China's Shadow Banks

Ye Sheng, who runs a luggage parts-manufacturing company in China's eastern Zhejiang province, is an unlikely looking banker. He doesn't wear three-piece suits, and his place of business rings with the shouts and banter of hundreds of workers who screw steel wheels to the bottom of satchels bound for department stores in South Korea. But Ye is a moneylender all the same. To keep his company in cash, he has taken in $10,000 in deposits from family and friends. He pays them interest, uses their money as working capital, and occasionally he extends loans to other private companies. "I give better...