FXStreet (Delhi) – Zhi Ming Zhang, Head of China Research at HSBC, suggests that credit stress in China is rising especially amongst industrial sectors that suffer from overcapacity and output price deflation.
Key Quotes
“2016 will see a continued rise in credit stress especially amongst the traditional industrial players, led by State-Owned-Enterprises (SOEs). There is a risk that a rise in defaults amongst these issuers has the potential to have wider implications.”
“Given, however, that borrowers are heavily concentrated at the provincial level of local government, Beijing should have quite strong direct control over potential defaults. So, whilst we believe a credit-led risk scenario is a significant tail risk, it is a low likelihood event, to which we attribute a less than 5% probability.”
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