World Economy

Default Shocks Global Market

Default Shocks Global MarketDefault Shocks Global Market

The decision of China-owned Baoding Tianwei Group to default on its debt has shocked the global market, stoking concerns that more government-owned companies could follow suit, Asia First reported. The China International Capital Corp (CICC), the country’s largest investment bank, described the default as a landmark in the history of China’s bond market, even though the interest payment it has missed was relatively small in size. Analysts said the impact of Baoding’s default may be unprecedented because it has broken the presumption that government-owned enterprises in China have lower default risks. Baoding became the country’s first state-owned company to default on an onshore bond after it failed to pay RMB85.5m ($13.8m) bond interest due Tuesday. The default came after the company reported losing RMB10.1b in 2014 due to its new energy businesses.