International Investors are too fixated on trade tension between the US and China. Instead, they would do well to take heed as Beijing continues a war against non-bank lenders and fintech companies that is tightening liquidity and spooking investors in mainland China.

Money remains tight on the mainland even as financial stability has replaced deleveraging as the official order of the day. Speaking at the Lujiazui forum in Shanghai at the end of June, Guo Shuqing, the head of the China Banking and Insurance Regulatory Commission, warned that there would be more corporate defaults in China, adding that it would actually be a good thing as a sign of market discipline.

There are already signs that companies are finding it harder to roll over debt and refinance loans, as interest rates rise and earnings slide. There have been 22 corporate defaults this year, involving Rmb21bn in unpaid obligations, according to data from the CLSA unit of Citic Securities. Many analysts believe worse is to come.