Default Waves Emerge as China's 'Shadow Banking' Sector Grapples with Crisis

Abstract

An escalating crisis within China's "shadow banking" domain looms as a potent threat, potentially exacerbating the challenges an already beleaguered economy is facing. Interestingly, a fresh report has cast doubt on the efficacy of Beijing's government to intervene effectively using fiscal stimulus. Recent coverage by Bloomberg News, dated Wednesday, has illuminated that Chinese authorities have sought the expertise of Citic Trust Co., a subsidiary of the state-owned China Construction Bank, to undertake an evaluation of Zhongrong International Trust Co.'s current state. When Citic was tasked with a similar assessment for a prominent asset management entity in 2021, the subsequent outcome involved a substantial bailout package designed to avert the firm's collapse.