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Actionable news in YIN: Yintech Investment Holdings Ltd,

China's Veiled Loans May Prove Lethal

Credit is a risky business, but loans that dare not speak their name? They are possibly even more dangerous, as China is about to find out.

As many as 15 publicly traded Chinese lenders, large and small, report roughly $500 billion of such debt between them, which they hold not as loans but as receivables from shadow banking products. While the traditional credit business of these banks is 16 times bigger, receivables have jumped sixfold in three years. Explosive growth of this type usually ends badly. It's hard to see why it'll be different for the People's Republic.

Before they can brace themselves -- or embrace the risk, if they think the rewards are worth it -- equity investors need to know where to look. Flitting from one explanatory note to another in dense annual reports isn't everybody's idea of a day well spent. But the effort may be worth it. For instance, page 184 of Agricultural Bank's 2015 annual report informs us that the bank has 557 billion yuan ($85 billion) worth of assets tied in "debt instruments classified as receivables." On page 245, we further learn that most of this is old hat, and the only fast-growing portion is an...