first piece of news for the week: First tremor feared in China shadow banking system

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An honorable member of the Coffee Shop Has Just Posted the Following:

http://english.caijing.com.cn/2014-01-17/113833115.html

Repayment of the 3-billion yuan ($496 million) product sold through the Industrial and Commercial Bank of China, the world's largest lender by assets, will probably be simply delayed.
A Chinese trust company warned investors that it may not repay investors of a high-yield product when it matures on January 31, state media said, promoting speculations whether it would become the precedent-setting first default of a shadow banking loan.
Repayment of the 3-billion yuan ($496 million) product sold through the Industrial and Commercial Bank of China, the world's largest lender by assets, will probably be simply delayed to avoid any possible contagion risks, reported by the China Securities Journal, quoting analysts.
The trust company said it is considering legal action to press related parties for repayment to protect investors’ interests, according to the report. It added that it has "communicated positively" with some investors, who said they would like to cooperate with the firm in defusing risks of a default.
ICBC, which marketed the product without providing any formal guarantee against default, said on Thursday it will not use its own money to repay investors of the product issued by China Credit Trust Co Ltd. The lender will have not bear the "major responsibility" to repay investors under agreements signed with the trust firm, say experts, although some expect the bank will eventually should the bulk of the shock, according to the Guangzhou Daily.
China has not suffered a large-scale public default as yet because local governments and state banks have stepped in with bail outs. A default, if occurs, will shatter assumptions of state guarantee of products even sold through a murky shadow banking system like this one. Investors, therefore, are watching closely how the case will be resolved.
ICBC's governor Jiang Jianqing, deputy governor Luo Xi and executives at the China Credit Trust had reportedly been in Shanxi, where the product was issued, trying to work out a solution with the local government.
China Credit Trust issued the product in 2010, raising a total of 3.03 billion yuan as of March of 2011. The money was then invested in equity in Shanxi Zhenfu Energy Group. Alarm bells rang, however, over the trust loan when a vice chairman of the coal company was arrested for accepting deposits without a banking license.


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