Demand for private loans outside the state-owned banking system have flourished after the government raised interest rates and tightened credit rules last year. In the steel sector, cash-strapped traders have offered steel products as collateral for loans they can’t get from conventional banks. The loans are then invested in other markets. But this grey-area financing — the extent of which is hard to quantify — may have distorted the market by inflating apparent demand. And if the economy and the property market don’t improve, some fear borrowers may struggle to repay loans, triggering a heavy liquidation of steel stocks. “This bubble of radical financing is destined to break.