Looming $500 million default to test China's banking system - Jan. 24, 2014
A high-yield investment product offered by China's largest bank is facing imminent default, an event that will cost investors millions and raise questions about the country's banking system.
The doomed 3 billion yuan ($500 million) trust -- cheerfully named Credit Equals Gold #1 Collective Trust Product -- is expected to go belly up at the end of January, the victim of a soured loan to a troubled coal mining company.
The trust, which promised investors a 10% return, was issued by China Credit Trust Company and marketed by Industrial and Commercial Bank of China, a state-owned enterprise that is among the largest and most profitable banks in the world.
Investors are now scrambling to figure out whether a bailout from the issuer, bank or government will materialize. Meanwhile, outside observers are watching to see how China handles the potential default of an investment product generated by the country's shadow banking system -- a rapidly growing but opaque part of the financial system.