20/11/18

"A Daisy Chain Of Defaults": How Debt Cross-Guarantees Could Spark China's Next Crisis



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"A Daisy Chain Of Defaults": How Debt Cross-Guarantees Could Spark China's Next Crisis
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On November 8, China shocked markets with its latest targeted stimulus in the form of an "unprecedented" lending directive ordering large banks to issue loans to private companies to at least one-third of new corporate lending. The announcement sparked a new round of investor concerns about what is being unsaid about China's opaque, private enterprises, raising prospects of a fresh spike in bad assets.

A few days later, Beijing unveiled another unpleasant surprise, when the PBOC announced that Total Social Financing - China's broadest credit aggregate - has collapsed from 2.2 trillion yuan in September to a tiny 729 billion in October, missing expectations of a the smallest monthly increase since October 2014.

Some speculated that the reason for the ....

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