The world’s largest bank by assets, Beijing-based ICBC, has announced it won’t take full responsibility for a trust investment worth 3-billion yuan (£300 million) that may go bust. In other words, one of China’s ‘big four’ banks may be linked to a default on a loan pretty similar to the sort that started the Lehman crisis in 2007.
In fact, it may be worse, due to the lack of transparency. The troubled Chinese loan was sold through a trust company that belongs to the nation’s vast and opaque shadow-banking system, which offers credit to companies that might find it hard to raise money otherwise. Many of these trust loans are of the convoluted, ‘structured’ kind that sparked Lehman’s downfall and rocked the world. China’s total shadow-banking debt now equals $4.8 trillion — when you consider that Beijing now holds a record $1.3
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