(Bloomberg) -- The lines between China's financial sector and property market are getting blurrier still.
While the degree to which China's banking system is exposed to its red-hot real estate sector has long concerned analysts, a new report from CreditSights Inc. suggests a fresh link is growing. Chinese property developers such as Greenland Hong Kong Holdings Ltd., Country Garden Holdings Co., and China Evergrande Group have been bulking up their online finance businesses, offering loans and other financial products to retail investors as a way to drive revenue, diversify their business, or repay debt.
"Internet finance has become a new growth area for Chinese developers, to our surprise and concern," the analysts wrote in a recent report. "The deviation from the core real estate business and the opaque nature of internet finance worry us."
State-linked Greenland, for example, aims to grow the unit's assets under management from 5.7 billion yuan ($854 million) at the end of the first half of 2016 to 50 billion yuan by 2018, according to the research firm. Its mobile wealth management platform — Greenland Guangcai — currently has around 50,000 registered users and has sold more than 2,000 products with an average investment of around 173,000 yuan, the report said.
Other major developers such as China's Country Garden, China Evergrande, China's Oceanwide Holdings Co., are also involved in the practice, according to the research firm.
"The internet finance arms of Chinese developers are typically accounted for as 'investments' or 'other financial assets' under their respective balance sheets. But details on their business, such as the nature of investment and its size and cost, are often not available," Cheong Yin Chin, one of the report's authors, said in an interview.
Adding more trouble is a lack of regulation by the government, she added. "It's difficult to track the total [peer-to-peer] lending or the amount of leverage employed in those wealth management products because such transactions are not regulated. They fall under the category of 'shadow financing'," she said.
While internet finance is still in the early stage of development and accounts for a small portion of total assets, investors should be on the lookout for its broader market impact, she added.
"I think that investors would prefer to invest in pure Chinese developers or pure internet companies rather than a hybrid," said Cheong. "Investors are still figuring out ways to assess the potential impact of such deviation."