Government Intervention Stops Chinese Defaults

Despite starting the year with dire predictions that China faced a slew of defaults, few mainland borrowers have welshed on their debts, thanks to various stripes of government intervention.

“The central government earlier this year issued a decree saying [local governments] need to focus on preventing financial or regional systemic risk,” Donna Kwok, senior China economist at UBS, told CNBC. “Local governments have taken this to heart,” stepping up intervention either by directly or indirectly bailing companies out or actively mediating between corporates and banks, Kwok said

China’s debt levels – which soared to 250 percent of gross domestic product (GDP) according to some estimates – have been a major concern for investors for years, spurring fears that the surge in borrowing is fueling a dangerous property bubble and overcapacity in many industries, including steel, mining and solar energy, any of which could face collapse as the economy slows and Beijing tries to choke off overinvestment.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza