That deal eased "concerns that default would pound investor confidence in shadow banking and trigger credit crunches," Xinhua said.
Defaults, we might suppose, aren't so bad. There's always a way out of the shadow.
They're also rare compared to the amount of lending in China. In 2012 just 0.27% of trust products faced "repayment difficulties," the Mingtiandi real estate newsletter says on its Web site this month, citing data from the China Trustee Association.
Lending grew an unusually fast 18% in January, UBS Bank notes in a Feb. 17 report. Assets in China's trust industry went up 46% last year to $1.8 trillion, Mingtiandi says. These numbers don't depict much fear.China's tough talk about cleaner shadow banking could hit liquidity again as it did in mid-2013 and last month. But the government knows its economy -- still led by manufacturing and infrastructure despite endless gab about reforms -- needs investment, meaning new loans. Given government support for loan-driven investment, any central bank squeezes are likely to be episodic rather than routine or long term. The biggest risk may be volatility, not a sinking of the markets. "We are...more concerned about credit volatility triggered by renewed bouts of liquidity squeezes, a tightening of shadow credit regulations, or more importantly, any potential credit defaults in the shadow credit market that could lead to a temporary shrinkage of certain credit markets," the UBS report says. At the time of publication the author had no position in any of the stocks mentioned. Follow @laowiseass This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.