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The city of Wenzhou, known for its entrepreneurs, emerged as a hotbed of cross-company guarantees and high-rate loans in 2011.
The city of Wenzhou, known for its entrepreneurs, emerged as a hotbed of cross-company guarantees and high-rate loans in 2011.
(Eugene Hoshiko/AP)

BREAKINGVIEWS

China debt threat shifts to local level

Reuters Breakingviews delivers agenda-setting financial insight. Its global correspondents react to stories as they develop, delivering sharp and provocative commentary on big financial news as it breaks.

China’s next credit crisis may be a local affair. A recent suggestion of setting up local bailout funds reflects the fact that it’s no longer big banks that present the biggest risks, but towns and regions. The elaborate ties between local borrowers, lenders and governments could make future credit problems both chaotic – and concentrated.