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Corporate China will always find a way to borrow

Yields on offshore junk bonds decline while shadow banking activity surges

A hazy sky covers Pudong, Shanghai's financial district. (Photo by Kenji Kawase)

HONG KONG -- Where there is a will there is a way. Cash-hungry Chinese companies apparently continue to leverage up despite Beijing's vow to rein in excessive credit growth and curb nonstandard lending amid increasing reported cases of bankruptcy.

A telling sign is the recent developments in the Chinese offshore dollar bond market, where yields on speculative-grade offerings have been declining steadily. The spread over investment-grade issues -- the premium that investors demand for riskier bonds -- has narrowed by more than 200 basis points since last January, data from S&P Global Ratings shows.

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