Shadow bank activities may spark crisis

The rapid growth of China's shadow banking - crossing many sectors and taking in banking, trusts, securities and insurance - may spread risks quickly from the money market to the real economy and trigger a systemic financial crisis, a report on financial regulation said.

Non-traditional financing directly involves a total of 36 trillion yuan ($5.85 trillion) of assets in China, according to a report, released on Friday, by the Institute of Finance and Banking at the Chinese Academy of Social Sciences.

Interbank business is the critical link. Once the risks with shadow banking become real problems in the interbank market, banks and other financial institutions may face a liquidity drought, bringing defaults and a credit crisis in its wake.