Shadow banking, among the biggest hurdles to restoring confidence in China's banking system, likely could be resolved by increasing the availability of loans for smaller businesses, the vice chairman of Minsheng Banking told CNBC.
"For these smaller businesses, they have a lot of financial demands in asking for loans. However, the banks cannot satisfy their demand. Therefore, this drives shadow banking," said Liu Yonghao, Minsheng Banking's vice chairman and holder of an around 7 percent stake in the bank.
"How can we help these smaller businesses so that they are able to make loans? How do we provide financial services for these smaller businesses through our financial and banking system," he said. "If we fix this, then we can fix shadow banking."
The size of China's shadow banking sector has stoked concerns over the stability of its financial system as it isn't clear how much of the debt can be repaid. Around $600 billion-$900 billion of trust loans are set to be rolled over this year.