A Chinese mining boss who threw a multimillion-dollar wedding for his daughter last year is now struggling under a pile of debts that threaten to trigger a major default in the country's shadow banking industry.

Until a few weeks ago Xing Libin was known as the wealthiest man in Liulin, a county in northern China that struck it rich over the past decade thanks to bulging coal deposits. Looking more like a tousled professor than a slick tycoon, Mr Xing acquired mining rights for what local media said was "the price of a cabbage" and built his unlisted company, Liansheng Resources Group, into a big player in the Chinese coal industry.

Mr Xing put his success on display in March 2012 at a Rmb70m ($11m) party to jointly celebrate his daughter's wedding and his company's 10th anniversary. He rented three planes to fly family and friends to the resort island of Hainan, brought in pop stars for a gala concert and assembled a fleet of six Ferraris for the wedding procession.

But since then the slowing Chinese economy and plunging price of coal have dealt a heavy blow to Liansheng and other mining companies across the country's coal belt.

On November 29, the Liulin County People's Court in Shanxi province announced it had received an application from Liansheng to restructure its operations because it was unable to pay off loans.

Figures presented by the court revealed the extent of the company's woes, according to the website of the People's Daily, the official Communist party newspaper. "Liansheng Group's financial situation is bleak," it said. "Its debts have nearly reached Rmb30bn and it has already basically lost the ability to repay its debts. Moreover, it faces multiple financial problems, including owing money for taxes, workers' pensions, project funds, materials and equipment."

Chinese regulators have long worried about debt risks in the coal industry and effectively barred banks from lending cash to miners. Yet like its peers Liansheng had little trouble finding willing lenders among China's burgeoning shadow banks, which regulators have allowed to help plug the financing gap.

From late 2011 to early 2012, Jilin Trust, one of China's vast array of non-bank financial institutions, sold to investors an investment product worth Rmb1bn backed entirely by loans to Liansheng.

Jilin Trust warned investors at the start of this month that the first tranche of the Liansheng loans were nearing maturity and that the mining company had yet to cover what is owed, according to China Business News, a local financial newspaper.

A manager with Jilin Trust confirmed to the Financial Times that it had contacted investors about the risk."This company has cash-flow problems. This credit product faces repayment difficulties," she said, adding that Liansheng had not notified it before applying for restructuring, a process that could pave the way for it to default on some debts.

Multiple calls to Liansheng went unanswered.

Trust companies in China are often very demanding in their requirements for physical assets as collateral, but the Liansheng product was backed only by third-party guarantees. Jason Bedford, a former Big Four auditor who has focused on the Chinese trust sector for the past six years, said he had never seen a product that relied exclusively on third-party guarantees.

"This is clearly very risky," he said. "If this was fully disclosed in the product prospectus and there is no evidence of mis-selling, then the loss could be passed on to investors."

Liansheng's troubles are a reminder of the thin dividing wall between China's banks and its shadow lending industry. The Liansheng loan product sold by Jilin Trust was distributed in part via China Construction Bank, the country's second-biggest lender by assets.

Banks tell customers they do not guarantee trust products, which offer returns far higher than traditional bank deposits, but buyers often ignore the warnings in the belief they carry the banks' implicit backing. The Liansheng investment product targeted an annual return of 9.8 per cent.

Additional reporting by Emma Dong