Investors are increasingly worried about the risk of defaults in China as the country's debt pile accumulates while the economy slows, but analysts say Beijing can manage for now.
"The risks are manageable. Much of what goes on in China is controlled by the government. And the government has plenty of firepower to ensure growth holds up," said AMP Capital's head of investment strategy and chief economist Shane Oliver in a note published on Tuesday.
The risk of debt defaults in China overtook the threat of deflation in the euro zone as the second biggest "tail risk" among investors, according to a Bank of America Merrill Lynch global investor survey published on Wednesday.
China's total debt grew from 141.2 trillion yuan at the end of 2013 to 153.7 trillion yuan at the end of September 2014, or 247 percent of gross domestic product (GDP), according to Morgan Stanley's calculations.
But that concern appears overblown.
"China's central government has the financial capacity to handle a financial crisis if one materializes—government debt is only 55 percent of GDP," a McKinsey Global Institute research note published in early February said.
China's government is in a bind: It needs to reduce debt and has the firepower to do so, but risks slowing the economy if it takes action.
In March, Beijing acknowledged economic momentum was slowing when it set its 2015 GDP growth target at "around 7 percent" – the lowest level in 11 years.