China Now Largest Corporate Debt Issuer

China's corporate sector has become riskier in recent years, with declining corporate cash flows. Even with the increased risk, China is now the largest issuer of corporate debt, with $14.2 trillion outstanding at the end of last year. By comparison, U.S. companies had $13.1 trillion in debt outstanding. S&P estimates that one-fourth to one-third of Chinese corporate debt is loaned by shadow banks, financial intermediaries that provide services similar to traditional banks, but not tied to banking regulations. One risk of shadow banking is that lending in this segment can contract much more quickly than in the regulated banking segment. By 2018, it is estimated that Chinese corporate debt will increase to $20 trillion.