The share of international credit exposures to mainland China hedged through offshore transactions reached a record low this year – a secular trend that may now be tested by worries about the country’s financial environment.

Of the $904 billion in claims by foreign banks vis-à-vis Chinese counterparties as of end-June, just 6% was hedged by transferring risk offshore, by way of credit guarantees or derivatives, based on Bank for International Settlements (BIS) data. This compares with 8% two