China’s campaign to reduce risks in its financial sector has shown positive results in the first quarter of 2018, according to international ratings agency Moody’s.

“We are noticing slowing asset growth and stabilizing asset quality, as well as accelerating loan growth as banks are returning to conventional lending and away from shadow banking activities,” Nicholas Zhu, senior analyst and vice president at Moody’s, was quoted as saying by Chinese state media arm Xinhua.

“Looking ahead, we expect the regulators will maintain a cautious approach in order to alleviate any potential disruption to the real economy from the clampdown on shadow banking and interbank activities,” Zhu added.

China’s banking sector saw its total assets reach RMB256 trillion (US$38.7 trillion) by the end of the first quarter, growing 7.4% year-on-year, data from the China Banking and Insurance Regulatory Commission showed. This was slower than the 14.3% growth in the previous year.

Chinese authorities have instituted tighter regulations on the financial sector, having named prevention of risks in the financial industry as one of the “three tough battles” it aims to win in the next three years.

The ountry’s insurance sector has been a battleground in Beijing’s campaign to clean up its financial markets. The government recently took over controversial insurer Anbang after a major financial scandal which led to the arrest and conviction of its chairman.

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