial banks’ total assets increased by 3.29 per cent - sharply lower than the previous year’s 18.51 per cent. For the 20 city and rural commercial banks, asset growth nearly halved from 23.02 per cent in 2016 to 12.13 per cent in 2017.

The Chinese government raised the issue of cleaning up practices and eliminating shadow banking at the recent 19th National Congress and other forums.

The banks’ annual reports show that this battle against shadow banking had a particularly pronounced impact on joint-stock and city and rural commercial Banks. At the end of 2017, the JSCBs had total liabilities of RMB 33.18 trillion, by 2.5 on a year ago and a far slower rise than the 18.66 per cent rate in 2016. Total liabilities of the 20 CRCBs also grew more slowly – by 11.33 per cent to RMB 11.92 tr.

“Looking ahead into 2018, we can see that the measures taken to reduce risk are also reducing the problem of idle funds in banks,” Leung said. “Banks are now more focussed on serving the real economy. At the same time, new regulations will push up compliance costs and rising interest rates will affect the cost of capital. We envisage that certain banks will be able to benefit from the new rules on provisions, while others may need to boost their capacity to manage credit risk and to focus on improving profitability and capital adequacy," he added.

The 34 banks that are covered:

Large Commercial Banks
Industrial and Commercial Bank of China
China Construction Bank
Agricultural Bank of China
Bank of China
Bank of Communications
Postal Savings Bank of China
        
Joint-Stock Commercial Banks
China Merchants Bank  
Industrial Bank of China
Minsheng Bank of China
China CITIC Bank  
China Everbright Bank
Ping An Bank
Hua Xia Bank
China Zheshang Bank

City & Rural Commercial Banks
Bank of Shanghai
Bank of Jiangsu
Bank of Ningbo
Shengjing Bank
Huishang Bank
Bank of Jinzhou
Bank of Tianjin
Harbin Bank
Zhongyuan Bank
Zhengzhou Bank
Bank of Chongqing
Bank of Qingdao
Bank of Gansu

Chongqing Rural Commercial Bank
Guangzhou Rural Commercial Bank
Jiutai Rural Commercial Bank
Changshu Rural Commercial Bank
Wuxi Rural Commercial Bank  
Jiangyin Rural Commercial Bank
Zhangjiagang Rural Commercial Bank