China Banks Show Too-Connected-to-Fail Link to Loans

Du Ronghai received an urgent phone call from his private banker at Industrial & Commercial Bank of China Ltd. about an investment opportunity promising a 10 percent annual return. Only for the privileged few, he was told.

Du, who owns an apparel manufacturer in southern China, said he hopped on a plane the next morning for a four-hour flight from his home city of Harbin. That afternoon, at an ICBC office in Guangzhou, he looked at the sales contract he was required to read in person and invested 3 million yuan ($488,000), his first foray into the high-yield world of shadow banking. The employee kept telling him the product, called a trust, was so good that bank staff were pooling money to buy it, he said.