China Banks' Waning Demand Hints at More Bond Defaults Ahead
- More corporate bond defaults are likely as pressure mounts
- Banks are reducing loans for other firms’ bond purchases
Pedestrians walk along an elevated walkway in the Lujiazui Financial District in Shanghai, China.
Photographer: Qilai Shen/BloombergThis article is for subscribers only.
China’s banks, scrambling to adjust to the government’s deleveraging campaign, are likely to add to pressures on the corporate bond market as they shed more of their massive note holdings and de-risk their balance sheets.
Further payment problems are likely in a market that has already seen at least 14 corporate bond defaults this year, according to Logan Wright, Hong Kong-based director at research firm Rhodium Group LLC. As well as cutting their own holdings, Chinese banks have pulled back from lending to other firms that use the funds to buy bonds, exacerbating the pressure on the market.