The poor, small Southeast Asian country of Laos is set to cede majority control of its electric grid to a Chinese company, as it struggles to stave off a potential debt default, people with direct knowledge of the agreement said, Reuters reported. The deal comes at a time when critics accuse Beijing of “debt trap diplomacy” to gain strategic advantage in countries struggling to repay loans taken out under President Xi Jinping’s global “Belt and Road” infrastructure initiative.

Chinese developers are facing the biggest liquidity test in more than four years, exacerbating challenges brought on by stringent funding restrictions and a prolonged profitability drop, Bloomberg News reported. Cash reserves of the nation’s 50 largest-listed home builders were just enough to cover short-term debt as of June 30, the least since 2016 when China began deleveraging its economy, according to recent earnings data compiled by Bloomberg. That metric fell below 0.5 for eight companies, the most in four years, signaling greater risk.

This isn’t the bottom for Chinese banks’ bad loans. Be prepared for more and weaker balance sheets. China’s lenders reported large declines in net profit for the first time in decades Sunday, citing dire economic conditions fueled by Covid-19, Bloomberg News reported in a commentary. In preparation to deal with ballooning bad debts and future losses, provisions rose sharply by 656 billion yuan ($95.8 billion) for souring loans. Prudent as that may seem, the worst is yet to appear. Much of this isn’t a surprise.

Troubled Peking University Founder Group Corp’s (PUFG) administrator is not recognising the keepwell deed the Chinese conglomerate provided for a $300 million dollar bond issued by Nuoxi Capital, financial intelligence provider Redd reported, Reuters reoprted. Keepwell deeds are used by some Chinese companies to facilitate offshore bond sales by their subsidiaries. The deeds are similar, according to lawyers, to “letters of support” where the issuer would be backed by an onshore company, but they stopped short of guaranteeing the debt.

China’s fragile economic recovery is ushering in a dangerous new phase for the nation’s $4.1 trillion corporate bond market, Bloomberg News reported. With the economy now strong enough for policy makers to dial back financial support but still too weak to save the most distressed borrowers, some fund managers are bracing for defaults on domestic Chinese debt to hit record highs this year. Delinquencies have already started rising after a remarkably quiet second quarter, and pressure on borrowers is set to grow as 3.65 trillion yuan ($529 billion) of notes mature by year-end.

Fosun International Ltd. is poised to lose its 20% stake in Cirque du Soleil Entertainment Group, the latest in a series of failed overseas deals for the Shanghai-based insurance, health care and tourism conglomerate, Bloomberg News reported. A consortium of Montreal-based Cirque du Soleil creditors is set to take control of the struggling circus operator, people familiar with the matter said. The company filed for bankruptcy protection in June as the Covid-19 pandemic slammed its distinctive global chain of musical, acrobatic shows.

There’s mounting scrutiny over the state-owned parent of BMW AG’s joint venture partner in China, Brilliance Auto Group Holdings Co. Investors are increasingly concerned about the Liaoning-based firm’s capacity to juggle its debt load as the pandemic weighs on profits, Bloomberg News reported. Concern is growing about the financial health of Brilliance Auto, the parent of Hong Kong-listed Brilliance China Automotive Holdings Ltd., which manufactures vehicles with the German carmaker in China via a joint venture.

New regulations issued by China’s financial authorities may help to smooth the resolution of bond defaults and exchanges and to improve transparency surrounding the bond-exchange process, but the effectiveness of the changes will ultimately depend on how they are implemented in practice, says Fitch Ratings. The Shanghai and Shenzhen stock exchanges, under the supervision of the China Securities Regulatory Commission (CSRC), released formal rules on corporate bond exchanges on 30 July, Fitch Ratings reported.

China’s multi-year clampdown on its peer-to-peer lending industry has whittled the number to just 29 platforms, down from about 6,000 at its peak, according to the nation’s top banking regulator, Bloomberg News reported. The crackdown, which is likely to be completed at the end of this year, has left investors with more than 800 billion yuan ($115 billion) in unpaid debt from failed platforms, Guo Shuqing, chairman of the China Banking Regulatory Commission, said on China Central Television on Friday. Regulators, together with the police, will try their best to recoup the money, he said.

Lenders to the world’s biggest airport baggage-handling group Swissport have offered a rescue package that would restructure its €2.1 billion of net debt and could transfer ownership to them from struggling Chinese conglomerate HNA Group, The Irish Times  reported. The owners of €1.4 billion of senior secured bonds issued by Swissport have promised to invest in the business to help it survive the pandemic, which has hit its operations hard with the grounding of flights.