Chinese corporate defaults this year through April are 3.4 times the amount last year.

Since the global financial crisis, the total value of outstanding corporate bonds has doubled, from around $37 trillion in 2008 to over $75 trillion today. But the growth has been far from even, with non-financial debt growing much more rapidly in certain jurisdictions. As the volume and price of this debt has grown, so too has its riskiness. And that could be a recipe for disaster, warns Sir John Cunliffe, deputy governor for financial stability at the Bank of England.

In the US, non-financial debt is up 40% on the last peak in 2008. Cunliffe expressed even greater caution concerning emerging markets, where corporate debt as a proportion of the global debt pile has grown the most over the past 10 years. “Emerging market debt now accounts for over a quarter of the global total compared to an eighth before the crisis,” Cunliffe said.

Before the financial crisis, emerging market companies were issuing a total of $70 billion per year in bonds, according to OECD data. That was before the world’s biggest central banks embarked on the world’s biggest monetary experiment, in which companies the world over were invited to participate.

By 2016, emerging market corporations were issuing ten times more money ($711 billion) than before, much of it in hard foreign currencies (mainly euros, dollars and yen) that will prove much harder to pay back if their local currency slides, as is happening in Turkey and Argentina right now. Although bond issuance by emerging market companies declined by 29% in 2017 and remained around the same level in 2018, it is still approximately 7.5 times higher than the pre-crisis level…

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