Conflicting news from China.
The Bad News.
Shandong Ruyi Fashion Group – owns Lycra and Gieves & Hawkes – has defaulted on a $153bn bond. This follows other defaults that has sent tremors through China’s $4tn corporate bond market since November. A combination of worldwide fall in demand in all sectors due to pandemic and over-borrowing permitted by lax regulation by Chinese authorities.
The Better News
The same regulator has fined Alibaba, Tencent-backed online bookstore China Literature Group and logistics group Shenzhen Hive Box for failing to apply for regulatory approval for deals going back to 2014.
The Good News
In November, China reported a record trade surplus of $75.43bn, propelled by an unexpected 21.1% surge in exports compared with the same month last year. Exports to the United States climbed 46.1% to $51.98bn, also a record.
Two conclusions; China is pursuing its new and refreshing policy of refusing to bail out companies who overreach themselves. The economy continues to bounce back from Covid-19.