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High-risk ‘shadow’ credit in China put at $2.9 trillion by IMF 

August 15, 2016

Gulf News

Hong Kong: International Monetary Fund staff said that 19 trillion yuan (Dh10.5 trillion, $2.9 trillion) of Chinese “shadow” credit products are high-risk compared with corporate loans and highlighted the danger that defaults could lead to liquidity shocks.

The investment products are structured by the likes of trust and securities companies and based on equities or on debt - typically loans - that isn’t traded, staff members John Caparusso and Kai Yan said in a report released Friday.

The commentary highlighted the potential for risks bigger to the nation’s financial stability than from companies’ loan defaults. While loan losses can be realised gradually, defaults on the shadow products could trigger risk aversion that’s harder to manage, the report said.

The “high-risk” products offer yields of 11 per cent to 14 per cent, compared with 6 per cent on loans and 3 per cent to 4 per cent on bonds, the commentary said. The lowest-quality of these products are based on “non-standard credit assets,” typically loans, it said. Read more

 
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