Turkey is planning a good bank/bad bank arrangement for the surge in bad loans due to the lira collapse, according to a report by Bloomberg on Monday, citing people familiar with the matter.

The Turkish banks are trading at around 30-40% of book value, and we continue to hear about Turkey’s prospective shift toward China.

Al-Monitor reported on Friday on Ankara’s pivot toward Beijing, in the context of why Turkey has been so quiet about alleged torture of Turkic Uyghurs in China’s northwest:

“Ankara, which is experiencing serious economic problems, is trying to diversify its holdings of US dollars and euro bonds. China offers an opportunity for Turkey to diversify its resources.

“Ankara also hopes that China can invest in Turkey in the fields of energy – particularly natural-gas storage, nuclear energy and solar energy – communication, satellite technology, the Internet, mobile broadband, rail and sea logistics, e-commerce, e-finance, and mining. Considering Beijing’s massive infrastructure project, One Belt, One Road, Ankara believes China can bring hundreds of millions of dollars in capital to Turkey for investments in Turkey’s critical transport infrastructure. It’s worth remembering that the US Senate is considering a bill to prevent Turkey from borrowing from international financial institutions, including the International Monetary Fund.

“‘Now it’s not as easy as it was some years ago for us to borrow from the US or Europe,’ a Turkish economist working in a government institution told Al-Monitor on condition of anonymity. ‘We now think we can try to borrow from China. We can also borrow from the yuan market, which will be no different than borrowing from other markets.'”

Turkey’s plan for dealing with bad loans, along with the potential help from China, fits into a broader narrative that the route in emerging markets (EM) may be nearing its end. There is still plenty of disagreement on this question and the question of where the dollar will go from here.

Franklin Templeton sees light at the end of the tunnel for EM, though basket cases such as Turkey will continue to face pressure, per Bloomberg:

“For us here locally we’re focusing on the Asia region, it’s about countries that are in a better fiscal position, good domestic stories and good policy actions by their leaders,” said Siniakov. Some emerging markets, including Turkey and Indonesia, will continue to see pressure, he said.

Chris Siniakov is managing director of fixed income for Australia at Templeton.