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China is the world's second-largest economy, a simple fact that underscores the importance of its financial health to investors worldwide.
And unfortunately, thanks to China's subprime crisis, it's not doing as well as we're led to believe.
The Chinese stock market has fallen to levels unseen since the 2009 global financial crisis, and short-term interest rates have reached as high as 25%.
We've been told by the mainstream financial press the Chinese economic crisis is being caused by shadow banking.
The term has been demonized by reporters outside China. But that's not the whole story. In fact, there is a valid reason for shadow banking to thrive in China:
"Chinese banks are mostly state-owned, and they rarely lend money to the private sector. Thus, there has always been strong demand for financing outside of official banking circles," says Money Morning Global Investing & Income Strategist Robert Hsu.