The Chinese government had put plans in place to reduce the high levels of debt in the country's economy this year, but the negative economic effects of the trade war have put those plans on the back burner and companies are again levering up, in large part with dollar-denominated debt.
Why it matters: As the yuan weakens, debts held in dollars get more expensive. That could pose a major problem for China should the economy continue to slow. It would also mean problems for the rest of the world, as China is the planet's No. 1 trading nation.
- The big picture: Having shown that they are unafraid to let the yuan weaken past 7 to 1 with the dollar, Chinese authorities are raising concerns about many companies' indebtedness.
Watch this space: Dollar-denominated debt held by Chinese firms is now more than $1.5 trillion, 20% higher than it was in 2015, data from the Institute of International Finance shows.
- The distribution of dollar debt has fallen to around 50% of total corporate debt from 70% in 2015, but banks and other financial institutions are now more exposed to currency risk because of their increased borrowing in dollars.