China

It was not so long ago that investors were speculating just when Chinese regulators would allow the first onshore bond to default, the Financial Times reported. Now, the authorities are rushing to provide liquidity relief to calm a surge in bond market failures. The government must act because the defaults represent collateral damage in its broader campaign to rein in excess borrowing in the financial system. Private companies have suffered most, exposing vulnerabilities in a sector that is largely responsible for creating jobs in the Chinese economy.

Chinese stocks haven’t been this volatile in years as traders struggle to decide whether the $6 trillion market has bottomed out, Bloomberg News reported. Buffeted by crosscurrents ranging from the trade war and rising defaults to monetary stimulus and cheapening valuations, the Shanghai Composite Index has recorded seven straight swings of 1 percent or more -- the longest such stretch since Chinese markets crashed in 2015.

China’s leader, Xi Jinping, has called it the “project of the century” and said it will usher in a “golden age” of globalisation. With Beijing-backed projects in 78 countries, the “Belt and Road Initiative” (BRI) is one of the world’s most ambitious development programmes. But critics fear it could become the conduit through which some of China’s debt problems are transmitted overseas, the Financial Times reported.

China's HNA Group Co Ltd is in advanced talks to sell a 30 percent stake in aircraft lessor Avolon Holdings Ltd to Japan's Orix Corp, two sources said, as the company attempts to restructure and trim stakes even in its core assets, the International New York Times reported on a Reuters story. The aviation-to-financial services conglomerate, which has racked up massive debt from acquisitions in recent years, is nearing a deal to sell the stake in Dublin-based Avolon for about $2.2 billion, the sources, who were familiar with the matter, told Reuters.

Beijing’s softening stance on deleveraging and defaults has helped fuel a mini-revival across Asia’s credit markets, pushing up bond prices in recent weeks and sparking debt issuance, The Wall Street Journal reported. Issuers from China to South Korea and India sold about $9.2 billion in new U.S. dollar bonds during the week ended Aug. 3, the highest weekly tally in Asia excluding Japan since mid-April, according to Thomson Reuters. New deals had nearly ground to a halt in early July over fears of rising defaults among Chinese borrowers.

Struggling to find well-paid work after arriving in Shanghai as a graduate from a middle-ranked Chinese university, Tom Wang turned to another source to fund his spending: credit cards. “Using credit cards did not feel like spending money, and the debt grew and grew,” said the 26-year-old, whose starting salary of Rmb3,000 ($470) a month could not cover rent and the consumption habits he called “irrational”, such as buying the latest smartphone, the Financial Times reported.

China’s central bank has started actively encouraging banks to extend more credit by taking a softer stance on loan quotas, people familiar with the matter said, as authorities ratchet up efforts to bolster a cooling economy, Bloomberg News reported. The People’s Bank of China has delivered the message via so-called window guidance, said the people, who asked not to be named discussing private information. The central bank hasn’t provided specific targets, but it indicated a willingness to be more flexible on banks’ government-imposed lending caps, the people said.

Imran Khan, Pakistan’s former cricket captain and newly elected prime minister, is on a sticky wicket. His victory in last week’s polls was secured in part on a pledge to ramp up spending on public services. Yet the coffers are empty and a balance of payments crisis looms, the Financial Times reported. Instead of the “Islamic welfare state” he hoped to create, his aides are forced to ponder the prospect of an IMF deal. Even that safety net may not be at hand.

A slowing economy and a rumbling trade war are giving officials trying to tame China’s debt reason to be more selective about their targets, not to give up completely, Bloomberg News reported. Less than two years into the broad-based drive to contain credit growth, policy makers are now placing more emphasis on curbing debt at state firms and in parts of the property market. Meanwhile, the vise-grip that’s been causing contraction in the shadow banking sector and at local governments is being eased in the hope of preventing a sudden stop in the economy.

Recent optimism in China’s debt market will soon be put to the test, with investors able to demand early repayment for as much as 544.7 billion yuan ($80 billion) of debt by year-end, Bloomberg News reported. The amount of local bonds with put options that hit trigger points in the coming five months comes to almost 1.4 times the tally from January to July, according to data compiled by Bloomberg.