A big source of easy financing for Chinese companies is coming under pressure, leaving in its wake a string of corporate defaults.

Starting in 2015, China’s asset management industry became a booming centre for “shadow finance”, lending outside the formal banking sector. Banks, securities houses and trust companies were able to raise cash from wealthy investors and structure lending products through accounts at asset management companies. Loans linked to asset management companies, and structured finance products called asset management plans became hugely popular.

By the end of March, securities companies had Rmb1.99tn ($280bn) in funds linked to asset managers that had been lent out through such arrangements, according to the Asset Management Association of China.