Skip to content
Subscriber Only

Key Part of China Shadow Banking Faces Doubling of Defaults

  • Borrowers face repayment difficulties amid business shutdown
  • Near record 5.4 trillion yuan trust products are due this year
Office Workers in Shanghai as Premier Says Most of China Is Returning to Normal
Photographer: Qilai Shen/Bloomberg
Updated on

China’s $3 trillion trust industry, a key alternative source of funds for weaker companies, risks sending shock waves through the nation’s financial system with defaults among its investment products predicted to double this year under the strains of the coronavirus outbreak.

The once fast-growing pocket of shadow banking in China has 5.4 trillion yuan ($766 billion) in trust offerings coming due this year, high-yield products backed by loans that are sold to banks, institutional investors and wealthy individuals. About 300 of these products will go into default compared with last year’s record of 118, estimated Xu Zijun, a Beijing-based senior analyst at Reality Finance Research.