Breaking News
Black Friday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

China's corporate bond defaults touch a record high

Stock MarketsJul 09, 2021 01:16AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: FILE PHOTO: Chinese Yuan banknotes are seen in this illustration taken February 10, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

By Patturaja Murugaboopathy and Andrew Galbraith

(Reuters) - China's corporate bond defaults have hit a record high this year, highlighting tightening credit conditions and a growing reluctance by regional governments to bail out troubled state-owned firms.

Chinese companies' bond defaults amounted to 62.59 billion yuan ($9.67 billion) in the first half of the 2021, the highest ever, according to Fitch Ratings.

That increasing proportion of defaults by state-owned enterprises (SOEs) has raised concerns among some investors that the end of implicit government guarantees on SOE debt could create market instability.

China's bond defaults hit a record high this year

A total of 25 firms defaulted on bond payments in the first six months of 2021, compared with just 19 in the same period last year, the data showed.

Number of defaulted issuers in China

China's state-owned enterprises (SOEs) contributed to more than half of the defaults, totalling 36.65 billion yuan.

Concerns over the ability of SOEs to service their debts sparked global alarm in April after China Huarong Asset Management missed a March 31 deadline for filing its 2020 earnings.

China's SOEs lead defaults this year

Huarong has not missed any bond payments, most recently repaying a maturing $400 million U.S. dollar bond on Wednesday.

Analysts say that more SOE defaults do not necessarily bode ill for the market.

"SOE defaults could be a blessing in disguise by forcing the state companies to adhere to hard budget constraints and exercise greater credit discipline, the lack of which have been the culprits for excessive investment," said Chi Lo, senior economist at BNP Paribas (OTC:BNPQY) Asset Management.

"Beijing has been signalling a gradual retreat from government guarantees on state firm liabilities since 2017 ... But they have also reiterated that the bond default risk needs to be diffused in an orderly manner."

As large maturities loom in the second half of the year, weak regional SOEs with deteriorating liquidity profiles should continue to see higher bond-repayment pressure, said Shuncheng Zhang, a Fitch analyst in Shanghai.

"But a surge in defaults is unlikely as central authorities guide distressed SOEs to negotiate repayment arrangements in advance," he said.

($1 = 6.4755 Chinese yuan)

China's corporate bond defaults touch a record high

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Ray Brown
Ray Brown Jul 09, 2021 4:47AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The link to the graph needs to be fixed.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email