Beijing’s bid to de-risk China’s financial sector is likely to continue to weigh on the corporate bond market, analysts say, especially among property developers and local-government financing vehicles.

A hypothetical slowdown in corporate debt, meanwhile, would reduce China’s GDP growth rate by 1 percentage point per year over the medium term, according to new research from Fitch Ratings.

“The growth shock would be driven by the sharp slowdown in business investment necessary to significantly reduce the corporate sector’s borrowing requirement,” the research found.

“It is hard to put a precise time frame on when China will start to see the deleveraging of the real economy, but at some point it looks inevitable,” said Brian Coulton, Chief Economist at Fitch. “The scenario analysis we have undertaken suggests that, when it does occur, it will be a process that will be a significant drag on growth.”

Fitch’s scenario suggested that business investment growth would have to fall by around 5 percentage points per year to stabilize corporate debt by 2022. Such an adjustment would reduce GDP growth rate to around 4.5%, far below the estimated potential growth of around 5.5% per year.

China has already seen at least 14 corporate bond defaults this year, and the trend will likely continue, according to Logan Wright, director at Rhodium Group, who was quoted by Bloomberg on Sunday.

“You have seen banks redeeming funds placed with non-bank financial institutions that have reduced the pool of funds available for corporate bond investment overall,” Wright said.

“Unlike the US, where the majority of buyers of bonds are mutual funds, individuals and investment companies, in China, the key holders of bonds are bank on-and off-balance sheet positions,” Jason Bedford, an analyst at UBS Group was quoted as saying.