Trust firms in China set to see rise in defaults
As banks cut lending, local governments in China are increasingly using alternative sources of financing, such as trusts. That is storing up trouble, say market participants.
Trust companies in China face a rising risk of default as local governments accelerate their borrowings from non-bank lenders to fund infrastructure projects.
“Many trust products use land/property as collateral,” says David Cui, China strategist at Bank of America Merrill Lynch. “If the market is concerned about a potential decline in their value, investors may decide not to roll over these trusts, raising the risk of defaults.”
The next two years will be challenging for China’…
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