(Bloomberg) -- China’s regulators took a softer stance than expected as they tightened rules around the $15 trillion asset management industry, underscoring the balancing act between deleveraging the financial system and slowing an economy already facing challenges.

The People’s Bank of China released guidelines late Friday aimed at asset management products, soon after the banking and securities regulators published their own rules on specific wealth products. The regulations, aimed at shrinking China’s sprawling shadow-banking system, were less severe than industry participants and observers had feared, a recognition by policy makers of economic strains that have emerged in recent months.

“While maintaining the overall direction of earlier policy proposals, the new changes mostly represent a more flexible way to manage these products and hence a more dovish policy stance,” Goldman Sachs Group Inc. economist Song Yu wrote in a note published Monday. “The key uncertainty remaining is how the regulators ‘window guide’ financial institutions with these sets of documents.”

China is experiencing the most severe convergence of negative economic and financial events since the botched yuan devaluation of 2015. Stocks tumbled into a bear market last month, the yuan has seen six weeks of declines and corporate defaults are running at an all-time high. The deleveraging campaign has left weaker borrowers such as private small firms and local government financing vehicles scrambling for funds.

Banking shares were seeing mixed trading in Shanghai and Hong Kong on Monday after rallying on Friday on expectation of policy easing.

A central bank adviser said early this month that China will try to avoid a “one-size-fits-all” policy as it tries to contain the nation’s swelling debt, sending another signal that the government is fine-tuning its deleveraging efforts.

China’s shadow-banking sector saw the biggest net monthly drop on record in June, according to Bloomberg calculations based on the central bank’s data, weighing on the supply of new credit to the real economy.

Among key points in PBOC’s guidelines:

During the grace period, financial institutions must decide on a plan in an orderly and independently manner; to implement the plan upon confirmation by regulatory authoritiesThe latest measures will give banks more flexibility and liquidity to tackle off-balance sheet exposure at their own pace, Credit Suisse Group AG financial analysts wrote in a note published Monday.

“It doesn’t change the regulator’s target to rectify most asset management products under the new guideline by end-2020, and we do not expect this to provide much relief to bank’s wealth management fee income, which we expect to remain subdued in 2018,” they wrote.

--With assistance from Will Davies.

To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net;Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Russell Ward

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