BRISBANE, Australia - China's economy is going through a "period of pain" as authorities try to shift it towards slower, more sustainable growth, with the rapid expansion of its shadow banking sector a major problem, the vice finance minister said on Saturday.
"We do have problems that have been accumulating over time," Vice Finance Minister Zhu Guangyao told reporters at the G20 Leaders Summit in Australia.
Zhu reiterated President Xi Jinping's catchphrase of a "new normal" for the Chinese economy, saying it would be "running at relatively high speed instead of super high speed."
"We are changing gear and our economic structure is undergoing a period of pain and a period where we are absorbing the large-scale stimulus packages we rolled out earlier," he said.
The IMF expects global growth of 3.3 per cent this year, with China growing 7.4 per cent and the United States 2.2 per cent. That would still be China's slowest growth in 24 years.
Zhu said shadow banking, a term that broadly refers to a variety of lending that does not appear on bank balance sheets, and overcapacity in the parts of the economy were some of the major problems facing China.
"The main problem of shadow banking is the offshoot business of the banks, and it's mainly about the trust funds that they run," Zhu said.
The Financial Stability Board said in a recent report that China's shadow banking sector grew rapidly in 2013 and was now the third largest in the world.
Zhu said the size of the shadow banking sector compared with the total financial volume of the world's second-largest economy"is not that great, but the biggest risk here is that growth is very rapid."
Beijing has been trying to rein in the riskier elements of shadow banking without shutting down the flow of money to smaller businesses that need funding.
Figures on Friday showed bank lending tumbled in October and money supply growth cooled, raising fears of a sharper economic slowdown and prompting calls for more stimulus measures, including cutting interest rates.
Zhu said the global economy recovery was too slow and unbalanced, and also called on the United States to ratify a much-delayed IMF quota and governance reform package. "We also really hope to see that our partners in Europe, in Japan... will restore a relatively high growth rate," he said.