China’s $13 trillion bond market seems calmer this year, with fewer defaults than 2018. Underneath the surface, though, is a churning current that threatens to swallow investors who aren’t careful, a Bloomberg View reported. The case of Xiwang Group Co. is one such cautionary tale. Just days ago, this distressed industrial conglomerate in the northeast province of Shandong thought it could borrow for peanuts. The company, whose business operations span corn-oil processing to steel manufacturing, tried to raise 450 million yuan ($63.5 million) at a coupon range of 7.5% to 8.5%.

Many privately held firms in Shandong, China’s third-biggest province by economic output, are struggling to repay short-term debt due to declining industry fundamentals, entangled cross guarantees and ill-managed investments, S&P Global Ratings said, Reuters reported. China’s slowing economy and enforcement of environmental protection rules have pressured the profitability and cash flow of Shandong companies in over-capacity sectors including oil refining, petrochemicals, steel, aluminium and textiles, S&P said.

China’s slipping economic momentum is sparking a shift in government priorities—away from curbing mounting debt levels and toward a renewed focus on raw growth, The Wall Street Journal reported. Gross domestic product growth fell to 6% for the third quarter of the year, hitting the bottom of Beijing’s targeted range, amid clearer signals the government wants to ramp up infrastructure spending and official support for businesses, the kinds of policies that fueled borrowing—and economic expansion—after the 2008 financial crisis.

The new head of the International Monetary Fund urged policy makers this week to undertake measures to bolster the slowing global economy and asked for a show of hands from those who planned to follow her recommendations. Not many hands went up. Finance ministers and central bankers who gathered in Washington for the IMF’s fall meetings in recent days said in interviews and public events that the biggest risks to the global economy are trade-related uncertainties and divisions among nations over how to reduce them, The Wall Street Journal reported.

China needs to fundamentally reform its delivery of development finance aid in the Pacific region to ensure it does not create a “debt trap” for vulnerable island nations through its Belt and Road Initiative, a report has warned, the Financial Times reported. The report published on Monday by the Lowy Institute warns if the current $6bn lending splurge from Beijing into the region continues in a “business as usual” manner then it poses a significant risk of future debt sustainability problems.

Chinese banks are bolstering their offshore loan recovery teams as they face a wave of bad debts linked to struggling overseas businesses and acquisitions, the Financial Times reported.

Analysts on the lookout for China’s next financial shock are training their sights on the least regulated corner of the nation’s sprawling shadow banking system, Bloomberg News reported. Their concern centers on so-called independent wealth managers, which have expanded rapidly in recent years by selling high-yield products to affluent investors. Largely untouched by a government clampdown on nearly every other form of non-bank financing, the industry has grown from obscurity into a major source of funding for cash-strapped Chinese companies.

A record pace of defaults hit China’s domestic bonds this year. In 2020, it could be the offshore market’s turn. That’s because of a looming wall of dollar debt, issued by now-stressed borrowers, that comes to maturity, Bloomberg News reported. There’s $8.6 billion of offshore bonds coming due next year that currently have at least 15% yields -- classifying them as stressed, according to data compiled by Bloomberg. Put another way, nearly 40% of total outstanding corporate dollar bonds from China’s most troubled companies is due next year.

Commodities trader Trafigura has joined a group of lenders to provide a $1 billion loan backed by future oil sales to Chinese independent refiner, Shandong Qingyuan, in a deal which underscores the opening up of China to trading houses, Reuters reported. Chinese banks have scaled down lending due to an economic slowdown, creating an opportunity for trading houses to step in, just as they had after the 2008-2009 financial crisis when risk appetite fell as bank regulation increased.

China’s banks are racing to issue domestic perpetual bonds as they seek to top up capital levels to meet tighter regulations, with about Rmb810bn ($114bn) worth of debt issued or in the pipeline, the Financial Times reported. The embrace of “perps” — bonds with no maturity date, which qualify as loss-absorbing capital — is part of an effort by Beijing to shore up the nation’s financial system as the economy loses steam, and after a crackdown on the “shadow” banking sector, in which many banks had invested, put several under stress.