China's Trophy Hunting Crackdown Won't Deter the Shadow Bankers

China’s new restrictions on companies buying foreign assets is designed to curb risk in the $40 trillion financial system. But debt raised for outbound investment is just one piece of the hefty pie that makes up the country’s leverage challenge.

While offshore investment by Chinese companies has fallen in 2017, shadow financing -- one of the biggest sources of banking debt -- remains elevated despite moves by the authorities this year to rein it in. The largely unregulated sector has swelled as investors thwarted from moving money overseas due to capital controls seek out higher returns.