Shadow banking may have hit $3 trillion

China's shadow banking products might have reached 21 trillion yuan ($3.38 trillion) at the end of last year, or 39 percent of 2012 GDP, Moody's Investors Service Hong Kong Ltd said on Monday.

On top of this, they could have expanded by 75 percent over the past two years, a report by the global rating company said.

"The opacity associated with shadow banking products and the threat of loss and contagion outweigh their potential benefits in terms of diverting riskier borrowers from the formal banking system," it said.

The shadow banking activities have expanded into wealth management products and the bank lending to companies and individuals.

Moody's said the latest regulatory steps to tighten controls and restrict the growth of shadow banking was a positive development.

But the system still lacks transparency, which means potentially higher risks for economic growth, the report said.

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