Letters of credit (L/Cs) have not been included in China'supgraded tool for monitoring economy-wide financing flows.

Analysts and ratings agencies had hoped that L/Cs would be included in the tool that aims to track and strengthen regulations for non-bank sources of finance, which is otherwise known as shadow banking.

Banking concerns

The People's Bank of China started its total social financing (TSF) measures in 2011 and now says that it will do so on a regional basis.

The TSF index responds to concerns expressed that companies were obtaining funding from shadow banking channels, and thereby could be bypassing China's strict bank loan quotas.

Concerns in this respect have been raised about financial instruments such as L/Cs, trust loans and bankers' acceptances.

Adjusted figures

Ratings agency Fitch is one of several observers of China's financial system who think that the new regional measures in the TSF do not go far enough.

Fitch publishes what it calls adjusted TSF figures. These include measures not taken into account in the official data, including L/Cs and some trust loans.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.