If you dont understand what it means is, in china they have always bailed out people who cant pay their debts to banks which makes their banks run in a 100% risk free world.
So what they did in the shadow banking system was they sold investors WMP (Wealth Management Products) and with that money they gurantee to pay high interest back, then they just lend this money to anyone with any hair brained scheme or high risk loans at high interest rates. They didnt care if the borrower couldn't pay it back because the gov would just flip the bill.
This is exactly the same as subprime in the US, expect with subprime they didnt care if they could pay it back or not as they sold it on after to someone else.
What the Chinese gov has just said today is, NO, we are not going to pay out your customers defaults to the banks.
This means the banks now ware the risk, like any normal bank.
So the banks are now going to be madly going through their loan books panicking about all their dodgy lending practices over the past 5 y ears that are coming home to roost.
This is really bad for Australian property and chinese investors
