China’s shadow banking could lead to losses of $375 billion, according to CLSA Ltd. estimates of likely levels of bad debt.

The brokerage estimated the potential bad debt ratio for “bank-related shadow financing” at 16.4 percent, or 4.2 trillion yuan, in a report released to the media in Hong Kong on Tuesday. Assuming a 40 percent recovery rate left a potential loss of 2.5 trillion yuan.