BAML Joins Soros, Expresses Concern Over Chinese SOE Bond Defaults

Coinciding with George Soros broadside regarding China’s sinking debt ship, a Bank of America Merrill Lynch piece notes that defaults by Chinese state owned enterprises through SOE bond obligations “may cause financial instability” if poorly handled. The report blames the nasty “shadow banking” segment for a portion of scorn and muses about an “implicit” government risk guarantee that might spread panic if a bailout is not in the offing. The message: the implied promise of a financial bailout must be met or the financial system could experience a significant value readjustment.   As credit spreads have been increasing in the…