Is a Chinese Debt Crisis on the Way?

Investors concerned about a Chinese debt crisis sparking a larger financial crisis should simply relax, says Simon Arrata, CEO of Harvest USA. The Chinese government has the situation well in hand, Arrata said.

"The central government is focused on state-owned enterprises and reducing over-capacity," says Arrata. "SOEs constitute only 10% to 15% of the aggregate economy. That area may feel stress, but no systematically important SOEs will default."

He adds that the government is deftly managing the economy's evolution from one dominated by exports and manufacturing to a consumer-based one.

"Consumption is now 50% of Chinese GDP, and that is up from 40% five years ago," says Arrata.

The Harvest Funds Intermediate Bond Fund (HXIIX) - Get Report is up 2.2% thus far in 2016, according to fund-tracker Morningstar. The $60 million fund has returned an average of 4.7% annually over three years, outpacing 99% of its peers in Morningstar's emerging markets bond category. The trailing 12-month yield for the fund is 4.2%, according to Morningstar.

The fund holds at least 80% of its net assets in a portfolio of fixed income securities of companies based in China and Hong Kong. It focuses on bonds rated BBB or higher, but a portion of the fund's underlying securities are nonrated or noninvestment grade.

Arrata was previously a senior vice president at Fidelity Investments and managed $3 billion in assets for Fidelity's high-net-worth clients prior to joining the firm's institutional division.

As for China's economy, Arrata says the country will meet its government's expectations of 6.7% GDP growth. That should encourage bondholders.

"There is actually risk to the upside based on positive data points around money growth and recent PMI data," says Arrata.