The worst of China’s bad loans problems are yet to come but this also creates opportunities for investors in the distressed debt field, DAC Management, a firm specialising in this area has said.

The worst of China’s bad loans problems are yet to come but this also creates opportunities for investors in the distressed debt field, DAC Management, a firm specialising in this area, has said, according to Bloomberg.

“They keep reporting such a low number for so many years, there’s only one way it can go - up,” DAC co-founder Philip Groves was quoted by the news service as saying during an interview in Hong Kong. “We’ve yet to see it because if you look at corporate defaults, they keep getting covered by the government. At some point, they can’t cover every single one,” he said.

DAC is headquartered in Chicago.

The interview is another example of how there are concerns about the health of the Chinese economy if, as expected, a period of red-hot growth in recent years is followed by deceleration and a discovery that some companies and financial institutions have wasted or misallocated capital. There have been worries, for example, about risks building in the so-called “shadow banking” sector in recent months.

The new service referred to data showing that nonperforming loans at Chinese banks jumped by the most since 2005 in the third quarter to RMB766.9 billion ($125.3 billion). DAC manages about $400 million of its own and clients’ money onshore in China.