Get ready for more China shadow-banking defaults: China has just settled a high-profile failure of one shadow-banking product and already another has emerged, with analysts expecting a wave of potential defaults ahead.
"We definitely expect to see more trust-related products souring through 2014 and maybe next year as well," with the difficulties likely coming from stressed industries, such as coal, as the economy slows, said Ruta Cereskeviciute, senior economist at consultancy IHS.
""If borrowers of trust loans are unable to refinance their outstanding debt via another trust loan or via some other shadow banking product, the company may default on its trust loan, leading to a potential default in the underlying trust product," Bernstein said, noting that often there is a duration mismatch between the loans and the underlying projects receiving financing."
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