China's Looming Financial Crisis: Shadow Banking, Property Crisis, and Debt Bomb Threaten Economy
China's shadow-banking industry, particularly the trust industry, is facing significant challenges as weak economic growth and a wave of defaults in the property sector threaten the financial system. Xinhua Trust, the first Chinese trust to go bankrupt in over two decades, is selling its assets at discounted prices, signaling the troubles faced by the industry. Zhongrong, one of China's largest trusts, has also missed payments to clients, raising concerns of further collapses and economic problems. The interconnectedness between trusts, local governments, developers, and larger financial firms has spooked investors and contributed to the poor performance of the Chinese stock market. Policymakers are aware of the risks and have implemented regulatory measures, but the extent of the industry's connections and challenges may pose difficulties in resolving the situation.