BlackRock sees yuan depreciation as wakeup call for China debt hedging

China Overseas Land & Investment Ltd's 63 billion yuan ($10 billion) foreign currency liabilities at the end of 2014 were matched by just 8 billion yuan of forex assets, a coverage ratio of 12 percent. The figure is as low as 2 percent at Agile Property Holdings Ltd and 8 percent at Country Garden.

"If the yuan continues to depreciate further, Chinese companies with material foreign currency borrowings would see their financial metrics deteriorate," said Franco Leung, credit analyst at Moody's Investors Service in Hong Kong.

A better way to manage a weakening yuan is to issue bonds on the mainland as a natural hedge, said HSBC's Suen. Chinese developers have sold 134.1 billion yuan of notes this quarter, exceeding the total in the previous four quarters.

Geely Automobile Holdings Ltd, founded by billionaire Li Shufu, has been employing some natural hedging strategies including selling foreign-currency debt for overseas parts purchases and when investing in production outside of China, said Lawrence Ang, executive director at the company.