State-backed shadow funds in China are helping drive corporate valuations in the region into "nosebleed territory", according to a new report from Bain & Company.

"It's what I call corporate shadow capital," said Suvir Varma, a partner with Bain and head of the firm's Asia Pacific private equity practice. "It's these state-linked corporates in China or insurance companies that have very deep balance sheets and long-term asset-liability needs. One of the most significant increases of where the money is coming from has indeed been these shadow capital players."