One of the persistent concerns about China's recent boom is
that it has been financed by excessive debt and that this debt
burden will trigger a fiscal or financial crisis. The concern is
heightened because of the explosion in credit extended by non-bank
financial institutions outside the official channels - the so
called "shadow" banking market.1
China has a long history of shadow market financing flowing from
small, informal and unregulated groups, to all sectors not well
covered by banks. A number of formally incorporated entities,
including trust companies,2 leasing and guarantee
companies, have also emerged, with the scope to provide alternate
financing .
The increase in this shadow banking has increased dramatically
over the last few years. The People's Bank of China (PBOC)
estimates the size of shadow lending at 3.38 trillion yuan or over
20% of total outstanding loans in China. A recent Bloomberg
article put that figure at 55% by the end of this year, up
