What does China’s regulatory crackdown mean for EM corporate debt?

Chinese corporates are experiencing growing pains as fines and restrictions rain down on sectors like tech, real estate and education.

However, while the new regulations have caused credit spreads to widen significantly, they may also represent a path to long- overdue reforms in various parts of the Chinese economy. Additionally, debt investments, unlike their equity counterparts, are not necessarily dependent on long-term growth prospects—rather, performance is often a function of a company’s balance sheet strength and its ability to repay its debt.

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