The FT reports that a succession of defaults “has rattled China’s $15tn bond market” but says that the defaults are to be welcomed as they show that Beijing is imposing financial discipline after a surge of Covid inspired debt.
China’s economy is recovering and the easy credit that was provided to beat the pandemic is being reined in as the Chinese economy recovers.
China’s top official, Liu He, warned of “zero tolerance” towards misconduct in financing deals or attempts by companies to evade their debts.
The FT reports that Beijing’s strategy is bearing fruit. Defaults have increased the average coupon rate for new bonds from state owned enterprises as realisation grows that state owned enterprises will not be bailed out by the Government.
China has informed the world that corporate efficiency and investor protection is underway. The importance is to recognise that China is changing as it reaffirms its pursuit of its single minded policy of prosperity and stability.