Market falls threaten to expose cracks in corporate China

Shanghai

DESPITE reassurances by regulators that margin debt in China's stock markets remains manageable, total leverage could be as much as US$645 billion - magnifying risks not just for retail investors, but also the thinly stretched corporate sector.

The scale of lending in China's stock markets has become a major concern for global investors. For many, it is a greater worry than even the Greek crisis because a Chinese market crash could destabilise the world's second largest economy.

Margin debt, incurred when investors only put down part of the cost of a share purchase, has officially roughly doubled since the beginning of 2015.

That rapid run-up in leveraged trading was brought into sharp focus last week as China's benchmark CSI 300 index tumbled 14 per cent, raising fears of fo…