Chinese banks have been lending more to corporations and households and less to borrowers in the interbank market as the regulatory screws have tightened. But this back-to-basics push may prove unsustainable. Even if much of the new lending were not for speculative purposes, restrictions are growing on the wholesale funding market that allows the banks to keep the credit flowing, the Financial Times reported. As this drives market rates higher, the People’s Bank of China (PBoC) is under pressure to contain default risks in the industrial base.

It’s been the worst month for China’s local corporate notes in two years. And it might just be the start, as the nation’s top bond fund manager says yield premiums could rise further in 2018, Bloomberg News reported. President Xi Jinping is stepping up efforts to trim the world’s largest corporate debt burden, after emerging even more powerful from the Communist Party’s twice-a-decade congress in October. Financial institutions are hoarding cash amid expectations the government will announce more measures to curb leverage, and that is pushing up borrowing costs in the money market.

Alibaba’s finance affiliate has banned consumer-loan products that charge annual interest rates above 24 per cent from its marketing platform. The step is the latest sign of how tighter regulation is reshaping China’s once-freewheeling internet lending industry, the Financial Times reported. Online consumer lending has boomed over the past year. Small-loan companies that lend online using their own capital have largely replaced peer-to-peer lenders as the main source of online consumer and small-business loans, following a regulatory crackdown on P2P.

Chinese developers such as China Vanke and Country Garden are increasingly turning to the securitisation market as an alternative fund-raising channel as the onshore bond market remains mostly inaccessible, the International New York Times reported on a Reuters story. Property companies are in particular stepping up the securitisation of receivables from property sales, providing them with funds to develop other projects.

Chinese central bank governor Zhou Xiaochuan said growth prospects have improved in the world's second-largest economy, but its monetary policy remains prudent and neutral, the International New York Times reported on a Reuters story. Earlier this week, China published upbeat data showing its economy got off to a strong start to 2017, supported by bank lending, a government infrastructure spree and a long-sought resurgence in private investment.

In attempting to head off a Bernie Madoff moment, China has set the stage for an even deeper bond market rout, Bloomberg News reported. Ten-year government note yields last week hit the psychologically important 4 percent level as investors braced for sweeping rules to curb risks in the country's $15 trillion asset-management industry.Caving into social pressure, banks in China have been bailing out wealth-management products that have gone bad. That's not going to be allowed come June 2019.

China Huishan Dairy Holdings Co Ltd, struggling under billions of dollars worth of debt, is preparing for provisional liquidation in a legal escalation of one of the most spectacular collapses of a Hong Kong-listed firm in recent years, the International New York Times reported on a Reuters story. Shares in the mainland group, once a hot property with investors, have been suspended since they plunged 85 percent without warning in March, after which it revealed missed loan payments and the disappearance of its finance director.

China Huishan Dairy Holdings Co., the Hong Kong-listed dairy company targeted by short sellers including Muddy Waters Capital LLC, said on Thursday that it is preparing for provisional liquidation, Bloomberg News reported. The firm had told its Cayman legal advisers to make the preparations, it said in a Hong Kong stock exchange filing. Huishan’s board earlier found that the net liabilities of its units in China “could have been” 10.5 billion yuan ($1.58 billion) as of March 31, the company said.

China’s central bank injected $47bn into its financial system on Thursday, its largest intervention in nearly a year, in an effort to calm investor fears that Beijing’s crackdown on debt-fuelled growth would put a break on the country’s rapid expansion, the Financial Times reported.

China has chosen 31 more government-owned firms to participate in its third round of mixed ownership reforms aimed at injecting private capital into the state sector, an official of the country's powerful economic planning body said on Wednesday. The mixed ownership reform plan is designed to inject market discipline into, as well as open up additional financing for, China's lumbering, debt-ridden state sector, the International New York Times reported on a Reuters story.