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Shadow Banking Could Derail China's Economy Print E-mail
by Tom McGregor    Tue, Jan 28, 2014, 12:16 AM

BEIJING: As more and more wealthy Chinese are floonding their cash into questionable banking investments, a default on those investments may pop the economic bubble of China.

China Radio International reports that, "Shadow banking has expanded rapidly in recent years. For instance, trust assets surged to about 10 trillion yuan by the third quarter last year, up 60 percent on the previous year. Chinese banks are only allowed to offer official rates to depositors, and those rates are flat with inflation, which has left Chinese savers ready to turn to other investments."

Experts anticipate that more Chinese investors will withdraw their investments from shadow banking, which could spark a series of defaults.

According to China Radio International, "Banks are banned from lending money to industries with overcapacity or local government financing vehicles. When borrowers from these categories knock on a bank's door for money, they will be offered a high interest loan from other funding channels. The money is often raised through banks' networks."

Chinese investors are losing confidence in shadow banking.

To read the entire article from China Radio International, link here:

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