Financial Stability and Development Committee Warns of More Bond Defaults to Come Following Yongcheng Coal Debacle

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One of China’s top financial authorities says that further bond defaults will follow on the heels of Yongcheng Coal’s failure to make payments on one billion yuan in short-term debt.

A meeting of China’s Financial Stability and Development Committee (FSDC) convened on 21 November said that Chinese regulators would target the “behavioural” factors behind bond defaults, in addition to “cyclical” and “comprehensive factors.”

The meeting forecast that bond defaults would continue to occur in future, but that “debt evasion conduct will be corrected” while the “predictability of defaults is increasing, associated impacts are weakening, and impacts on the market will marginally decline.”

The FSDC called for “researching standardisation of bond market development and maintaining the stability of the bond market.”

The remarks from the FSDC come shortly after Yongcheng Coal & Electricity Holding Group – an SOE based in Henan province, announced on 10 November that it was defaulting on one billion yuan (approx. USD$152 million) in short-term bonds that it had issued just weeks previously.

The default has since prompted the launch of investigations into key players involved with the issue, including Industrial Bank Co., China Everbright Bank, ZY Bank, Haitong Securities and China Chengxin International Credit Rating.

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