, Columnist
China Bonds Need Pain to Gain
Regulators should resist the temptation to bail out investors.
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What happens when there are $1 trillion-worth of securities in a market but trading volume is negligible? Nothing... until people decide they want to sell.
That's the situation in China, where the fixed-income market has grown to be the world's second largest yet where bonds hardly ever change hands. Now that a potential default by a state-owned entity has jolted the market out of its complacency, investors are trying to unwind positions. They're finding there aren't enough buyers.