China’s Bond Defaults Set to Hit CNY 100bn at Record Pace

Bloomberg reports that Chinese companies have so far this year failed to make payments on CNY 99.8bn ($15.5bn) of onshore bonds. This is set to be the fourth consecutive year that the second-largest economy hits the CNY 100bn of defaulted debt mark. However, the defaults this year is at a record pace unlike earlier years when this number was breached only in Q3. This comes as state-owned enterprises have defaulted on debts with an overhang regarding China Huarong, whose financial position is yet unclear. Real estate companies led the defaults, making up 25% of the missed onshore payments with names like CFLD and Tianjin Real Estate at the top. Others like Tsinghua Unigroup and Hainan Airlines also made it to the list. Charles Sambor, head of emerging-market debt at BNP Paribas Asset Management said, “Policy makers are willing to draw a line in the sand between what is systemic and what is not. They want to inject more credit risk in the system and change the mindset of investors, forcing them to look more at stand-alone credit risk rather than speculating on the likelihood of support from the central government.” Offshore bond defaults have also risen with $3.7bn in January and February but none since, nearly half of 2020’s full-year figure of $8.3bn, according to Bloomberg.

For the full story, click here