First China Local Default Could Come in 2018, Aberdeen Says
- A privately placed note from a small borrower could be first
- Some units are now paying record coupon rates to refinance
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It’s been years coming, but the latest Chinese moves to rein in leverage mean 2018 may be the year for the country’s first bond default by a local government financing vehicle.
The units that amassed record debt in the borrowing-and-building binge after the global financial crisis have faced increasing strains, and with their borrowing costs climbing Moody’s Investors Service and others have anticipated a default at some stage. Aberdeen Standard Investments says the groundwork is now ready for that to happen in 2018.