In a 52-story office tower overlooking the leafy streets of this city's embassy district, some 400 deal makers at Citic Trust Co. arrange financing for property developers, steel mills and other businesses starved for cash and shunned by China's traditional banks.
The lenders at Citic and other institutions that make up China's "shadow banks" have created the closest thing China has to the culture of Wall Street. They take risks that traditional banks won't, going so far as to create investment funds for assets like top-shelf liquor and mahogany furniture. Their top executives drive luxury cars and frequent expensive clubs.
Now, China's shadow banks—a mélange of trust companies, insurance firms, leasing companies, pawnbrokers and other informal lenders subject to limited oversight—are at the center of mounting concerns over whether the country's slowing economy could trigger a debt crisis.
In recent days, the Chinese government has moved to crack down on undisciplined lending. Chinese stocks posted their worst one-day loss in nearly four years on Monday after China's central bank released a statement signaling it was moving to contain runaway credit growth. Markets fell further in early trading Tuesday.
Read more: China's 'Shadow Banks' Fan Debt-Bubble Fears - WSJ.com
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