Concerns about shadow banking in China are overblown, the chairman of China Investment Corporation (CIC) which is responsible for managing some of the country's massive currency reserves, told CNBC.
"The issue of shadow banking in China has been exaggerated. Yes there are issues, but on the whole the financial system in China is sound," CIC chairman Ding Xuedong, told CNBC on the side lines of the St Petersburg International Economic Forum in Russia.
Shadow banking refers to how financial intermediaries create credit in ways that may be overlooked by government regulation.
Often these financial instruments are highly complicated and unregulated and the growth of their use in China in recent years has raised concerns about the financial risks facing the world's number two economy.
"The shadow banking over there is potentially 2007 all over again if things don't go properly," Art Cashin, director of floor operations at UBS, told CNBC Thursday.
Ding said shadow banking in China should be looked at from two perspectives.
"First some of the wealth management products are designed to provide returns to the clients on market driven rates. These are normal wealth management products," he said.
"But when you look at the other side, there are some wealth management products that were meant to circumvent normal or proper regulation and they may cause risks to the banking sector as well as China's economy as whole," Ding added. "When you look at these two perspectives, you'll see that the shadow banking issue in China is not as serious as feared. Also, the central bank has taken measures to tackle the issue."