We perform transaction-level analyses of an increasingly important type of shadow banking in China-entrusted loans.Using a sample of listed firms that are subject to mandatory disclosure requirement for this type of activity,we examine the lender,borrower and loan characteristics.We find entrusted loans increase when the official credit is tight and therefore are a market solution to credit shortage.Lenders either pursue short-run profits(when making non-affiliated loans)or support affiliated parties(when making affiliated loans).Although the two types of loans differ significantly in their average interest rate levels,the pricing of both incorporates fundamental and informational risks.Moreover,the pricing of loans can predict future loan performance.