BEIJING China's crackdown on risky lending has driven borrowers into an even darker place in their search for capital - underground banking.
The domain of loan sharks, underground lending is the least regulated area of China's shadow banking, or non-banking, sector and for some it is seen as the biggest risk to China's financial stability.
It connects China's army of wealthy savers with mostly small borrowers unable to access normal lending and who can end up paying exorbitant annual interest rates of 100 percent or more.
At 8 percent of China's $9.4 trillion economy, according to IMF estimates, it is a surprisingly large niche.
As China intensifies its efforts to discipline risky lenders and calm exuberant credit growth, financial stress is building in the country and underground debt is becoming one of the biggest banking risks.
Analysts say the underground market is most vulnerable to worrying spikes in unpaid loans, especially since its borrowers are often small-time exporters hardest hit when the economy stutters.
"You may see a high frequency of defaults," said Qiang Liao, an analyst at Standard & Poor's in Beijing. "The borrowers are more vulnerable to an adverse economic environment."
The risk is that a major default of an underground loan could trigger a domino effect threatening the wider financial system.
Such dangers were highlighted this month when an investment trust teetered on the verge of a default after raising funds to make a loan to a struggling coal company, which had also borrowed from loan sharks. The coal company has collapsed amid falling coal prices, with the high rates on its underground loans contributing to its downfall.
Among anecdotal evidence of the growth in loan sharking, media reports said Inner Mongolia saw an "explosion" in the number of court disputes over underground loans last year at over 43,000.
In Jiangsu in south China, businesswoman Gu Chunfang was sentenced in October to effective life in prison for illegally amassing 1.8 billion yuan with promises of annual returns of 40 percent. Some of the money was invested in coal mines.
"When I look at the figures for the money I've borrowed, I feel uncomfortable and pressured, so I rather not look," Gu was quoted by the International Finance News as saying, when she explained why she had stopped keeping accounts.
Gu was undergoing plastic surgery on her face to alter her looks and evade the police when she was arrested, the paper said.
FAST LIFE AND FAST CARS
Analysts believe the underground market, which most estimate is worth around 3 trillion yuan to 4 trillion yuan, is one of the major sources of funding for shadow banks.
But any assessment of what underground lenders get up to are intelligent guesses at best. Information is hard to come by and how much money is involved is not really known. Likewise, where the cash goes after it is raised is also not clear.
When China tightened credit controls in 2011, the sector was thrust under the spotlight after dozens of company bosses from Wenzhou city, known for its private enterprise, fled town to avoid repaying their underground loans.
Wu Ying, probably China's best known underground lender who was jailed for life in 2012 for cheating investors of 380 million yuan by offering returns as high as 180 percent, was said to have invested in over 700 shops and 20 cars, including four BMWs and a Ferrari.
"Informal lenders are the least transparent of the actors in China's shadow banking system," the IMF said in a report in October 2012, adding that they challenge financial stability.
The spotlight has been on loan sharks previously. More than 10,000 people reportedly blocked a train station in central Hunan province in 2008 after a local loan shark scheme lost some 620 million yuan of their cash.
China's overall debt has ballooned in recent years. The ratio of total debt-to-GDP, including government, corporate and household debt, was set to reach 218 percent of GDP by the end of 2013, up 87 percentage points since 2008, rating agency Fitch estimated last year.
China's efforts to bring the growth under greater control ironically quickened the rise of shadow banks, which thrive on the thirst for cash and a desire among savers for sterling returns.
With China's one-year deposit rates at 3 percent and scarcely above annual inflation, many savers succumb to the promise of fat investment returns.
Estimated by Standard & Poor's to account for $3.7 trillion of lending, or a third of all bank loans, the growing might of shadow banks has raised fears that they might imperil China's financial stability with their looser lending standards, especially at a time when years of breakneck economic growth is coming to an end.
"They help people to increase their leverage to unsustainable levels at a time when their businesses are going down," said Christine Kuo, a senior credit officer at Moody's.
Qinghai Sunshiny Mining Co Ltd knows how fatal steep rates can be. It turned to loan sharks after it was blacklisted by banks in 2005 and owed 119 creditors 13.2 billion yuan as of September, local media said.
Rates on some of the loans were 120 percent, or 314 percent if interest was compounded, and Qinghai Sunshiny has since gone bust.
(Reporting by Koh Gui Qing; Additional reporting by Shao Xiaoyi in BEIJING and Shanghai Newsroom)