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