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John Wang
April 29 16:40

China’s bondholders are getting anxious

Debt market might be on the verge of deep trouble.
The holders of China’s bonds are becoming anxious over lacking security. Investors are afraid of growing possibility of bad deals while the pandemic whips up a new wave of restructurings.
Chinese bond market is worth around 25 trillion RMB. It is becoming one of the most important sources of investments for the major Chinese companies as well as government-backed enterprises. At the same time it’s experience with pressure or defaulting is at least limited. This is why bondholders are worried that their investments are not protected enough.
The leader of Moddy’s China Credit Research division Ivan Chung believes, that the investors started becoming anxious in the last two years, when a number of loan incidents took place. Despite the precautions, the bonds with underwhelming protection are still on the market. 
The threats are worsened by the efforts of the authorities aimed at preventing the wave of defaults in the postpandemic economy. The government encourages the impacted businesses to extend repayment deadlines or swap their debt that is up for repayment for newer bonds. 
According to Goldman Sachs data, no less than 10 Chinese loaners have been saved from defaults in 2020 by the extension of principal repayments, which are worth around 6 billion RMB.