While the default was on the most part of a small interest payment, the problem is there are billions and billions of defaults to come.
Well, the default on coupon payments of a CCC rated bond in itself is not a 'major event' in finance.
Yesterday the banks found out that their high risk lending is not going to be covered by the government.'
Absolutely. This is the question - what will and will not be covered by government?
Bear in mind that the only countries to avoid middle income traps are export led corporatist East Asians with state guided capital markets (Korea, Singapore, etc). But state guided capital does not mean law-less kleptocrats and autocracies. Can China make a successful transition to state autonomy? I don't know.
From a financial point of view external v internal position:
SAFE Releases Table of China’s International Investment Position at the End of June 2013
by CCH China November 4, 2013 1:00PM
Recently, SAFE released the table of China’s international investment position at the end of June 2013. The data shows that until the end of June 2013, China’s foreign financial assets were USD 5,433.8 billion, while financial debts were USD 3,588,5 billion and net foreign financial assets were 1,745.3 billion.
Under foreign assets, USD 542 billion were foreign direct investments, USD 241.1 billion were securities investments, USD 1,096.3 billion were other investments, while reserve assets amounted to USD 3,557 billion; within foreign financial debts, USD 2,258.2 billion were directly invested from foreign countries, USD 358.5 billion were securities investments, and USD 1,071.7 came from other investments.
Also can see data in chart format: http://www.ibtimes.com/chinas-mountain-foreign-debt-not-scary-it-looks-1556107
Watch the assets and continue to worry about Chinese domestic credit.
