One Hong Kong-based hedge fund has accumulated the prospectuses of no fewer than 250 of the trust companies that sit at the heart of the Chinese shadow banking system. These contain virtually no disclosure except on the value of the real estate that backs loans whether committed or proposed.

In some ways China resembles Japan in the early to mid-nineties or the US in 2007-08 on the eve of their respective financial crises, both triggered by overvalued property. It is not only that property companies are huge borrowers (in the case of China both domestically and in the offshore US dollar high-yield bond market). It is that many other borrowers in China can take out loans only if they have property to serve as collateral.

The combination of a weak property market and record leverage among corporates has become one of the main concerns of investors in Chinese shares and debt. Rising leverage, much of it involuntary as sales and cash flows weaken across a host of sectors, will at some point lead to rising non-performing loans at both banks and non-banks, limiting their ability to provide credit in the future. In the context of China, nobody knows whether that is a good or a bad thing, given the excess capacity in sectors from cement and coal to ships and steel.