2019 Set to Be Another Record Year for Chinese Onshore Bond Defaults

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2019 is set to be another record year for onshore bond defaults in China following a flurry of recent payment failures amidst easing economic growth.

Data from Bloomberg points to at least 15 onshore bond defaults since the start of November, pushing the total since the start of 2019 to 120.4 billion yuan (USD$17.1 billion), just short of the record-breaking figure of 121.9 billion yuan for 2018.

Monday saw two defaults, including Peking University Founder Group’s failure to repay a 2 billion yuan bond, and Tungshu Optoelectronic Technology’s failure to make early payment of interest and principal for a 1.7 billion yuan instrument.

The defaults in 2019 nonetheless comprise only a tiny fraction of China’s estimated $4.4 trillion onshore corporate debt market.

S&P Global Ratings said in November that it expected the onshore default rate in China to hold steady in 2019 compared to last year, at roughly 0.5%.

A recent report from Fitch points out however that the default rate for bonds issued by private Chinese companies has risen to an unprecedented 4.5% for the first 10 months of 2019.

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