Because these off-book investment institutions usually borrowed from the banks, in the end commercial banks were left holding a sizeable portion of subprime and its derivative products. The Basel II banking guidelines set requirements for debtors to bring certain offbook services back on-book in a timely manner. But most banks, with the exception of those large European banks, have not yet taken these guidelines.
And the Chinese banks are currently not subject to the Basel II. As long as the banking system doesn’t get dragged into the mess, the subprime mortgage problems would only have limited impact. As far as direct investment risk is concerned, investors will have to absorb their losses, and central banks generally would not stand to provide support.