China’s watchdogs will improve the mechanism used to deal with bond defaults, according to state media, amid a record-breaking year for corporate delinquencies.
China’s central bank, securities regulator and state planning commission will soon publish rules that will «regulate the disposal of corporate bond defaults», said a «Reuters» report citing Chinese state media. Authorities will also provide guidelines for trustee business and creditor meetings.
«In 2020, China will step up monitoring credit risks, stabilize market expectations, and crack down on the practice of dodging repayment obligations,» the report added, citing Zou Lan, a senior official from the People's Bank of China.
China Default Risk
Default risk in China is rising to unprecedented rates this year in the backdrop of a global slowdown and ongoing trade conflict with the U.S. According to ratings agency Fitch, private issuers in China have already posted a record-high default rate of 4.9 percent in the first 11 months of 2019 with similar pressures expected in 2020.
Most recently, six Chinese firms had reportedly defaulted or come near to defaulting on $9.7 billion of debt in the province of Shandong, the country’s third-largest economy.
