The role of guarantors for loans to other companies in China has become increasingly fraught as the country’s economic growth slows, The Wall Street Journal reported. About a quarter of China’s US$13 trillion in total outstanding loans as of the end of October was backed by promises from other companies and individuals to pay up if the borrower defaults. Reliance on these guarantees is now backfiring, regulators and analysts say, resulting in a surge of bad loans that banks had assumed were insured and threatening financial contagion.
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