China's shadow banking assets will continue to drop as regulators in the country increase focus on containing systemic risks in the financial sector, according to a report from Moody's Investors Service.

"The ratio of shadow banking assets as a share of China's nominal GDP at the end of 2020 reached the lowest level since 2013," said Lillian Li, a Moody's Vice President and Senior Credit Officer.

Trust lending and asset management led the decline in shadow banking assets, said the report.

Trusts will continue to shift away from the real estate and infrastructure sector next year as Chinese authorities will strictly monitor the financing channel to curb speculative housing purchases and limit developers' leverage, according to forecasts from the Moody's.