Into the shadows: risky business, global threat

This is more of a Western banking problem than a China issue, because if it tips over, we go with it.



The first of an FT series investigates China’s precarious shadow banking system

Financial Times
By Jamil Anderlini
15 June 2014

From the window of his office, Qiao Jingshan can look out across downtown Yuncheng and see signs of new construction everywhere. Half-built or empty apartment complexes are scattered across the cityscape bearing names like “Eastar Upward”, “Golden Riverside” or “Stars and River Mansion”.

As chief accountant for Yuncheng City Investment, a financing vehicle for the local government, Mr Qiao has played a crucial role in the development of this gritty steelmaking city in central China. His latest job is to sell his company’s “trust product” – a high-interest, deposit-like investment – with the proceeds going to a big public heating project for Yuncheng.

Despite paying a tempting 9.7 per cent annual interest rate, his product, marketed as “Eternal Trust Number 37”, is not catching on with investors. Mr Qiao is worried.

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