As China slows with a receding credit tide, its titanic armies of naked swimming businesses are exposed. So far, the headlines have been hogged by Huarong and Evergrande but there are many other defaults and the potential victims in opaque Chinese debt daisy chains are limitless.
This is one reason why I do not expect China to enter an acute financial crisis. Rather, these irresolvable debts will drag the entire economy down over time into a bog of slow growth as bad debt is rolled over forever.
That said, we do go through these periods of reform that threaten instability and possible crisis. So where are we now? Goldman has more:
