Strains Emerge in China’s $3 Trillion Financing Market

Risky borrowers are running into trouble in China and that is putting pressure on trust companies, an important corner of the country’s shadow-banking system, The Wall Street Journal reported. The fear is that this could further reduce the credit available for private businesses, acting as a drag on an economy whose growth is already slowing. Lightly regulated trust companies have been critical lenders for these firms, as traditional banks deal mostly with favored state-owned enterprises. These problems could also bounce back on many small investors. As of March, there were 68 trust companies with 22.5 trillion yuan ($3.3 trillion) of assets, including loans equivalent to 2.9% of China’s total banking assets, according to data from the China Trustee Association and Moody’s Investors Service. Trust companies generally lend to finance projects like building apartments, factories or highways. Read more

Location