What If That Bond Issuer Never Meant to Pay You Back?
In China, state-owned defaulters are shifting out good assets before creditors take them to court. Investors are getting nervous.
Emergency situation.
Photographer: Qilai Shen/BloombergChina’s $4.1 trillion corporate bond market can be tricky to navigate. If 2018 was known as the year private businesses started to fumble, this one will go down for its wave of ugly defaults among state-owned enterprises. Some are so unseemly that even state banks are cutting their exposure.
A default, on its own, is unpleasant but not unacceptable — this is a risk bond investors are prepared to take. But what if some issuers never meant to pay you back in the first place? There’s now a deepening suspicion that SOE companies will just move good assets out before creditors drag them to court. Two recent examples illustrate why investors are nervous.