Credit default swap trading 'no threat to property market'

Trading in credit default swaps is unlikely to trigger a substantial correction in China's property market, economists said on Tuesday, saying that concerns that speculators would use credit default to short the market were unfounded.

The National Association of Financial Market Institutional Investors, a unit under the People's Bank of China, has approved trading in credit default swaps, a financial swap agreement that allows buyers of CDS to be compensated by sellers in the event of a loan default.

Industry analysts said that the move underscored the government's intention to increase the use of market forces in addressing China's debt problem instead of resorting to a government bailout when credit defaults take place.