The G20 meeting in Osaka at the end of June brought a clutch of positive developments in the trade war between China and the US – a resumption of talks that had broken down in May, an accompanying ceasefire on new tariffs and a partial lifting of the US blockade of telecoms giant Huawei.
No-one should be getting too excited. For one thing, the official line on both sides is to expect a drawn-out negotiation…For another, China and US corporates have already been feeling the strain for months – at least, if bank estimates of default risk are to be believed. Data on 2,375 US companies shows credit quality started to deteriorate in January this year…
…Data on China corporates tells a similar story – a near-20% improvement in credit quality since the start of 2016, which peaked at the end of the first quarter of 2019 and is now deteriorating.
In this series of monthly articles from Risk.net, David Carruthers, head of research at Credit Benchmark, reports on the corporate credit impact of the China-US trade war. Also this month, credit trends and distribution of Brazilian corporate and financial entities, insights into UK corporate small and medium sized enterprises (SMEs), and the ongoing troubles facing US and UK retailers.
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