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Weakness persists into August

The evidence suggests that much of the weakness seen in July continued throughout August. Though there are some signs of life in the real estate sector, we continue to believe that, without substantial government action, a significant uptick in growth remains unlikely.

11 September 2014

Developer financing risks mount

1H14 financial results for China’s largest developers reveal faster debt accumulation, declining profit margins and rising inventories, suggesting that real estate sector risks are starting to rise.

10 September 2014

Further trust slowdown ratchets up the pressure

Trust issuance has continued to slow as the value of maturing trusts are rising dramatically, increasing potential default risks. To date, however, policymakers remain reluctant to countenance infrastructure trust defaults, with defaults most likely to occur within the energy and mining sectors.

28 August 2014

Shadow finance slowdown intensifies

Our latest analysis of official and industry data highlights the slowdown in shadow financing seen since the middle of 2013, a trend that is raising default risks across a number of key sectors of the economy.

19 June 2014

Slowing sales pose big risks for developers

Our analysis suggests that the current slowdown in home sales, rather than the slowdown in shadow bank lending, represents the largest risk to property developers’ finances.

05 June 2014

Local government debt risks mount

Our latest analysis of local government finances shows that local governments are finding it harder and more costly to access financing. Revenue is slowing, while a large amount of existing debt is coming due, making defaults by a number of local government financing vehicles increasingly likely.

05 June 2014

China permits first municipal bonds

China’s Ministry of Finance has announced that ten provinces and municipalities will be allowed to issue municipal bonds with immediate effect, in line with our predictions. The move underscores the fact that ‘stimulus’ measures implemented by Beijing will likely be within the parameters of reform, with the announced boost to infrastructure investment to be funded through funding reforms, rather than monetary loosening.

21 May 2014

Local government debt: a larger and more dangerous time bomb

We continue to believe that Beijing retains the policy options to avert a local government debt crisis, but it will be harder for the authorities to prevent one in 2014 than in 2013 or 2012.

16 January 2014

China sees “reasonable” growth in 2014, targets government debt

China pledged at the end of a key conference in Beijing today to achieve “reasonable” economic growth in 2014 while pushing forward reforms to control local government debt and combat industrial overcapacity. We think that 7% is the most likely official target for GDP growth next year, a rate of expansion that could accommodate a forceful reform drive that may be directed particularly at industrial overcapacity and debt-ridden local governments.

13 December 2013

Banks spoil the SOEs, hitting profits

State-owned banks have quietly been lending to state-owned enterprises at reduced interest rates so far this year, buoying the economy but at the expense of bank profits

19 September 2013

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