Trouble Is Brewing in the Darkest Corner of China’s Shadow Banking

Analysts on the lookout for China’s next financial shock are training their sights on the least regulated corner of the nation’s sprawling shadow banking system, Bloomberg News reported. Their concern centers on so-called independent wealth managers, which have expanded rapidly in recent years by selling high-yield products to affluent investors. Largely untouched by a government clampdown on nearly every other form of non-bank financing, the industry has grown from obscurity into a major source of funding for cash-strapped Chinese companies. The worry now is that products arranged by independent wealth managers will face mounting losses as China’s economic slowdown deepens and corporate defaults surge. Read more

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