Pimco has been selectively looking at China's offshore U.S. dollar bond market, Mukherji said, adding that Pimco's focus was on sectors that may be shielded from default because they would likely continue to receive government support.
"What we focus on are those sectors that are going to get ongoing support from the state even as China transforms from an industrial to a consumer consumption driven economy," he said. "Those sectors would be oil and gas, transportation, consumer, internet."
But Daiwa noted that there are hazards to removing the government backstop, in addition to the hazards of keeping it.
The only way for the government to "save credit at all costs" from defaults would be to print more money, Daiwa said, noting that would pressure the Chinese currency.
That, combined with likely interest rate cuts, would cost China's market the yield advantage that currently attracts investors, and could spur "significant" fund outflows and a "downward spiral" for the yuan, Daiwa said. Daiwa assigned a 30 percent probability to that scenario.
But Pimco expected China to continue to stage-manage the bond market.
While the market needed to prepare for more defaults, "the government has the will and the willingness to control the default cycle," Mukherji said. "So I think that will be a slow moving process. It will take years before a full default cycle comes."
Moody's has also said it did not expect a major credit blowup, but predicted some bumps in the credit market.
"The overarching role of the Chinese state mitigates the risk of a financial crisis," it said in a note Thursday. "Even in the absence of a systemic crisis, major imbalances created by rapid debt accumulation are likely to erode credit quality over time."
It noted that it holds a negative outlook on China's sovereign rating, the majority of rated Chinese issuers and the country's banking sector, citing the "substantial dead-weight cost" to the economy from the country's debt overhang.
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—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1