{"id":4133,"date":"2022-06-17T09:39:30","date_gmt":"2022-06-17T09:39:30","guid":{"rendered":"https:\/\/goldenpi.com\/blog\/?p=4133"},"modified":"2026-02-24T14:01:14","modified_gmt":"2026-02-24T14:01:14","slug":"china-a-rising-debt-bubble","status":"publish","type":"post","link":"https:\/\/goldenpi.com\/blog\/market-view\/china-a-rising-debt-bubble\/","title":{"rendered":"CHINA – A RISING DEBT BUBBLE"},"content":{"rendered":"

After the United States of America, China has the world’s second-largest bond market. Its bond market<\/a> size stands at a staggering\u00a0 $17.5trillion dollars. The Chinese bond market was not open to foreign investors for a very long time. In particular, an economy as big as China was off-limit to foreign investors. This means local-currency Chinese bonds were not open to trade on major global bond indices.<\/p>\n

After the inclusion of Chinese bonds on global bond indices, China has seen major growth in its economy, as more foreign investments have been infused. But the past few years have not been really good for the Bond market. According to Fitch ratings, in the first half of 2021, Chinese corporate bond defaults have hit a record high of $18 billion with $1.31 billion onshore bonds outstanding on average. Looking at the current situation, this figure is expected to grow month after month.The default is now 1.6 times bigger than it was in 2020 and 3 times bigger than it was in 2017.<\/p>\n

This massive bond default event has put the financial system in China and around the world in jeopardy. “Too big to fail” companies are the ones who caused this mismanagement. Huarong Asset Management Co. and China Evergrande Group are the two Chinese behemoths.<\/p>\n

These real estate firms, asset management firms, and, in particular, state-owned firms, have wreaked havoc on the global economy. China\u2019s State-owned enterprises (SOEs) individually accounted for almost half of the defaults made in 2021, standing at a figure of $5.79 billion.<\/p>\n

\"Chart<\/p>\n

Fact :\u00a0 In the first half of 2021, a total of 25 firms defaulted on bond payments, compared with 19 firms in the same time period in 2020.<\/p>\n

These bond defaults highlight the tightening credit solutions and a reluctance toward troubled state-owned firms by the government to bail them out. All these defaults have resulted in China repricing its risk in the credit market and discouraging debt-fueled expansion.<\/p>\n

How to beat market volatility through bonds?<\/a><\/span><\/strong><\/p>\n

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