The rise of defaults in China’s bond market is posing an imminent question to regulators: how to deal with souring debts and respond to bondholders’ demands to protect their investments?

By the end of November, the size of China’s bond market reached 100 trillion yuan ($14.3 trillion), the world’s second-largest after the United States, central bank data showed. The total value of outstanding corporate bonds also ranked No. 2 at 20 trillion yuan.

But the history of defaults in this huge market is inappropriately short. It was only in 2014 that China recorded its first corporate bond default, breaking the long-standing expectation that the government would come to the rescue. However, defaults of domestically traded bonds remained rare until last year when total defaults hit 122 billion yuan. The pace continued this year as onshore bond defaults have exceeded 130 billion yuan so far.

According to China International Capital Corp. (CICC), between 2014 and October 2019, a total of 339 corporate bonds issued by 110 companies missed payments, involving 317.7 billion yuan.

As defaults increase with the slowing economy, investors complain about the lack of protection for their interests.

Read the full story on Caixin Global.

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