China's Hidden Debt Stirs Investor Angst as Defaults Rise
- Cross guarantees could lead to systemic risk, BBVA says
- Chengxin says it’s hard to get guarantee info from companies
China's NPL Ratio Declines in 4Q, First Time Since 2012
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Rising defaults in China are unearthing hidden debt at companies across the country.
Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains.