China's shadow banking industry may soon enter the limelight, after lending through official channels fell to a record low, signaling potential problems ahead. New yuan loans dropped 14% last month year over year, according to a recent report on Bloomberg News.
Many analysts are concerned that this decline underscores the inability of official loan data to capture the scale of China's debt markets. And, at least one analyst warned that the country is "a step closer to a potential credit event in the shadow banking sector".
The iShares FTSE/Xinhua China 25 Index (NYSE: FXI) is trading up 1.23% in early trading and remains 17% higher over the past three months.