China’s Zombie Province Shows Trouble With Its Bond Market
- Liaoning companies still operate after defaulting on debt
- Provincial bonds pay little more than peers, despite recession
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Nowhere are China’s rusted-out industries worse than in Liaoning, a province that’s slumped into outright recession and where officials have admitted to years of inflating fiscal revenue data.
Liaoning is also a showcase for how long a road China faces to create a world-class bond market. For all its problems, the district pays little more than its peers to borrow. On the corporate side, authorities’ reluctance to let more insolvent enterprises go under means a limited role for the market, with financiers willing to restructure their debts on the sidelines.