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Shuli Ren

Get Ready for More Chinese Defaults

Beijing has started talking about deleveraging again. That could disrupt an eerie calm in the market.

Cutting developers down to size.

Cutting developers down to size.

Photographer: Tomohiro Ohsumi/Bloomberg

China’s bond market has been eerily quiet lately. 

Over the past year, investors in China’s U.S. dollar bonds had gotten used to the idea of defaults. As early as 2015, the government started allowing some state-owned enterprises to renege on their commitments, a painful but welcome step that helps differentiate healthy firms and troubled ones.