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Of course, although a smaller starting scale does have its advantages, any benefits will be rapidly eroded if growth continues to exceed expectations. Since 2008, China's overall debt has leaped by more than 70 percent of GDP, just under half of which was driven by shadow bank lending. The growth of China's shadow banking currently ranks fastest in the world. For now, though, the size remains manageable.

The second reason is the lack of leverage and securitization and mark-to-market mechanism in China's shadow banking system. Trust companies, corporate bond issuers and other shadow banking players in China are not highly leveraged. They also have almost no securitization, limiting the impact that any default would have on the entire financial system. Moreover, their underlying assets are mostly loans.

In the event that a cluster of defaults triggers a mass unwinding of shadow credit, assets that Chinese banks may be forced to bring back onto their balance sheets would largely be loan assets, which are simpler and more straightforward to "re-intermediate" than the structures that US banks had to deal with. Although China's banks may still suffer sizable losses, they can choose to record higher nonperforming loans over a longer period of time. Moreover, the absence of "mark-to-market" pressures on complex derivative positions should prevent a "wildfire" magnification of their losses.

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